When the NFL’s official hospitality partner goes to the Super Bowl, it doesn’t want to be crashing parties that belong to someone else, which is what has happened in the past. On Location Experiences, the hospitality firm that was spun off by the NFL more than a year ago, has set out to own the signature events at the year’s biggest game.
In the last few months, On Location has been on a buying spree to bring some of the biggest Super Bowl parties and concerts in-house by acquiring Sean Connolly’s Kreate Inc. and Jack Murphy’s Nomadic Entertainment. The agency also created a joint venture with Ricky Kirshner’s event business.
Each of the three companies has had significant behind-the-scenes roles in planning and executing the entertainment around the Super Bowl, not to mention other big events outside of the NFL.
By combining forces with these high-end production houses, On Location now has its hand in the biggest Super Bowl concerts and parties, the official tailgate and fan fest, the halftime show and 9,500 of the best tickets, all under the banner of an official NFL hospitality partner. On Location is owned by RedBird Capital Partners, Bruin Sports Capital, 32 Equity (the entity that oversees the NFL’s private equity efforts) and Jon Bon Jovi.
“Outsourcing the production of these events and parties … that was the old business,” said John Collins, On Location’s chief executive. “We’re moving into a totally different world now” by buying and owning these entertainment businesses.
“We want world-class people building out world-class events at the Super Bowl, and that’s what we’ve got,” Collins added.
Kirshner’s events company produces the Super Bowl halftime and pregame shows, as well as the Tony Awards and the Democratic National Convention. After the 2008 DNC, Kirshner was assigned to produce all televised events around President Barack Obama’s inauguration.
Connolly’s Kreate agency is best known for putting together the NFL’s official pregame tailgate and producing the NFL Experience. Connolly has also produced fan fests for the NHL Winter Classic, MLB events and U.S. Open tennis.
During Super Bowl LI, Kreate will manage the Texans House, a hospitality site for Houston’s hometown team to entertain its best clients and fans.
Murphy, meanwhile, founded Nomadic Entertainment earlier this year, but for years he’s been producing Super Bowl activations like DirecTV’s Super Saturday Night, Pepsi’s Super Friday Night and the Motorola Mile. Nomadic will run the three-day concert series on Thursday, Friday and Saturday prior to Super Bowl Sunday.
Beginning with Super Bowl LI, Nomadic will build its own 60,000-square-foot, three-level modular facility called Club Nomadic that will be the site for the music fest with acts like Taylor Swift and Bruno Mars. AT&T/DirecTV and Pepsi are back as two of the title sponsors.
Murphy’s team began pouring concrete over five acres of an empty lot in Houston last week, on top of which the club will be built. Because of its modular structure, Club Nomadic can be broken down, stored and used again. Murphy came up with the concept last year in San Francisco, where he discovered an abandoned warehouse in the city and turned it into a night club. The modular format gives him the flexibility to take the club to different sites and events.
Knowing that he intended to build Club Nomadic, and that On Location wanted to put on big-name concerts as well, Murphy scheduled a meeting with Collins in New York. The intent was merely logistical — to make sure their start times wouldn’t overlap. They got along so well that Collins made an offer the next day, something Murphy was not expecting.
“We’re going to be in the same business,” Murphy said. “We just connected. My mindset is to create really elevated experiences, and that fit into what they wanted to do.
“At the Super Bowl, you’ve got this hodgepodge of events. People just bounce around all over town, going from one tent to another. We saw this opportunity to create a real high-end experience.”
Original article source: https://www.sportsbusinessdail…
Private equity investors are increasingly looking for seasoned, successful executives — so-called “rock stars” — to drive performance at their portfolio companies. RedBird Capital took it to the extreme with one recent deal, teaming with real-life rocker Jon Bon Jovi.
RedBird last year teamed with Bruin Sports Capital and the National Football League to launch On Location Experiences, which sells VIP packages to the Super Bowl and other marquee events. It then brought the “Livin’ on a Prayer” singer into the deal as both an investor and a manager.
Bon Jovi folded his own company, Runaway Tours, into On Location, building a music focus onto the sports-related company. The firm also brought in John Collins, former chief operating officer of the National Hockey League, to be CEO of On Location, a platform spun out of the NFL.
“This is what we love to do,” said Gerry Cardinale, CEO of RedBird and a former Goldman Sachs partner. “It’s a hands-on approach to investing that creates an inherent alignment with best-in-class operators and entrepreneurs. We have a passion for building companies, and we look to add value across a range of areas, which is easier said than done.”
Venture capitalists have been making big bets on rock-star managers for some time, but the phenomenon still isn’t as common in private equity. Besides RedBird, GPs that seek to back big-name executives include GTCR, Riata Capital, Pine Brook and Warburg Pincus.
This type of strategy is a way to return to the entreprenurial roots of private equity in merchant banking, when firms invested alongside founders and focused on growth, rather than leverage, to generate returns, sources said. It is perhaps more prevalent among newer shops, where GPs can tap into long-standing relationships with executives they have worked with before and have the ability to operate more nimbly than bigger, older outfits.
The challenge with this type of investing is that it is based on people. While an executive may have been the best at what he or she does for the past 20 years, there’s no guarantee of future success. Another risk: Backing rock-star managers means working with hyper-successful people who may have big egos and are used to having control, sources said.
“There are no statistics on using rock-star managers, but it’s something we do see,” said Ethan Vogelhut, executive director at Adveq, a firm that invests in middle-market buyout funds.
High-profile executives may not always be the best choice to lead a new or growing business, Vogelhut said.
“Those people do have broad networks and they understand the industry and the strategy they’re executing,” he said. “Even if [a GP] nabs a Fortune 500 executive, [the executives] typically have huge teams and much more of an institution behind them. If you’re starting something up, it’s a different skill set.”
Skin in the game
Cardinale said one of the keys to this type of investing is that the rock star manager invests alongside the firm. “Our focus is on proven business models where the founder of the business is heavily engaged and has written a check alongside us, so they have skin in the game,” he said.
This was the case with On Location, where Bon Jovi invested capital as part of the investor group and is also helping run operations as a manager of the business.
Other platforms at RedBird also reflect the strategy: Jerry Kent, most recently chairman and CEO of SuddenLink Communications, joined with Redbird and Ontario Teachers’ Pension Plan to invest in TierPoint, a data center roll-up. Albert Huddleston, founder of Aethon Energy, now works with RedBird on two ventures to develop oil and gas assets in the United States.
For Cardinale, these efforts embody the reason he launched RedBird in 2014 after retiring from Goldman Sachs.
“I had an entrepreneurial itch I needed to scratch,” Cardinale said during an interview in his office high over Madison Avenue. “I cringe when people refer to me as an asset manager. I want to be an investor, first and foremost.”
Riata touts seasoned execs
Although Riata Capital Group was formally launched only about a year ago, its roster of managers is time-tested, the Dallas based firm said.
The firm recently announced a partnership with Alan Shor, co-founder and president of The Retail Connection, a real estate advisory firm that represents more than 275 retail and restaurant chains, to pursue investments in high-growth, specialty retail and multi-channel consumer companies with EBITDA
of more than $5 million. Shor, known for his turnaround efforts for jewelry retailer Zales, has been involved with past deals by Riata executives.
Launched by the founders of Brazos Private Equity Partners and Parallel Investment Partners, Riata Capital announced two other partnerships with industry executives. It teamed up with Brad Goebel and David Zachariah to zero-in on production-related energy services deals. The pair helped build up Accelerated Companies, an oil extraction equipment maker, from $20 million in enterprise value to $430 million prior to its sale in 2014 to Dover Corp.
Riata also lined up John Eramo and Steve Roberts for marketing services companies after the two worked at Executive Greetings Inc, a designer and distributor of promotional material, and as operating partners on Personnel Concepts, Quartermaster, Hinda Incentives and LogoSportswear.
Working with established industry executives helps Riata move more quickly on deals, said Managing Partner Barron Fletcher.
“Part of what this allows us to do is be prepared, knowledgeable, researched and faster,” he said. “The challenging part of any process is the compressed timing and speed and the ability to take enough time to truly understand the business. Instead of starting on home plate, we try to start on third base.”
Using veteran execs to launch new businesses
William Spiegel, a founding partner and managing director of Pine Brook, prides himself on finding unmet needs in financial services and working with established executives to fulfill them.
For example, Pine Brook spotted an opportunity to start a mortgage insurance company in the wake of the collapse of Lehman Brothers. Spiegel turned to Mark Casale, an insurance executive who had worked at Radian Guaranty and elsewhere.
“I called [Casale] and said, ‘A number of the mortgage insurers aren’t going to make it,’” Spiegel said. “We knew each other [since 2000] … I had stayed in touch with him and then backed him [in 2009].”
With Casale at the helm, Essent Group, a specialist in private mortgage insurance and a reinsurance provider for mortgages secured by U.S. residential properties, went public in 2013 and raised $335 million. It now sports a $1.8 billion market cap.
In a more recent example, Pine Book teamed up with Jerome Breslin, known for building up Bank of America’s commercial insurance unit, to launch Clear Blue Financial Holdings LLC, a new commercial insurance firm providing a bridge to overseas reinsurers looking to tap into the U.S. market.
“We’re working with well-established industries and we’re growing complicated and capital intensive businesses,” Spiegel said. “There are always opportunities to back great executives — rock-star executives — and map out a multi-year capital plan.”
With a buyout, the money gets invested up front by essentially putting risk into the capital structure and leveraging the cash flow stream, Spiegel said. Pine Brook may invest $10 million or less to help a company find and build up its office space and hire employees. It may then deepen its investment as the business takes off.
“The biggest risk is in the early stages of an investment,” Spiegel said. “We face execution risk. We don’t take product or market risk.”
Here’s how the return math works for Pine Brook:
If a business it starts ultimately generates a 15 percent annual return on equity, it will double its book value every five years. Since financial services businesses that generate a 15 percent return on equity typically trade between 1.5x to 2x book value, that means Pine Brook can generate returns on its invested capital in excess of 3x book value over a five-year period, or an IRR in the mid-20s, Spiegel said.
“Effectively we create businesses that generate cash flows, and we can sell those cash flows at a premium,” he said.
But backing the right manager remains key.
“The whole strategy has to be — not only is there a macro opportunity, but who is the CEO?” Spiegel said. “I’d rather back a great CEO in a mediocre industry, than invest with a mediocre CEO in a great industry.”
Original article source: https://www.pehub.com/buyouts/gps-back-rock-star-executives-to-electrify-returns/
Transaction Will Scale TierPoint’s Operations to 38 Data Centers Nationally in 24 Markets
ST. LOUIS (January 20, 2016) – TierPoint, LLC, has signed a definitive agreement to acquire Cosentry, a rapidly growing provider of cloud, colocation and managed services based in Omaha, Nebraska.
Cosentry currently operates nine data centers in several Midwest markets, including Omaha, Nebraska; St. Louis, Missouri; Kansas City, Missouri and Kansas; Sioux Falls, South Dakota; and Milwaukee, Wisconsin. The company has been named one of Inc. Magazine’s “5000 Fastest Growing Companies” for eight consecutive years. Terms of the acquisition, which is expected to close in March, were not disclosed.
Upon closing, Cosentry will become a subsidiary of TierPoint and operate under the TierPoint brand. At that time, private equity firm TA Associates, which acquired Cosentry in 2011, will become a significant investor in TierPoint, joining RedBird Capital Partners, Cequel III, Ontario Teachers’ Pension Plan, the Stephens Group, JZ Advisers and Thompson Street Capital Partners.
“Cosentry is an excellent company with great people and this acquisition gives us a significant, strategic advantage in key Midwest markets, where there is an increasing demand for data center services,” said Jerry Kent, Chairman and CEO of TierPoint. “We’re also extremely pleased that a leader like TA Associates, with a long and rich history of smart investments, has chosen to become a significant investor in TierPoint. The combination of TierPoint and Cosentry will bring economies of scale, which benefits our customers, and the addition of TA Associates to an already strong investor group brings additional financial firepower.”
Brad Hokamp, Chief Executive Officer of Cosentry, said that the acquisition will benefit Cosentry customers. “TierPoint can offer our customers an even more robust portfolio of cloud and managed services than we currently have available,” said Hokamp. “TierPoint’s expanded data center footprint, which spans 19 markets coast to coast, will also give our customers additional geographic options to meet their growing business needs.”
“We are very pleased to be investing in TierPoint,” said Harry D. Taylor, a Managing Director at TA Associates. “With their complementary product offerings and service areas, we are confident the addition of Cosentry to TierPoint’s portfolio will prove to be an industry powerhouse.”
On behalf of the investor group, Gerry Cardinale, Managing Partner and Founder of RedBird Capital Partners, a lead investor, said, “We are extremely pleased with the team’s execution of our build-up strategy over the last year, culminating with this most recent acquisition of Cosentry. Under Jerry’s leadership, the original TierPoint platform has been transformed through several key acquisitions and continued organic growth across its nationwide facilities base. Today, TierPoint is a leader in delivering innovative colocation, managed and cloud-based data center services to its customer base in regional markets across the country. We are also very happy to welcome TA Associates to the investor group and to continue our strong collaboration with management in executing our investment thesis.”
When the acquisition is finalized, TierPoint will operate 38 data centers nationally in 24 markets and serve more than 6,000 customers.
TierPoint is a leading national provider of cloud, managed services, and colocation, helping organizations improve business performance and manage risk. With corporate headquarters based in St. Louis, TierPoint operates highly-redundant, carrier-neutral data centers in the states of Arkansas, Connecticut, Florida, Illinois, Maryland, Massachusetts, New York, North Carolina, Oklahoma, Pennsylvania, Tennessee, Texas, and Washington.
Contact: Patrick Baczenas 314-720-3136 Patrick.Baczenas@tierpoint.com