Global Music Rights (GMR), the boutique U.S. performance rights organization that represents Bruce Springsteen, Drake, the John Lennon estate and among others, is in advanced talks to sell a majority stake to the private equity firm Hellman & Friedman, sources tell Billboard.
Co-founded by Irving Azoff and Randy Grimmett in 2013, GMR’s majority owner, Texas Pacific Group (TPG), has signed a letter of intent to sell its undisclosed majority stake to Hellman & Friedman (HF), according to sources close to the talks. Other sources described the status of the talks as having reached an “understanding” to sell. The Azoff Company, which manages GMR among other companies in its portfolio, will retain its stake and continue daily management of GMR if the deal proceeds, sources say, although some say it, too, has earned a payout by selling a portion of its minority stake in the deal. Music Business Worldwide reported news of the sale on Thursday.
Institutional investors and private equity funds like New Mountain Capital and Blackstone have bought significant stakes in competing U.S. performance rights organizations in recent years, attracted by the key role that PROs play for businesses looking to access music in a commercial context.
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Multiple reports put the price for GMR at $3.3 billion. Sources tell Billboard that is the company’s valuation, and that GMR generates between $450 million and $500 million annually; other informed sources say the valuation is lower than that and dispute that revenue figure. With the Azoff Group retaining part of its stake in GMR, the price TPG fetches for its stake will be less than the headline $3.3 billion figure, those sources point out. GMR is being advised by the investment bank Moelis.
Representatives for TPG, HF and The Azoff Company declined to comment.
Hellman & Friedman is a San Francisco-based private equity firm that specializes in traditional buyouts in the technology and financial services sectors. Among media and entertainment companies, HF previously invested in the German media company Axel Springer and Getty Images. It has since sold its stakes in both companies.
The deal, which is expected to close this year, will not change anything “for the writers or the GMR management team,” a source familiar with the matter says. “GMR’s goal will remain the same: to transform the industry and bring more value to songwriters and their publishers. This is just a deal where one private equity firm investing in a company will be replaced by another. TPG’s exit from GMR is simply an exercise in realizing return on investment.”
Knowledgeable financial sources suggest the complex deal could involve TPG stakes in The Azoff Company, the umbrella holding company that oversees not only GMR but the artist management company Full Stop Management; the private equity-funded investment arm Iconic Artists Group, which buys artist and songwriter music rights; and Giant Music, an independent record label. Other sources say that even though TPG is exiting its GMR investment, it still retains a small minority equity stake in Giant Music.
GMR has built a reputation for being highly selective when it comes to signing songwriters, even more so than rival boutique performance rights organization SESAC.
Founded in 1930, the Blackstone-owned SESAC currently represents only songwriters it has invited to join for representation, an approach that has resulted in a carefully-curated song roster that allows it to command market rates commensurate with its catalog.
In contrast, the two largest U.S. PROs, ASCAP and BMI, operate under DOJ-mandated consent decrees and must accept any songwriter who wants to join. They are also subject to government mandated rates, set through rates courts in the federal Southern District of New York, if negotiations with licensees fail.
GMR has built a reputation for only signing superstar writers. Its limited catalog of about 150-200 artists and songwriters across a number of genres includes Bad Bunny, Billie Eilish, Drake, Eddie Vedder, Harry Styles, Jon Bon Jovi, Prince and others.
While sources say that GMR often pays the highest rates among PROs, those rates are not disclosed. However, in 2016, in a since-settled Radio Music Licensing Committee (RMLC) lawsuit against GMR alleging GMR engaged in monopolistic practices, the RMLC complaint quantified how large GMR is by citing that its share of radio performances sat between 5% and 7.5%, but it was charging as though it represented 15%. The complaint also said GMR lured songwriters to sign there by promising to pay out 30% more than its competitors.
If the GMR deal closes, it will mark the second time in a year that a U.S. PRO has changed hands. In February, New Mountain Capital acquired BMI in a deal believed to be valued at $1.2 billion, with sources saying that the PRO had about $145 million in earnings before interest, taxes, depreciation and amortization (EBITDA). That implies about an 8.25 times multiple. Sources say the constraints of the DOJ’s consent decree weighed down BMI’s valuation. When Blackstone acquired SESAC in 2017, Billboard estimated the PRO’s lucrative business model helped it fetch a nearly 12 times multiple of $85 million in EBITDA for a $1 billion valuation.
Like SESAC and now BMI, GMR is secretive about its financials and none of its data is public. Depending on what GMR’s specific financials are, it could go for at least a 12 times multiple, if not higher, with some financial sources suggesting it could maybe even reach a 17 times EBITDA multiple.
One GMR characteristic that songwriters find attractive is its use of a rate card, a unique feature among U.S. PROs that is considered more transparent and easier to understand than the rate formulas employed by ASCAP and BMI, numerous sources say.
Sources say GMR’s affiliation with Azoff and his portfolio of companies that employ powerful industry executives is one of the keys to its success. In fact, some big-name artists and songwriters handled by Azoff management companies are signed with GMR. Consequently, with Azoff and Grimmett and other top Azoff executives still calling the shots, the company is expected to retain its thus-far unique status as the home of superstar and mega-hit songwriters.
