SFX Spree Spotlights Fast-Growing Genre

Last updated: The Buyside

Five deals, the largest being the $130 million acquisition of ID&T, have expanded the buyer's presence in the electronic dance market

Even the most niche areas of an industry can experience their fair share of M&A. In the case of electronic dance music, or EDM, one company in particular has managed to wield dealmaking as a way of solidifying a position in the media sector. SFX Entertainment Inc. (Nasdaq: SFXE) recently unveiled five purchases, the largest being the $130 million acquisition of ID&T, and shows no sign of stopping.

A young company banking on the continued popularity of dance festivals like TomorrowWorld and Electric Zoo, SFX began its buying spree just as the New York company raised $260 million in an initial public offering in early October. SFX soon opted to buy ID&T, an Amsterdam-based producer of dance music festivals and events in Europe and around the world, including Sensation, Mysteryland, Q-Dance and TomorrowLand. ID&T produced the most recent Sensation event at Brooklyn’s Barclays Center in October. Later in the month, SFX took over Totem OneLove Group Pty Ltd., a producer of Australian electronic music festivals.

Both deals spotlight the company’s mission to tap an overseas market, according to SFX CEO Robert F.X. Sillerman. Sillerman, who founded the company in 2011, is the former chief of CKX Inc., which was sold to Apollo Global Management LLC (NYSE: APO) in 2011. In 2000, he sold his first business, a conglomerate of regional rock promoters, to Clear Channel for $4.4 billion. That deal ultimately formed Live Nation. Sillerman now aims to compete against Live Nation in the land grab for EDM production companies. SFX has reached beyond promoters and nightclubs to digital media platformes as well, beginning with the February purchase of Beatport, a Denver-based provider of dance music downloads and industry news, for about $50 million.

Between the ID&T and Totem deals, SFX managed to sprinkle three other acquisitions: New York-based Arc90, a product design and development agency; Philadelphia-based Fame House, a digital marketing agency that specializes in the music and entertainment industry; and Tunezy, a Toronto-based service that connects content creators to fans. Terms of each deal are undisclosed, but SFX noted that $150 million from the IPO would be used for M&A.

With these deals, SFX will operate 52 festivals worldwide, but whether EDM is a fad or a bankable sub-genre remains to be seen. The global dance market, which includes record sales, live performances and sponsorships, reportedly generates $4.5 billion annually. Supporting that theory is SFX and the hype surrounding the company’s IPO. So far, SFX has sold roughly 20 million shares, 17 percent more than the 16.7 million it initially planned. Counting those deals, SFX would have recorded $239 million in revenue last year, with losses totaling $68 million.

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