- Apollo investment in Legendary Entertainment is the latest big private equity move in Hollywood.
- Dealmakers said independent production companies are valuable amid the streaming wars and demand for programming.
- Insider identified 11 companies that are attractive acquisition targets as consolidation continues.
wars have spurred a period of frenzied dealmaking in Hollywood.
Amazon kicked off the latest round of M&A in May with its $8.45 billion offer for 97-year-old studio MGM. In the months since, several entertainment companies have sold pieces of their businesses, including Reese Witherspoon’s Hello Sunshine and Will Smith and Jada Pinkett Smith’s Westbrook Inc. to Blackstone-backed Candle Media, as well as Joe and Anthony Russo’s AGBO to South Korean video game publisher Nexon.
In the latest big move, private equity giant Apollo has taken a $760 million minority stake in Legendary Entertainment, the production company behind 2021 box office hits “Dune” and “Godzilla vs. Kong” for Warner Bros., the two companies announced on Monday.
The activity has top Hollywood dealmakers telling Insider that practically every independent production company is a target.
Private equity firms are leading the pursuit, especially when it comes to talent-fronted shingles, because they see value in investing in content before the streaming service boom plateaus — and demand for original programming along with it.
“More traditional media companies are trying to pivot,” said Waymaker Law founder Ryan Baker, adding that periods of disruption foment more M&A activity because it’s “quite common for entrenched incumbent players tied to existing technology to not be as nimble” and they can often adapt more quickly by buying than building.
Not only does the appetite for production capabilities appear insatiable, but valuations also are sky-high. Hello Sunshine, whose projects include Apple TV+ drama “The Morning Show,” was valued at $900 million in its Candle Media deal. SpringHill Co., founded by LeBron James and Maverick Carter, nabbed a $725 million valuation when it took on an investment from a group including RedBird Capital, Nike, and
‘The key is buying franchises.’
Such targets aren’t being evaluated as traditional production companies, but rather as IP generators that have the potential to feed the demand for the next “Squid Game” or “Yellowstone,” projects built with DNA that could anchor universes and also extend beyond the screen.
“Original content is becoming more important and you want to bring a lot of the production capabilities in house,” said Pivotal entertainment analyst Jeffrey Wlodarczak. “The key is buying franchises.”
All that deal flow is leading some Hollywood companies to hang “for-sale” signs. Village Roadshow, the producer of “Joker” and “The Lego Movie,” has hired PJT Partners to seek investment or acquisition offers, per the Wall Street Journal. STX Entertainment has been fielding bids from buyers including The Najafi Companies and more recently Lionsgate, according to a report from Variety.
The limited set of larger production businesses that make attractive acquisition targets, sources said, includes A24, Skydance Media, and MRC. But among smaller shops, having a talent affiliation is key. A production company without a big-name is more like an arms dealer, a top dealmaker said, and typically lacks the potential to expand into multiple verticals — or to command a top-tier valuation.
But celebrity-fronted businesses come with their own risks. If the talent isn’t interested in expanding beyond filmed entertainment, the value of the deal declines. And if a star’s reputation falters, the business could slip with it.
Not all independent shops control the IP they create. Many production companies make work-for-hire or don’t control the rights to a project once it is sold off to a studio distributor. Still, some buyers are game to pay for access to the next big idea from, say, creators like the Russo brothers, even though their reputation was built largely on “The Avengers” — aka Marvel IP — said another dealmaker who asked to remain anonymous.
Based on interviews with five entertainment industry experts and insiders, Insider identified a list of 11 production companies that could be compelling acquisition targets as M&A activity continues. This list was originally published on January 27 and was updated January 31.
11 Hollywood M&A targets with production capabilities and brand recognition
- A24 The company led by David Fenkel has long been the subject of acquisition speculation thanks to its lineup of buzzy titles, including Greta Gerwig’s “Lady Bird” and best picture Oscar winner “Moonlight.” A24 — which also produces TV shows like “Ramy” — has a production deal with Apple and a film licensing agreement with Showtime.
- Array Ava DuVernay’s company produces, markets, and distributes films from women and people of color. Array also is behind DuVernay projects like Netflix series “Colin in Black & White” and has a deal with the streamer to release film projects including 2021 dramedy “Donkeyhead.”
- Bad Robot J.J. Abrams and wife Katie McGrath’s 23-year-old shop is behind everything from HBO drama “Westworld” to the next installment of the “Mission: Impossible” franchise. Though Bad Robot doesn’t own the rights to those titles, Abrams is such an in-demand creative talent that WarnerMedia in 2019 paid a reported $250 million for a five-year film and TV overall deal with him.
- Blumhouse Jason Blum’s shingle has perfected its model of producing horror films on a tight budget, projects that reap big gains when they hit with audiences. Consider 2021’s “Halloween Kills,” which made more than $131 million at the box office, amid COVID fears and restrictions, on a $20 million budget. A 10-year first-look deal with Universal Pictures that runs through 2024 bodes stability for Blumhouse’s film business.
- Chernin Entertainment Peter Chernin’s company — which produced NBC’s “New Girl” and the rebooted “Planet of the Apes” film series — is said to be exploring strategic options. It has a first-look deal with Netflix, and in 2020 it struck a deal with Spotify to develop its podcasts for film and TV.
- HartBeat Kevin Hart has been looking to sell at least a piece of his production business, Puck reported in October. A deal would likely include the film and TV business as well as a stake in Laugh out Loud, which is behind digital series like “Cold as Balls” on YouTube and “Die Hart” on Roku.
- Imagine Entertainment Previously a target for Kevin Mayer and Tom Staggs’ Candle Media, the production company co-founded by Ron Howard and Brian Grazer is now in talks to sell a stake to London-based Centricus, WSJ reported. Its recent films include “Hillbilly Elegy” and “Tick, Tick…Boom!” for Netflix.
- Scout Productions The 28-year-old company led by Michael Williams and David Collins has driven some of the highest-profile LGBTQ+ projects in Hollywood, including “Queer Eye for the Straight Guy” and its “Queer Eye” reboot on Netflix.
- Seven Bucks Productions Led by Dwayne “The Rock” Johnson and Dany Garcia, Seven Bucks produced “Red Notice” for Netflix and has the upcoming “Black Adam” for Warner Bros. It also makes content for Johnson’s YouTube channel, where he has 5.89 million subscribers.
- Skydance Media David Ellison’s production shingle is behind the upcoming “Top Gun: Maverick” and is teaming with regular producing partner Bad Robot on “Mission: Impossible 7” and “Star Trek 4.” The company — which has taken investments from RedBird Capital, Korea’s CJ ENM, and Tencent — will produce a slate of live-action films for Apple, where it already has an animated film and TV series deal.
- Village Roadshow The film producer and financier majority owned by private equity firm Vine Alternative Investments is best known for Warner Bros. co-productions including “The Matrix Resurrections” and “Joker.” The company, which is led by CEO Steve Mosko, recently has been focused on producing its own original films.