The deal

US-based private equity firm Silver Lake has announced it is working towards taking Endeavor, the international entertainment and media giant that controls several top-tier sports properties, private.

In a statement last week (October 25), the investment firm said it is “currently working toward making a proposal to take Endeavor private,” straight after Endeavor itself announced a formal review that would “evaluate strategic alternatives for the company.”

Endeavor’s chief executive Ari Emanuel said, when announcing that review: “Given the continued dislocation between Endeavor's public market value and the intrinsic value of Endeavor's underlying assets, we believe an evaluation of strategic alternatives is a prudent approach to ensure we are maximizing value for our shareholders.”

The company added that despite considering strategic options, there would be no sale – full or partial – of its majority interest in TKO Group Holdings, the newly launched publicly-listed company that merged Endeavor’s mixed-martial arts promotion UFC and wrestling promotion WWE. Endeavor holds a 51% controlling stake in the company.

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Endeavor is a giant in the sports business industry. Aside from TKO, Endeavor owns the IMG talent representation and sports marketing agency behemoth, and the Professional Bull Riders (PBR) circuit. In addition, it controls the WME Sports talent representation agency, which has many of golf's biggest stars among its clients.

Its latest move to create TKO Group has brought two of the top-tier brands across sports entertainment promotion together under one roof.

However, the merger has also brought with it scrutiny as the beleaguered WWE chief executive Vince McMahon, who is under multiple Federal investigations in the US, is its executive chair. Under the terms of the deal, McMahon, WWE’s controlling shareholder, only owns 16.4% of the economic interests in TKO and 16.4% voting power in the new entity.

Conrad Wiacek, head of analysis and consulting at GlobalData Sport, said: “With Endeavor potentially looking to take the company private while it realigns strategic objectives, it does signify that the heavy outlays of the last few years will need careful management.

“IMG, UFC, and WWE have all been brought into the Endeavor model in recent years, and while the agency only has a majority share in TKO Holdings, the acquisition of WWE may be the driving force behind the decision. With WWE Chairman Vince McMahon facing numerous criminal proceedings relating to hush money payments and sexual assault charges, how Endeavor removed McMahon from the business may be the underlying driving force in the decision to take the company private.

“While UFC boss Dana White has also faced scandal in recent years, none of those have reached the level of Federal investigations, which would likely lead to Endeavor also being subject to Federal oversight. If the plan is to avoid such scrutiny by taking the company private and removing McMahon, while also trimming numerous staff members and streamlining operations, doing it in private without Wall Street and investor scrutiny may be the most sensible course of action in the short term.”

The detail

Silver Lake currently holds around 71% of the voting power in Endeavor and has said it is not interested in either selling its shares to a third party or in receiving bids for any part of Endeavor’s assets. The pair have been partners since 2012.

Egon Durban, co-chief executive of Silver Lake, is currently on the board of directors at Endeavor, as is the private equity firm’s managing partner Stephen Evans.

In terms of the strategic review, Endeavor has said there is no definitive timetable or deadline for the process, and that “there can be no assurance that this process will result in any particular outcome.”

Earlier this month, Emanuel confirmed that his company had submitted a bid to invest in US golf’s PGA Tour.

Silver Lake, meanwhile, holds stakes in the City Football Group soccer club ownership structure, sports merchandise firm Fanatics, and New Zealand Rugby.