Sat. Nov 27th, 2021

For decades, Sports Illustrated has produced some of the best writing in American journalism. But by the mid-2010s, like many print magazines, it had faded. Enter Authentic Brands Group, which in 2018 seized the magazine’s intellectual property for just $ 110 million.

This week, Authentic Brands set aside an IPO in favor of a large private equity investment of a consortium led by CVC. It values ​​the group at a whopping $ 12.7 billion enterprise value, confirming Authentic as one of the most intriguing and successful business models to emerge in recent years.

Today, Sports Illustrated still offers good but shorter articles. But it has also joined some tough partnerships with sports leagues, as well as gambling, commercial ventures that help support the original publication. This is how authentic roles, recycling stories, but seemingly lost cause brands including Brooks Brothers, Barney’s and Eddie Bauer.

Over the past 11 years, Authentic has spent $ 5 billion on IP acquisitions, particularly paying $ 2.5 billion for shoe company Reebok. in august. The company has historically not manufactured or sold goods itself, but earns royalties from licensees. Its revenue rose from zero a decade ago to $ 500 million in 2020 and operating margins are high at about 75 percent.

Asset-lite sounds good on paper. But it works less well when channel partners – in this case physical retailers – experience their own financial problems. Authentic Brands has set up a joint venture called Sparc with mall operator Simon Property Group. Sparc has more than 1,300 stores affiliated with Authentic’s brands such as Forever 21 and Aéropostale. In total, Sparc-related revenue already accounts for one-tenth of Authentic’s revenue.

Several brand compilers have appeared over the past few years. Authentic argues that its extensive portfolio and experience have created a unique “flywheel” effect. Some of the smartest buyout funds in the world agree, including its other shareholders BlackRock and General Atlantic. That participation is perhaps the only prestige that ultimately matters.

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