News | London, 05/29/2023

“Acquisitions Have Been Part of Our Story Since the Beginning“

Boost@Bertelsmann: Fremantle

Scott Henderson, Director of Mergers & Acquisitions at Fremantle, on the company‘s acquisition strategy and how the RTL Group subsidiary manages to expand its portfolio and achieve additional growth through targeted acquisitions.

In the financial year 2022 alone, Fremantle acquired majority stakes in the production companies Lux Vide, Dancing Ledge Productions, Element Pictures, 72 Films, Wildstar Films and Silvio Productions. The group also increased its stake in Eureka and acquired a stake in Fabel Entertainment to expand its capacity in the drama and documentary sectors. Further expansion of Fremantle’s business is one of the declared focuses of Bertelsmann’s Boost strategy. Scott Henderson, Director of Mergers & Acquisitions at Fremantle, uses the example of Italian production company Lux Vide to talk about the company’s acquisition strategy and how the RTL Group subsidiary manages to expand its portfolio and achieve additional growth through targeted acquisitions.

Mr. Henderson, Fremantle has acquired a number of production companies in recent years. What is the strategy behind this?

The Fremantle group as we know it today was formed in the early 2000s during the merger of CLT-UFA and Pearson TV into RTL Group, so acquisitions have been part of our story since day one. Over the following 10 to 15 years, Fremantle invested in multiple companies to add further capabilities to the group such as genre diversification and geographical reach, and to grow our core entertainment business.

Beginning in 2013, we began our entry into high-end scripted programming with the acquisitions of Miso in the Nordics (Scandinavia) and Wildside in Italy. These acquisitions, alongside a few subsequent investments and organic efforts have helped us create a sizable scripted business at Fremantle.

Over the past two years, we have continued to invest in scripted companies with both television and feature film capabilities across multiple territories, always looking to add the best creatives and talent to our existing scripted portfolio. At the end of 2022, we acquired our first high-end documentaries companies in the United Kingdom and Israel, with documentaries being a genre we are keen to expand further into. These acquisitions, alongside our organic growth, are fully in line with RTL Group’s stated goal of increasing Fremantle’s revenues to 3 billion euros by 2025, with half of this target to be achieved through organic growth and half through acquisitions.

What criteria make a production company interesting for Fremantle?

When we look at companies for potential investment, the main criteria is that the company has a mix of incredible creativity, a strong track record, an entrepreneurial mindset and great relationships with customers and talent. Given the close relationship with Fremantle going forward, the founders having a collaborative approach and values that fit with Fremantle’s are also really important qualities.

As you might be able to imagine, we are approached with a large number of investment opportunities each year, with the majority not being the correct fit. We are not in the business of acquiring companies for production volume or revenues. From our previous investments, we also have a good idea of what has and hasn’t worked with different companies.

And how do you even find out that a production company is for sale?

We find our opportunities through several different sources. Some are through external advisors working on behalf of the sellers, such as boutique investment bankers or legal advisors. Others are through Fremantle approaching companies directly, but most are through existing relationships that our local managers have with producers and talent. Fremantle’s local managers have an incredible market knowledge and often approach our management team to suggest opportunities.

In the specific case of Lux Vide, can you please describe the process from initial discussions to closing?

Lux Vide was a competitive process run through an external investment banker. The company was founded by, and is still managed by, the Bernabei family. So finding the right partner was fundamental to them. We had several rounds of non-binding offers where we were competing against other parties, some with offers higher than ours. Ultimately, the founders respected and connected with our management team and felt that the fit with Fremantle was the best for the company. We then came to an agreement on a deal structure. Fremantle was granted a period of exclusivity and the teams within Fremantle, alongside our external advisors, began work on due diligence. Our standard due diligence focuses on finance, tax, legal, HR, IT and commercial. On this particular acquisition the company owned and operated production studios, and were mid-way through building new studios at the time of acquisition. So we had some property advisors diligence the studios as well. Given that the company is nearly 30 years old and owned significant studio space, this was a big task. In parallel to the due diligence, we negotiated long-form legal documents, submitted anti-trust filings for the transaction, and went through the approval process at Fremantle, RTL and Bertelsmann.

What made Lux Vide in particular interesting to Fremantle?

Lux Vide is a well-established company with great catalog of shows and a different editorial tone than our existing companies, with a lot of shows created and produced for the commercial broadcasters in Italy and internationally. They are a brilliant team, with some long-running franchises – “Don Matteo,” for example, is currently shooting season 14 – and some excellent new shows in development. On top of that, they own their own studios in the Rome area, which allows the company to control the entire value-chain in-house, from creation through to delivery. In addition, we felt that that the deal we negotiated was great value for both Fremantle and the founders, and there were synergies with the wider Fremantle group.

What changes for a previously independent production company like Lux Vide when it becomes part of Fremantle? What are the advantages for them?

One of the key things we are not looking to do is change the creativity or culture of the company, as this is one of the main reasons for our investment. When we acquire a new company, there are usually certain changes around financial reporting and compliance to bring the company in line with the wider group standards. But generally, changes are limited. The advantages to joining Fremantle are that the companies have regular communications with our creative and distribution and format teams, who can help with the international appeal and funding of projects at an early stage, have access to a range of support services including research, digital, legal, finance, tax and IT, and are able to generally connect regularly and collaborate with Fremantle companies throughout the group.

Do Lux Vide employees feel that they are now part of a larger corporate family?

The management of Lux Vide are enjoying the support and backing of Fremantle, with our international capabilities and strategic support really adding value to the relationship, whilst allowing the company the space to be creatively autonomous. Their interactions with the Fremantle team feel collaborative, and there is a mutual ambition from both Luxe Vide and Fremantle to grow the company.

How intensive is Lux Vide’s collaboration with Fremantle’s other Italian companies, Wildside and The Apartment?

Fremantle encourages collaboration between all of its companies, and aims to create efficiencies and value for Fremantle as a whole. However, we respect the culture and independence of each of the companies and labels we invest in. Part of the process of integrating companies is everyone finding and maintaining this balance.