BMI’s transition to a for-profit model took the next logical step forward Tuesday as a New Mountain Capital-led shareholder group announced a majority growth investment in the organization. Along with ASCAP, which remains not-for-profit, BMI is one of the two largest performing rights organizations in the U.S.; the deal is expected to close by the end of the first quarter of 2024.
Mike O’Neill, BMI’s president & CEO, will continue to lead the company, along with his leadership team, following the closing, according to the announcement. New Mountain will acquire the company from the shareholders who own currently own it; those shareholders must approve the sale.
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Terms of the deal were not disclosed, but New Mountain announced that BMI’s current shareholders will allocate $100 million of the sale’s proceeds to songwriters and publishers affiliates “in recognition of [their] creativity.” The payout will follow to BMI’s distribution model: “The allocation of those funds, while not a distribution of royalties, will be in keeping with the company’s distribution methodologies, which are based on performance levels over a set period of time. BMI will work to finalize an equitable payout plan for this allocation in the coming months,” the announcement reads.
The announcement notes: “For the calendar year, BMI targeted a payout of 85% of its licensing revenues and delivered +11% growth in cash distributions to affiliates over 2022’s distributions, which were reflective of the company’s prior not-for-profit model.”
While the move has met with significant concern from the songwriting and publishing communities, the announcement states, “New Mountain’s growth investment in BMI will accelerate the company’s ambitious value creation plan, which has three core tenets:
“1. First, to continue to grow cash distributions for its affiliates.
“2. Second, to invest in next generation technology platforms and new service offerings that will improve royalty collections, enhance BMI’s customer service, and deliver the best possible experience for its affiliates.
“3. Third, to add new revenue streams driven by organic growth investments and M&A opportunities, with an initial focus on improving general licensing royalty collections, international partnerships and new service offerings. New growth investments will create additional opportunities for distribution income for its affiliates. New Mountain’s investment does not change the distribution targets previously communicated, which is the same approach the company followed in calendar year 2023 and which it will follow moving forward.”
Goldman Sachs & Co. LLC served as financial advisor to BMI and Fried, Frank, Harris, Shriver & Jacobson LLP served as its legal advisor. Moelis & Company served as financial advisor to New Mountain, and Simpson Thacher & Bartlett, LLP served as its legal advisor. As part of New Mountain’s investment, CapitalG will also invest a passive minority stake in BMI.
“Today marks an exciting new chapter for BMI that puts us in the best possible position to stay ahead of the evolving industry and ensure the long-term success of our music creators,” said O’Neill. “New Mountain is an ideal partner because they believe in our mission and understand that the key to success for our company lies in delivering value to our affiliates. We are excited about the many ways New Mountain will accelerate our growth plan, bringing new vision, technological expertise and an outstanding track record of strengthening businesses, all of which will help us build an even stronger future for BMI and our songwriters, composers and publishers.” He added, “I would also like to thank the BMI Board of Directors and BMI’s shareholders for their excellent stewardship and unwavering support of our creative community since the company’s founding in 1939.”
“BMI has been a trusted guide and champion of music creators from the beginning, and we are privileged to work with the company and its 1.4 million affiliates to build on that incredible legacy,” said Pete Masucci, Managing Director at New Mountain. “There are numerous growth opportunities ahead for BMI with significant potential to generate more value for the work of its songwriters, composers and publishers. We look forward to working together alongside Mike and his team to capitalize on those opportunities for the benefit of all BMI stakeholders.”
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