Why Hollywood Agency CAA Sold to a French Fashion Giant | Analysis

PARIS – The intersection of Hollywood with the luxury industry just took an enormous leap forward with the acquisition of Creative Artists Agency by Artémis, the French fashion and luxury giant led by CEO Francois-Henri Pinault.

While historic in the sense that a fashion-led company has never before made this kind of investment in Hollywood, it also says a lot about the changing face of entertainment economics. Endorsement deals and fashion contracts for actors, musicians and sports figures represent a significant source of income for top talent (especially during a labor shutdown).

And relationships to talent are a burning necessity for fashion brands, who effectively use actors rather than models to sell their wares.

The competition for relationships for those at the top of the talent chain — Rihanna, Beyonce, Zendaya, Ryan Gosling, Cate Blanchett — is stiff. Having an in-the-family relationship with a talent agency will make a difference.

But that’s just the most obvious part of how this deal may have implications for entertainment and luxury — and for how the two interact.

If you haven’t been paying attention, this courtship-turned-ownership has been a long time coming. Pinault’s Artémis controls $40 billion in assets including companies like Gucci, Yves Saint Laurent and Balenciaga (with Gucci the single largest driver of revenue).

And the connections with talent don’t end with Pinault’s marriage to Salma Hayek. (I would very much like to know what role Hayek played in facilitating this deal. Salma — call me.)

For years now, actresses have been wooed by the fashion brands, where they now get paid significant sums to wear one brand or another on the red carpet, or to attend a fashion show.

This year, Yves Saint Laurent — owned by Kering, which is largely owned by Artémis — started a production company and announced a series of films. And you probably noticed that Pharrell was named creative director of Louis Vuitton earlier this year and put on a wild fashion show on Paris’s Pont Neuf.

CAA, unlike rival Endeavor, hasn’t shied away from continuing to define itself as a company built around talent representation. Indeed, CAA acquired ICM last year, doubling down on talent, with the addition of world-class sports talent through CAA Sports.

“There’s going to be some kind of synergy here,” said Stefano Tonchi, the veteran fashion editor who recently joined TheWrap as our executive editor for Style. Tonchi was previously the editor in chief of W magazine and T, the New York Times’ style magazine.

“Actors will want to be at CAA, because CAA will give them resources in the fashion system,” he said. “It can help CAA to recruit talent, offering them access to great fashion platforms — and resources.”

But is it a good deal? Several people I spoke to on Wednesday questioned the reported $7 billion valuation, suggesting that it was well-known that CAA backer TPG wanted to exit its investment. And indeed, that the private equity fund had been frustrated for some time at the lack of anticipated growth.

Let’s back up: TPG bought a 35% stake in the agency in 2010 at a reported $700 million valuation. As the New York Times reported at the time, the investment proposition for growth was modeled after the sports representation business IMG Worldwide, then-owned by Teddy Forstmann, with a business that combined talent representation and production and programming. (But IMG was acquired in 2014 by Endeavor, CAA’s rival.)

Nonetheless, TPG increased its stake to own a majority position of 53% in 2014 at a valuation of $1.1 billion. The follow-on investment was reported to be $225 million. While CAA did indeed buy ICM, which owned a major sports representation business, the larger agency remains chiefly a business where — as the saying goes — the talent walks out the door at night.

The idea that CAA went from a $700 million valuation in 2010 to $1.1 billion in 2014 to $7 billion in 2023 — the kind of thing that tech companies do, but service businesses definitely do not — seems to defy logic.

The $7 billion valuation “is hard to believe,” said a leading M&A executive, on condition of anonymity.

Others questioned the long-term value of Artémis’ investment.

“This is a services business that is not scaling,” said another knowledgeable insider, also expressing skepticism.

Still, TPG got its exit and Artémis got its shiny Hollywood object to call its very own.

It so happens that your humble writer is in Paris herself right now, where she coincidentally had a get-to-know-you meeting with executives at the Kering Group an hour before the acquisition announcement came down. (They gave no hint if they knew about it.)

On the CAA side, insiders say it’s going to be business as usual, even as the respected Bryan Lourd rises to CEO. The insider insisted that none of the other partners are planning to depart, that Richard Lovett and Kevin Huvane remain co-chairmen and invested in working with their clients.

But the timing of this deal is unusual, coming when CAA is nominally weakened because of the double Hollywood strike. When actors aren’t making money, their agents aren’t making money, that’s the math.

CAA doesn’t disclose its financials, but recent years have put annual revenue between $400 million and $500 million. It’s hard to imagine the company will get close to that figure in a year when the assets driving revenue are completely sidelined.

Financials aside, and the numbers do ultimately matter, it’s the first time a luxury-led company has swallowed a Hollywood entity. It’s going to be interesting.

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