Cirque du Soleil: When An Investment Firm Buys A Circus
The private equity firm TPG Capital seized the opportunity to invest in Cirque du Soleil and boosted its potential.
I've always thought that investing is actually not about what's for sale, but about what you want to buy. So one of the things we really focus on is top down trying to spot trends in the world, in the economy, and then going out to find interesting opportunities within those trends. Number of years ago at TPG, we started doubling down in our efforts to invest in content. One of the areas of content that was actually growing most robustly was live events-- sports, concerts, conferences, so we began looking for opportunities to participate in that trend. Cirque, which people had thought of as a circus in some ways, in fact, was one of the leading producers of live content in the world. And the farther we got into looking at the company, the more we realized the opportunities that lay ahead. Cirque Du Soleil has 10 permanent show, and we have 9 touring shows traveling around the world in 350 cities. We have close to 5,000 employees working for us. You have artists, gymnasts. You have people who come from the world of dramatic arts. You have all kinds of different artistic expression that come together for a show. We have about 250 people working in the shops, which goes from everything to shipping and receiving, textile, store room, sort of library for new fabrics. We have a 3D shop, cutters, and seamstresses, and shoemakers, and hat makers. It's a huge group of people with lots of passion. As we speak right now, we're developing a new show. So when we open the show in Montreal in April, there will be 150 employees that are going to travel around the world all together. In each city that we visit, we will hire an additional 150 locals in order to help us to support the development and hosting our customer for merchandising, and ushers, and food and beverage. A history of being just incredibly committed. It creates for a very vibrant environment in which a lot of different kind of people seem to strive and be happy here. It's obviously a well-known brand. And one of the things we track across our consumer oriented portfolio is Net Promoter Score, or MPS, and Cirque has always been one of the highest overall MPS scores, kind of comparable to Apple, Netflix, others that we'd know out here. What's most unique about Cirque though isn't the high MPS score, it's that it's considered the most differentiated brand. So a brand's standing for something that is truly unique that no other brand is comparable. The organization started in 1984. And Guy and a bunch of street performers got together and developed the first show, which was called Cirque Du Soleil. Took a few years to make the company profitable. The first breakthrough was our first visit in Los Angeles. And then it continues to grow. The next breakthrough was the opening of permanent show in Las Vegas. The company has been booming at a very, very rapid growth. In 2008, like everybody else, there was some difficulty. And then it was getting tougher and tougher for us to bring Cirque Du Soleil to the next level. Guy felt that we needed to have new partners, new shareholders that had the power to bring us to the next level. So today, we're in that position with TPG as the control shareholder, and Fuson opening us China. We've been investing in China for a long time through our ownership of CAA. We've watched the Chinese entertainment markets open up and become hugely impactful in the TV and movie area. Couldn't there also be more opportunity in China for live events? When we put our investment group together to purchase the company, we immediately went out and found a Chinese partner that would join us as a major investor in the company to help make sure that we were making the cultural translation, the business translation correctly. A year and a half later, we have an office in Shanghai. We're going to open a permanent show in Hangzhou. So we're going to have our first touring show starting in November 2017. So all of a sudden, in a year and a half, we have been able to accomplish more in China in a year and a half than in probably 30 years before. You think about investing in a company, the first question you always ask yourself is what don't you change? So we began at Cirque by realizing that we didn't want to change the creative energy and talent that is a core of the franchise. However, we also realized that there was more they could do, and management was in agreement with us. The company historically had not had a head of China. Didn't have a head of sponsorships. Didn't have a head of business development. It didn't have a chief marketing officer. Cirque created this great product that they felt, you know, should sell itself. The reality in the competitive world we're in is you do have to put marketing muscle behind. And that marketing muscle is quickly evolving given all the new social media channels. We needed to build an infrastructure that allowed us to speak to customers beyond the show. We have found out by leveraging the data that we have that consumers actually want to hear from us more, right. They've become a fan. And just like if you're a fan of a sports team or you're a fan of a movie, you want to see a trailer. You want to check in on trades. You want to hear more about it. I'm saying some of the things that many marketers do, but we haven't actually done a lot of that. We had, fortunately for Cirque, it was it was a cult brand for so many years, right. And word of mouth, the crucial word of mouth in any marketers lexicon, drove it. Inspired by the adventurous spirit of freedom and the thrill of blazing your own trail, Cirque Du Soleil Volta. With Volta, we've partnered with Red Ball. It introduces our brand in a new way to new audience. It gets people to look twice. We're going to open an NFL experience on Times Square, so you cannot talk of a better window for an artistic content provider to put together a new experience for customer. So that experience in itself opened the door for Cirque Du Soleil to a new category of experiences that we can develop moving forward in a lot of different sports and in a lot of different cities. We're very serious and supportive about accelerating the pace of development of new shows. Obviously, there was some anxiety, but it didn't last long. Because the people in creation and production are totally fueled by new shows. And that, within a very short period of time, brought stability emotionally in the organization, and now we're at the stage of people get very, very much evaded by the fact that we are accelerating the pace of development of new content. I think the trend society of people wanting to leave their digital world to connect in a live experience is young and still growing. So understanding the particular challenges and opportunities of building a live events business has been hugely impactful for me. Delivering what Cirque delivers around the world to millions of viewers every year is really an incredibly difficult thing to do and do well. And so watching them do that and do it very well has really been a learning experience for me. Where do you see Cirque Du Soleil in 5 years? You know, my wish is that in five years from now, Cirque Du Soleil is considered as the leader of live entertainment in the world. [MUSIC PLAYING]