Deal focus: Events focus delivers Affinity 2.6x return on TEG

When Affinity Equity Partners carved out TEG from Nine Entertainment in 2015, the company was essentially a ticketing business. It served nine of Australia’s top 10 venues and most of the country’s leading sporting and entertainment events. Four years on, most of TEG’s revenue comes from staging those events itself, rather than fulfilling the role of ticketing agent for other promoters. 

This transformation underpins a recently agreed exit of just over A$1.3 billion ($880 million) that is expected to generate a 2.6x return – in Australian dollar terms – and an IRR 35% for Affinity. The buyer is Silver Lake, which has stayed in familiar territory for its first large-cap buyout in Asia. The private equity firm already owns several US-headquartered media, entertainment and sports businesses, including Endeavor, the parent company of UFC and Miss Universe, among others.

Affinity acquired TEG for A$640 million, with debt covering about half of the purchase price. It was one of several assets divested by Nine after creditors – which had completed a debt-for-equity swap in 2013 – relisted the business and sought to simplify it. TEG, then known as Nine Live, reported EBITDA of A$70 million on revenue of A$239 million for the 2015 financial year. The company’s Ticketek business contributed 70% of revenue.

“The ticketing business is a cash cow – you get a fee whenever anyone buys a ticket – but it had a market share of 65% and there wasn’t much room for growth,” says a source familiar with the investment. “A decision was made to grow the entertainment business instead. A lot of money was put into it and they went for the biggest shows. A business that was previously too constrained and unable to pay for top performers was able to write a $30 million check to get Taylor Swift.”

Ticketek remains the exclusive ticketing provider for over 135 venue and promoter clients, delivering 30 million tickets annually for over 30,000 events across 13 countries. This is complemented by an event promotion, venue management, and marketing division that has worked with the likes of Hugh Jackman, Guns N' Roses, Eminem, Katy Perry, Cirque du Soleil, Jerry Seinfeld, and the Brazil national football team.

During the four-year ownership period, revenue and EBITDA grew 26% and 13%, respectively, on a compound annual basis. Geoff Jones, CEO of TEG, said that Silver Lake’s combination of international expertise and relationships across technology, entertainment content and live events would support continued growth on a global scale. Steps have already been taken in this direction.

Affinity oversaw seven acquisitions – all funded through cash flow – of which four were in Australia and three overseas. From a newly established Asia unit in Singapore, TEG bought Malaysia’s TicketCharge and formed of a joint venture with Yongle in China. However, the most significant acquisition was arguably UK-based promoter and venue operator MJR Group.

“There are lots of good one-man operations in Australia, but Madonna isn’t going to go to them for a 12-show country tour,” the source adds. “On top of that, the MJR deal makes TEG more global. The company had a small business in Australia, but it could serve as a platform for more acquisitions in Europe.”

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• Topics
• Australasia
• Media
• Trade sale
• Australia
• Affinity Equity Partners
• Silver Lake