Uniting Forces, Power and Income: Why Do Football Agencies Merge?
Introduction
Forbes has estimated that the market for football or soccer agencies globally stands at a value of around $7billion. Many modern agencies do not simply stop at football. The global powerhouses such as Octagon, Wasserman and CAA venture far beyond football into the realms of golf, rugby, boxing, American sports and athletics and even into different spheres in the music and entertainment industry. These agencies grow in physical size, employing thousands around the world, and in terms of power, control and wealth. The overall value peaks far past the $7billion for soccer alone and it can be an attractive financial proposition for businessmen and women looking to enter the unique industry of sports agency and talent management and representation.
Over the last decade or so, a pattern has begun to emerge. The opportunity of wealth and power within the agency industry has materialised in the willingness of many well-established and financially gifted agencies to enter into mergers. In this blog I will analyse the reasons behind why agencies are choosing to merge with previous competitors and rivals, the benefits and issues that might arise as a result and will demonstrate these through the use of case studies.
Where Merging Began
In April of 2009, the William Morris Agency (WMA) merged with Endeavor Talent Agency in a landmark case in the history of talent representation. Endeavour had formed almost 15 years prior to the merger and had established itself as Hollywood’s major talent representation company. The William Morris Agency also operated within the entertainment sector and had done so for over 50 years. The opportunity was identified that if the two were to merge, it would create what has become known as a modern ‘superagency’. An agreement was reached and the company became William Morris Endeavor (WME) and was the single dominant force in talent representation in Hollywood.
So why is a monopoly over Hollywood’s best talents relevant to football and sport? Well, following the first few successful years of WME in the world of entertainment and Hollywood, a new and exciting opportunity rose once more. In 2013, a second merger took place as WME combined with the International Management Group (IMG). They acquired IMG for $2.4billion and consequently expanded far beyond their previous boundaries of Hollywood and entertainment talent.
IMG itself was already established as a major player in the world of sports talent management. The agency looked after clients from a wide array of sports from football, basketball, motorsports and tennis to the likes of martial arts, surfing and figure-skating. The merger was part of the ambitions of the Endeavor Holding Group, as it was now known, to position themselves as the very first ‘mega-agency’. This dream materialised as over the following years the group continued to expand and their power, control and wealth grew in situ. For example, in 2015, WME/IMG purchased ownership of the Miss Universe contest from Donald Trump in the entertainment industry, swiftly followed by acquiring the Ultimate Fighting Championship (UFC) ownership in 2016 for $4billion. As time has continued they have also developed other initiatives within the agency such as an Esports division and established control in the National Football League (NFL) and National Hockey League (NHL).
The extraordinary presence and volume of power that had been generated by WME, as a single organisation in the sports and entertainment sphere triggered a movement in the world of talent management. As I will explain, it demonstrated that there was a significant benefit to companies who were able to merge with other agencies in order to increase and improve their business. I will analyse more recent examples of major mergers within the sports world although I will also demonstrate that the impact of such a business move is not all positive.
Why Merge?
There are several significant attractions for agencies looking to enter into merger agreements with other similar companies. The American model resonates around diversifying the network and clientele that the company has access to. This involves merging into other industries such as the entertainment and music sector. Agencies such as Octagon have been successful across several industries and merging can help companies access areas they were previously not established within.
In the world of football, however, the motivation behind merging with other agencies is slightly different and can occur on a smaller scale. In a football talent agency the earning potential is very simply directly correlated with the volume and value of clientele. More players means an increased market share, more income, more influence, more control, more power and a wider network. It helps football agencies to not only survive from being driven out of business if their players move elsewhere, it provides additional finances and sources of income. The greater security of their business is amplified by a growing volume of clients that results from merging with other agencies.
In this modern era of football, the significance that players/clients possess and their worth as a financial asset is ever-increasing. As shown by the extraordinarily high player wage bills that clubs are obliged to pay each year, a lot of money is being distributed to the players at the heart of the game. The value that players come to have has further risen in recent times through off-field opportunities in commercial and business deals. Furthermore, as demonstrated in the recent case of Kylian Mbappe at Paris Saint Germain, players are also granted greater power and control over the proceedings and decisions that are made at their clubs. For agencies, this means that merging with other companies can enhance their accessibility to these players, opening up new and more powerful streams of revenue and control in transfer windows and contract negotiations.
2021 Mergers: Case Studies
In 2021, there were two significant mergers that took place in the world of football and sport. As the financial impact of the COVID-19 pandemic had been felt across the globe, it initiated a desire for agencies to unite forces in a bid to reignite their business and achieve greater financial and functional stability and robustness. The advantages of merging agencies were even more attractive after the pandemic and I have outlined the two most significant case studies below:
1. Creatives Artists Agency (CAA) acquired International Creative Management (ICM)
CAA, as the name suggests, was originally more concerned with representing talents in the world of arts and boasted several large names in the Hollywood industry. However, in 2019, prior to the pandemic, CAA had acquired Base Soccer, the UK based football agency. Base became known as CAA Base and continued to represent over 300 players and managers under the new umbrella of CAA. Sports was not an entirely foreign concept to CAA at this point having already ventured into Basketball by acquiring the Los Angeles-based Kauffman Sports Management agency as part of its plans to diversify the company’s power, network and clientele.
Meanwhile, International Creative Management had been doing some of their own diversification. As another music and entertainment focused organisation, they had added sport to their list of expertise after acquiring the Stellar Group at the beginning of the pandemic in 2020. Stellar had a respectable reputation, led by the agent, Jonathan Barnett, and represented over 800 athletes across multiple sports. The most notable clients in the world of football include Gareth Bale, Jack Grealish and Eduardo Camavinga. They had also merged with the Select Sports Group in the US which added several NFL clients to their roster.
In 2021, CAA reached an agreement with ICM to acquire part of the agency. It was an equity based deal which meant a significant increase in control, revenue and power and a step towards reaching the heights of a ‘mega-agency’. The executives of the agencies described it as a chance to broaden the scope of opportunities for their clients. It is obvious to say that two major agencies merging in such a manner facilitates access to almost every corner of the sports, entertainment and music worlds.
As expected, the merger was identified by the Wall Street Journal as the largest merger since WME/IMG in 2013. They estimated the value of the conjoined agencies to be at around $10billion across all the industries that they were now a part of. The clientele of each agency as well as the staff remained largely the same. However, the global outreach raised the limits and prospects of what could be achieved within the agency.
2. Unique Sports Management (USM) joins International Sports Management Group (ISMG)
This collaboration demonstrates a slightly different style of merger that a collective of agencies can enter into. Perhaps this example epitomises the benefit of business security that merging can provide as well as opening up further opportunities across Europe.
The example of CAA and ICM demonstrated how agencies that begin in the world of entertainment and music can also establish themselves in the world of sport and gain traction and clients through merging with previously established sports agencies. However, this case study varies in that it occurred between two well-known and already football-focussed agencies in an attempt to respond to growing global powerhouses such as CAA, ICM and the likes of Wasserman and Octagon.
ISMG is a Germany-based football agency with a well-established and recognised network throughout European football. It has access to all of Europe’s top leagues and clubs although the agency itself did not have a particularly highly valued clientele base. It was spotted by UK-based USM as an exciting business opportunity that would enable them to improve their handhold in the European market.
USM concluded a deal with ISMG to unite with the agency. The 300 players that were a part of USM and worth a total market value of over £670million, are now also registered under the joint umbrella with ISMG. This includes the likes of Reece James, Aaron Wan-Bissaka and Callum Wilson. The partnership is now branded as Unique Sports Group (USG) and is acclaimed to have been a part of over £1billion in football transfer transactions across 12 different European countries.
A CEO of USG explained that the merging was part of a “joint vision to maximise the European network of both agencies”. The potential is great, especially with an agency that operates within the Bundesliga, the league that boasts the youngest average player age and has received UK youth talent such as Jadon Sancho and Jude Bellingham, as well as the other major European leagues.
Whilst mega-agencies are emerging as a result of billion-dollar mergers that span across all talent management industries, football agencies are holding their own by uniting with each other to secure their business status and grow their power and network within the game. The USG merger demonstrates how merging with other football agencies can bring financial and business benefits to the companies.
Another Case Study: Wasserman acquires Key Sports:
At the beginning of March 2022, prior to the pandemic, the globally-renowned Wasserman agency acquired the UK-based Key Sports. Wasserman began as a Media Group in 1998 and quickly established itself as a major corporation in the world of agency. The focus of the company began in sponsorships before venturing into NBA and MLB clients at the beginning of 2006. Their first venture into soccer occurred towards the end of that same year as they acquired SFX, another UK-based soccer agency which represented the likes of Steven Gerrard, Jamie Carragher. Michael Owen, Emile Heskey and Park Ji-Sung. Over the next decade or so they also acquired agencies in other areas such as Golf, Boxing, media rights and a social media influencing agency.
By 2020, they were once again looking to expand their foundations within football in the UK and Europe. The aim was very clear, to boost the business, revenue and power of their football division. Key Sports presented a fitting purchase. Key already represented some big names in English Football such as Jamie Vardy, Harvey Barnes Nathan Ake and Tyrone Mings. Such an acquisition inevitably strengthens the position of Wasserman and its respectability within football agency. The CEO of Wasserman acknowledged the ease of taking over an agency that had already become well-established by itself and amassed a highly-valued client list. It was seen as a suitable next step forward for Wasserman. On the other hand, for Key Sports it also provided many potential benefits. By joining with one of the most global sports agencies, Wasserman facilitates Key Sports and its clients to have access to the worldwide network of football and of endorsement deals. This will add to the wealth of services and opportunities that they can provide to their clients.
The Issues
There are several worries and concerns that may arise as a result of this new pattern of merging agencies. The danger is summarised in the possibility for agencies to lose sight of their principles and the primary objectives of talent management and representation. For example, it is almost an inevitability that large increases in the volume and status of clientele in a merged agency will result in clients, particularly less lucrative clients, not being given the services and personal attention that was previously provided.
It could be argued that smaller agencies are much more readily able to provide personal and holistic services to their clients to ensure that they are dedicating themselves to finding the best opportunities and achieving the best outcomes for each individual. In a large, global agency it may no longer be possible to establish a sense of a personal, direct service and relationships with clients who become a part of a large corporation.
The importance of valuing the purpose of talent management is integral and imperative for a successful sports agent and agency. Their role is to care for their clients and enhance the rewards that their clients obtain throughout their career in football, other sports, entertainment or music. No matter how large an agency might become through merging with other companies, this purpose does not change; there should be an emphasis on personal and dedicated care and services to the clients.