Why Did IMG Let All Those Stars Walk?

It seems an odd strategy for sports marketing powerhouse IMG: Build the business by letting your star athletes leave. But that's exactly the path IMG is taking these days. Certainly not all its athletes are making for the exits. IMG still crosses the T's on Tiger Woods' Nike (NKE ) deals and makes sure Roger Federer's Wilson rackets are strung. But since private equity mogul Theodore J. "Ted" Forstmann spent $750 million for the company in 2004, IMG hasn't been the glitzy campus for sports studs that it used to be.

The question swirling around IMG: Is that transformation part of Forstmann's new strategy to expand the business in profitable, new directions--or a fumble that cost the company $30 million-plus?

One thing is clear: Last summer, IMG got out of the team-sports business. The move came after a shake-up that resulted in Forstmann firing one of the company's senior executives, Peter Johnson. A few months later two of the company's top sports agents left IMG, taking their clients, including baseball's Derek Jeter and football hotshots Peyton Manning and LaDainian Tomlinson, with them.

Johnson, then IMG's CEO of sports and entertainment and a loyalist of the firm's late founder, Mark McCormack, oversaw the agency's team-sports business. A 30-year IMG veteran, Johnson had close ties with Tom Condon, who represented football clients, and with baseball agent Casey Close. The relationship was so tight that both agents had "key man" clauses in their employment contracts giving them the right to leave IMG if Johnson ever departed. Four months after Johnson was fired, Condon and Close sold their practices to Creative Artists Agency Inc. Condon, whose lineup of 75 National Football League players established IMG AS A FOOTBALL POWER, collected $30 million.

Competitors are still amazed over how simply Close and Condon were able to leave IMG and take their clients. "Nothing like that has happened that I know of," says Donald L. Dell, the pioneering sports lawyer who founded the ProServ agency, now called SFX Sports Group Inc. "I don't think Teddy was in favor of just giving away his assets."

The notion that the team-sports heroes weren't worth keeping around doesn't fly outside IMG. "Everybody in this business wants to go to the Super Bowl and throw the hip party surrounded by the superstar quarterback," observes a prominent agent. "Teddy is no different."

Adding to the confusion, IMG attempted to jump back into the football biz, chatting up replacements for Condon in the months after he left the agency. That has fed speculation, including inside IMG, that Forstmann might have been unaware of details in the agents' contracts.

Forstmann declined to comment for this article. But sources familiar with IMG say the speculation is baseless and that Forstmann knew all along that he risked losing Condon and Close because of the clauses in their contracts. Besides, they say, team sports accounted for only a tiny fraction of IMG's total income, and repping team-sports figures sometimes makes it complicated to strike other deals with leagues and owners--a far more lucrative business. Finally, they point out that IMG profits are about three times higher now than when Forstmann bought it. So the company that all but gave away Derek Jeter doesn't seem to be having much post-parting remorse.

By Mark Hyman

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