Like Broadway producers working on a box office hit, Raine Group is backing Trey Parker and Matt Stone of “South Park” and “Book of Mormon” fame — a team they believe has the chemistry and the talent to bring in investment results.
And for an edge, the New York-based merchant bank partnered with a talent agency, WME Entertainment, headed by super agent Ari Emanuel.
“The "South Park' guys created two enormously successful franchises. In the past, both had to scramble for money to have cash flow coming in,” said Joe Ravitch, co-founder and partner of Raine, which focuses on entertainment, digital media and sports.
Raine Group, which has a $400 million private equity fund and $100 million in separate accounts, just invested $60 million for a minority stake in a company they are helping Mr. Parker and Mr. Stone form, Important Studios.
Among the investors: Abu Dhabi's Mubadala Development Co. and Government of Singapore Investment Co.
Industry insiders say making money in private equity entertainment and sports investments is as hard as writing a hit show. But Mr. Ravitch believes the duo's talent and Mr. Emanuel's Rolodex give the firm an edge in sourcing deals that not everyone sees.
As a result, Mr. Ravitch is confident the Raine Group venture will be a smash hit.
“We are combining young creative talent with highly cash generative, iconic franchises, providing a unique opportunity to invest fiduciary capital in the entertainment business,” he said. “Our downside protection is the existing franchises and our upside is assured, given the success rate of Matt and Trey.”
Still, if other private equity firms' experiences are any guide, entertainment and sports investment wins aren't easy.
“Entertainment and sports are a pretty small part of the deal world overall and one that investors are pretty skeptical of,” said Susan Long McAndrews, partner and head of U.S. primary investments in the San Francisco office of Pantheon Ventures, a private equity firm.
She added: “Private equity (general partners) say the sector is tough because of the fickle nature of what's hot and what's not, and they have no control over what people will like.”
Even though the sports and entertainment sector is tricky for private equity, there have been deals.
Last year, money manager Guggenheim Partners was part of a deal that bought Dick Clark Productions, the company that produces the Golden Globe awards show and the New Year's Eve broadcast formerly hosted by the late Mr. Clark.