(VIP-NEWS) — Even though the practice of staging summer sales has a long history in the retail trade, the announcement of the takeover and purchase of International Concert Service – and thus of the Wacken Festival – by Superstruct, marks another climax in the incidence of buy and sell in the 21st-century concert business. And this recent transaction took place in the year, when Wacken celebrated its 30th anniversary.
In this year’s February issue, VIP News published an article under the heading “Sales Time in the Concert Industry” and reported on the financial involvement of investment companies from outside the industry relating to their holdings in concert companies.
One of the key players in this context is Superstruct, at least as far as the European festival market is concerned. Within a very short space of time, this company has acquired the following festivals and concert companies; Down The Drain (Northside Festival/Tinderbox/DK), Elrow (ES), Flow Festival (FI), Oya (NO) Sonar (ES), Sziget (HU) and, most recently, Parookaville (DE).
These transactions were empowered by the financial support of the mighty Providence Equity Partners from the USA.
It should also be mentioned that Germany’s DEAG acquired a majority stake in I-Motion (Nature One/Mayday/Ruhr in Love, among others) at the beginning of June and that the takeover of Wacken Open Air by Superstruct at the end of the summer holidays marks the change of ownership of Germany’s most internationally known festival brand.
The Complications and Formalities Involved in these Company Take Overs
The bigger the buyer, the more demanding the procedures are when buying a company. A prominent example of this is the takeover of Four Artists by the German industry leader CTS Eventim, which was not approved by the Federal Cartel Office in 2017. Providence Equity, on the other hand, with fixed assets of around 40 billion US dollars, deals in even bigger transactions which explains the wording of the registration of the deal with the German Federal Cartel Office.
Consequently, the notification dated 9 August on the website of the Wacken takeover authority reads: “Providence Equity Partners, LLC (USA); indirect acquisition of control of ICS GmbH International Concert Service, Wacken (D) et al.” Subject to the approval of the German Federal Cartel Office, the takeover could be formally sealed within four weeks, which would then provide for a majority takeover by Providence Equity, the actual financier of Superstruct. The takeover of Next Events GmbH for Parookaville has also been under review since 31 July. If within four weeks no decision has been made, the consideration phase will automatically be prolonged by another three months.
The following entry on the website of the Austrian Federal Competition Authority is somewhat more revealing, but also more confusing: “LMF Luxco S.à.r.l. intends to acquire indirectly via the acquisition vehicle Superstruct Germany Holding GmbH, 55% of the shares and sole control of (i) ICS GmbH International Concert Service, (ii) ICS Festival Service GmbH, (iii) Hübner & Jensen Verwaltungsgesellschaft mbH, (iv) Hübner & Jensen GmbH & Co. KG and (v) SH-Promotion GmbH & Co. KG to acquire.
The proposed transaction concerns the live entertainment sector”.
The fact is that the Wacken ‘empire’ as a company is of course still in operation, albeit with different subsidiaries. Another, on the other hand, is that the business construct of the Wacken operators and their subsidiaries appears like an open book compared to that of Superstruct.
“Acquisition vehicle” Superstruct
Unfortunately, it was not possible to find out why the takeover of the Wacken Open Air Summer and its accessories needs also to apply for approval in Austria at the time this article went to press.
Though a remarkable consideration is the mentioning of the company names LMF Luxco S.à.r.l. and Superstruct Germany Holding GmbH. According to the entry in the commercial register, the mentioned company name “Blitz D19-414 GmbH, Düsseldorf, c/o Blitzstart Holding AG” became “Superstruct Germany Holding GmbH” on 30 July. The company LMF Luxco S.à.r.l., which in turn is based in Luxembourg and represented by the international law firm Squire Patton Boggs, has been the owner of the brand name “Superstruct” since 20 July 2017.
Location Advantage Tax Havens
It is part of the development programme of major international companies to be based in locations that offer advantages from a fiscal point of view. In the case of Providence Equity, the company is located in Providence, Rhode Island. In the ranking of international offshore tax havens, however, Rhode Island occupies only a lower midfield position.
It is interesting to note, however, that Providence Equity has its registered office in Delaware according to the entries on the website of the US Securities and Exchange Commission (SEC), as does Live Nation. Delaware, however, occupies a top position
in the Champions League of relevant tax havens alongside the Cayman Islands and Lichtenstein and ahead of Luxembourg.
Despite all the indications, James Barton, the CEO of Superstruct, is by no means just a resourceful investment mogul who knows the concert business only by observing the share price development of major Companies such as CTS Eventim or Live Nation.
Barton, born in 1968, instead knows the festival and promotion industry from scratch and has come a long way from being a local promoter to a middleman between the upper classes of the finance community and the concert industry.
Starting young, he kicked off in 1992 in Liverpool with the club event “Cream”. The 400 person rave grew into the Creamfield Festival in 1998, which at its best attracted up to 50,000 visitors and made its successful debut as an export hit in Argentina in 2000.
Further spin-offs followed in Brazil, Chile, Mexico, Poland, the Czech Republic and elsewhere.
On top of that, in 2008 Barton tapped into the London listed venture capital fund Ingenious Live VCT, one of the very first funds to finance concert companies, and in 2012 sold the mother ship, Cream Holdings, for £13.9 million to Live Nation. The concert industry giant immediately appointed him ‘President of Electronic Dance Music’, which, given the size of the company, is more like the status of a branch manager.
At the end of 2016, he resigned this post and established himself as CEO of Superstruct in January 2017.
Basic knowledge in buying and selling
It is obvious that a lot of specialist jargon from legal to business questions arises in such transactions. While Next Events used the consulting agency Mayland AG for the sales negotiations for the Parookaville, the creators of the Wacken Festival, according to their own statements, managed without the help of M&A experts (Mergers & Acquisitions).
Information on whether and which concert companies are next to be sold or taken on board by investors is treated just as discreetly as the purchase prices for Parookaville or Wacken. It is already clear, however, that the concert business of tomorrow will undergo substantial changes at both national and international level in view of the evergrowing conglomerates of companies in the industry. Reason enough in any case to expand the industry vocabulary with technical terms such as “Due Diligence” or “Vertical Spend Estimates”…
Failure of Fishing for Quotes
Needless to say, the Wacken Open Air is the best internationally known festival in Germany. The takeover of this event by Superstruct additionally confirms and highlights that the live music sector continues to undergo serious amendments in terms of business settings and structures.
To get some observations on the meaning of such deals for the live music sector, VIP News asked 12 German industry players three questions regarding their opinion on these market developments:
How do you expect such deals will change the concert business in general in the near future?
Do you expect more such deals to take place?
Do you consider these acquisitions rather as positive or negative for the German festival market
?Guess what happened? VIP News received statements from three of these players ranging from “ Just one word: Evil!”, “It’s really unbelievable, once again someone WITHOUT any reason.” and “My answer to all three questions you asked is rather blunt but true, I’m afraid: I got no fuckin’ idea.!”
Perhaps the selection of industry inmates approached was inappropriate, but at least one of bravely submitted her comments. Julia Frank of Wizard Promotion delivered a proper conclusion and analysis, that covers today’s market developments accordingly:
The investment industry seems to have discovered the live concert market, so more of these deals are to be expected in the future. We will find out how this will affect us as the industry in general, but we have learned from the consolidation of major labels around 15 years ago, that a lot of employees and artists were left on the street. AEG and Live Nation moving into the European market years ago also affected us all as well, but not to the point that the independent companies, with an adjustment of their game plan, were struggling or dying.
Superstruct buying into Parookaville and Wacken will give these festivals financial stability and they can concentrate on strong line-ups and teaming up with the other Superstruct-owned festivals. I imagine it will be more difficult for the independent promoters to place acts in the future, but the German festival market is strong and we have a lot of mid-size events that are very successful and sell out in advance every year.
They depend on us as much as we depend on them when it comes to acts as the big festival promoters often block them, so historically we have been working closely with them – a relationship that we will continue in the years to come. – Julia Frank – Wizard Promotions (DE)
By: Manfred Tari firstname.lastname@example.org