Vanity Fair On The Future Of The Agency Known As IMG

Vanity Fair's William Cohan talks to a lot of heavy hitters (David Geffen, Irving Azoff, etc...) for this lengthy insider’s look at anatomy of the IMG purchase by William Morris Endeavor, with a big focus on superagents Ari Emanuel and Patrick Whitesell.

Since I know many of you lie awake at night worrying about the well-being of golf’s once-dominant-agency-turned-all-things-business, the piece is worth checking out if nothing else to learn that the whole thing really is ultimately a chance for some powerful agents to eventually cash out on an IPO. Oh, and you’ll be shocked to know the assumptions for future revenues were sketchy, but the banks went ahead and loaned them money anyway.

One big question concerned the cash flow the banks were told the combined company would generate. That number was a whopping $448 million—some 88 percent more than the $238 million sum the two companies had reported for 2013. The projection contained a number of onetime adjustments and add-backs of expenses that had occurred in previous years.

For a change, it's not golf that’s blamed for the numbers not coming through.

Around the same time, problems with IMG's college-sports business began to seep into public view. According to someone at a presentation to the banks, Pyne had predicted that it would generate $100 million in cash flow in 2014. “If we do $100 million in 2014, it would be the lowest year we've ever had in college,” Pyne is said to have proclaimed to the banks. But in June, the new company lost a premier multi-million-dollar licensing-and-local-media contract with the University of Kentucky to a rival agency. Then it almost lost its deal with Syracuse University. Only through Whitesell's direct intervention was the contract salvaged. But, according to a former IMG executive, where once IMG had paid Syracuse $3.9 million a year and made around $2.5 million in profit, the new contract called for paying Syracuse $6 million a year and was unprofitable. Then IMG lost its contract with Arizona State and a portion of its contract with the University of Georgia. The wheels were coming off IMG's college business. (A WME/IMG spokesman says it's “only fair to state the wins [for the company] in the last five to six months”: Nebraska, Baylor, and Western Kentucky.)

Ah, good get there with WK!

For his part, Emanuel is undeterred. In 2014, according to a competitor, he asked many WME agents to take more equity in the new company in lieu of a portion of their bonuses. His promise to them is that when WME/IMG goes public they will be rich. But with the equity markets again looking shaky after a long upward run, that promise could be a hollow one, or the money a long way off, especially if the promised financial performance is not achieved. “I hear there's a lot of unhappiness,” says a veteran Hollywood observer. “Ari is having to do a good job of convincing their key people to hang in there for another couple of years, and all they keep saying is ‘I.P.O., I.P.O., I.P.O., and look at all the stock you have, and you'll make eight figures when we go public, and you're never going to make that money as an agent anywhere else in a onetime liquidity event, so hang in there until we get to go public.’ ” (Aside from press speculation, there is no indication the company is planning a public stock offering anytime soon.)