CAA Leaders Outline Ambitious Expansion: An Investment Bank to Fuel Big Deals

There’s a lot of dealmaking to come in the entertainment, sports and media sectors over the coming years, and CAA wants to take a bigger slice of that pie.

On Monday, the Artemis-owned talent agency announced a new venture: CAA Evolution, an investment bank and advisory firm focused on sports, entertainment and media clients, one predicated on navigating a rapidly-evolving market for the sector.

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CAA Evolution brings together Evolution Media Capital (EMC), CAA’s merchant bank, with Michael Klein’s M. Klein & Company, to super-serve that client base through CAA’s relationships in Hollywood, and Klein’s expertise in big-dollar dealmaking.

CAA president Jim Burtson, CAA Evolution CEO Bob Stanley, and M. Klein’s Michael Klein discussed their ambitions for the new venture in a joint interview with The Hollywood Reporter on Monday morning.

“What I like about this combination and this partnership is, this is an area where I would like to think we provide tremendous insight in what is an ever changing, ever more complicated sports and entertainment landscape,” CAA Burtson says. “In partnering with M. Klein and Michael, who I’ve known for a long time … We saw the opportunity to get the resources and scale and quality advice that would scale up the size of the clients that we could serve in the marketplace, and do that in a really efficient and potent way.”

EMC had a robust business mid-size companies in the space, like Jason Blum’s Blumhouse, and Kevin Hart’s Hartbeat, and Stanley says they expect that to continue to be a growth area for CAA Evolution.

“We sit in this place where we will continue to do this and you’re in an environment where the mid-cap production companies have a real opportunity to own IP and grow their businesses,” Stanley says. “So we’re going to continue to do that and I think we will do that successfully, and we will be able to do that with more scale based on the fact that our firm just doubled in size.”

However, the new company will also scale up their ambitions to include M&A involving large cap media companies (the owners of the content platforms, not just the owners of content), as well as sports team M&A, capital markets and IPO advisory, activist investor disputes, and other matters.

“I think we’re going to continue to do what we do now great at scale, and help those companies build their businesses in this evolving content market,” Stanley adds. “But we’re also going to sort of move into a different I’d say, cap size or deal size, that Michael’s expertise is in, and help these sort of larger media companies figure out where the world’s going, because everything’s moving so quickly, and we sit in a place where I think we’ve got a really great perspective of where that’s going.”

Klein adds that the sports market in particular has seen explosive growth over the past few years.

“What is clear is the size and importance of the sports market has become multiple levels beyond where it was even a decade ago,” Klein says. “That means that the transactions require a different set of expertise. They require substantial access to multibillion dollar capital infusions, and they have substantial impact on the long term value of both the investors as well as sponsors, and also on the media outlets that have that content.”

“On the media side as Bob indicated, there’s such a transition today and so many parties, be they activist investors or others who see value in the shifting landscape, that we hope that we have the ability to use the great expertise that CAA has, and perhaps some of our skills to help add value to participants in that market,” he adds.

Klein, who previously led Citibank’s investment bank, started his own firm in 2012, advising deals like the $130 billion merger of Dow Chemicals and DuPont, or Saudi Aramco’s $25 billion IPO in 2019. M. Klein & Co. will continue to operate as its own separate advisory firm outside of the sports, media and entertainment sectors.

He tells THR that CAA Evolution is his first advisory business built around “a pure industry expertise.” Klein says he has known Burtson going to back to Burtson’s days as an executive at Time Warner, and with Stanley on both buy and sell-side transactions.

“First and foremost, CAA is unique and extraordinary as a partner,” Klein says.

CAA, of course, is in a moment of transition of its own. The agency sold a majority stake to Artemis, the investment fund controlled by luxury goods mogul François-Henri Pinault, in September.

CAA Evolution is arguably the company’s biggest strategic move since the acquisition, taking on established players in the media, entertainment and sports banking space like The Raine Group, and LionTree.

Of course, the market for M&A, IPOs and other investment banking services has cooled over the last year or so as interest rates have risen and concerns about the macroeconomy have simmered.

The executives say that they expect the pace of dealmaking to pick up across the sectors. “We think there’s gonna be a significant velocity of transactions” in the sports LP (limited partner) market, Stanley says.

“They do become some of the biggest and most important transactions in the financial world,” Klein adds of sports team deals. “They also represent what is the bringing together of essentially sports ownership, leading private equity and venture capital participants, CEOs, and entrepreneurs. So there is overlap between the universes that we spend our time with.”

As for the entertainment sector, “Historically, there were sort of numerous numerous middle-market production companies, and they sort of evaporated a little bit over time,” Stanley says. “So this is a time when we can help these these companies that we work with get bigger and own their rights, own their IP and create long term value through cash flows and library value effectively.”

“The value embedded in the content and the individuals is growing at rates in some cases that are substantially in excess of the value of the institutions that own them,” Klein adds. “And that generally reflects a mismatch that has to be addressed and adjusted, so I would take the view, as we’ve seen in many transforming industries, that there’s a significant undervaluation that will be recognized over time.”

And as the deals flow in, CAA Evolution thinks it can carve out its own piece of the sector.

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