Gillian Tan is a Bloomberg Gadfly columnist covering deals and private equity. She previously was a reporter for the Wall Street Journal. She is a qualified chartered accountant.

Ari Emanuel is stepping inside the Octagon.

Emanuel's WME-IMG said Monday it's paying $4 billion for mixed martial arts empire UFC. It's a transformative deal that differentiates it from rival Creative Artists Agency and shows just how serious WME-IMG is in striving to extend its reach beyond its roots as a talent agency with a hand in sports and entertainment events into a broader content provider.

The deal comes as UFC's viewership steams ahead (Tom Brady and Justin Timberlake were front row at an event Saturday night in Las Vegas), thanks to the popularity of its leading athletes such as Ronda Rousey and Conor McGregor. While it does trail other sports considerably, the upside is that it's favored among millennials and there's a long runway for additional growth, something private equity and just about any other type of investor likes to see. 


If WME-IMG can replicate or better the success that it appears to have garnered from its April 2015 purchase of the more niche Professional Bull Riders, its investors will have much to cheer.  Already, it says PBR's Built Ford Tough Series has broken attendance records and seen television viewership rise more than 20 percent since the acquisition. 

The UFC transaction is being financed by WME-IMG's longtime investor Silver Lake, one of its occasional partners KKR and Michael Dell's investment firm. It's yet another example of buyout firms electing to put some of the billions of dry powder to work by making acquisitions through companies they already own instead of making a splash with new, pricier and arguably more risky targets.

And Silver Lake's been to this well before. The firm, which invested in WME in 2012, also wrote a check back in the winter of 2013-14 when the company combined with IMG. At the time of the merger, Silver Lake's Egon Durban said it would be "one of the highest-returning investments" in its history. Indeed, it's hard to see the firm walking away from WME-IMG -- whenever that may be -- as anything but a winner. 

The deal values UFC at around 16 times its recent full-year earnings before interest, taxes, depreciation and amortization , which means WME-IMG scored a relative bargain: It's paying less than what any would-be buyer of its publicly-traded rival World Wrestling Entertainment would need to fork out. 

That provides a deterrent -- not that founder Vince McMahon needs one -- to a WWE sale. If UFC's suitors (including China Media Capital and Dalian Wanda Group, according to ESPN) weren't inclined to pay up for UFC, they'd be less likely to do so for WWE. It generated a third or less of UFC's Ebitda in 2015 , and smaller, less-profitable properties rarely command a premium. 

Fight Club
UFC is worth more than double WWE, in part due to its broader reach
Source: Companies

That didn't stop WWE's shares from rising as much as 3.5 percent on Wednesday to an eight-month high. Still, with short interest at roughly 15 percent of the company's free float -- north of its 10-year average of 9.7 percent, according to data compiled by Markit -- investors, like wrestlers, would do well to maintain their defenses. 

-Rani Molla contributed graphics to this article. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

  1. There's been no word from the closely-held company on how its purchase of the Miss Universe Organization last September from, yes, Donald Trump, is going. 

  2. The duo have teamed up on previously successful deals including GoDaddy and Avago Technologies

  3. Based on the top end of a reported range of the last full-year's Ebitda being $200 million - $250 million. 

  4. WWE's fiscal 2015 Ebitda was $73 million

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Gillian Tan in New York at

To contact the editor responsible for this story:
Beth Williams at