Talent agency WME/IMG on Monday announced an agreement to acquire UFC, the mixed martial arts powerhouse that recently completed its 200th flagship event. No financial terms were disclosed, but sources familiar with the deal put the price-tag at around $4 billion.
Private equity firms Silver Lake Partners and Kohlberg Kravis Roberts & Co. (kkr) each are putting money into the deal and getting minority states in the company in the form of common stock, and will receive some governance rights—typically the ability to vote for board members and other matters—in UFC, which will remain a separate company from WME. Michael Dell will also become a part owner of the company, indirectly. Two investment affiliates of the computer company CEO are providing preferred equity. The deal will also include unspecified debt financing.
Some notes on this one:
1. My understanding is that Silver Lake and KKR are investing the same amount of equity for minority stakes, although Silver Lake has additional indirect exposure via its existing investment in WME.
2. WME has represented UFC for over 10 years, but its representation of individual fighters has only been on media and endorsement deals. In other words, it won't be on both sides of (sometimes contentious) negotiations between UFC and its fighters. We should expect, however, that WME will aid in making more UFC fighters household names―something that is particularly important in a women's division that lately has been unable to have its champions defend their belts.
3. Speaking of the women's division, there has been a lot of talk about how UFC is perhaps the only sport that puts its top men's and women's events on equal footing in terms of timing and promotion. This―alongside the short duration of MMA fights―is often credited as helping attract the millennial audience that has helped drive UFC's massive growth.
4. ESPN had first reported on the sale process back in May, after which UFC president Dana White called the reports bogus, saying the company "is not for sale." At the time, we reported that White was either lying or misinformed (more likely the former), as UFC had already engaged bankers that had spoken with WME (among others). It is, however, worth noting what White said directly after the aforementioned statement: "If somebody shows up with $4 billion, we can talk."
5. We also reported at the time that prospective buyers viewed White's continuing involvement as integral to any deal. Indeed, he will remain UFC president going forward.
6. WME was sure to point out in its press release that UFC is "one of the largest contributors to the Cleveland Clinic's Professional Fighters Brain Health Study," and UFC has talked about how its fighters take fewer repetitive hits to the head than do boxers or football players. That said, I'd have to believe that WME is assuming some serious liability risk in this area.