ICM announces management buyout

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International Creative Management’s leaders announced Friday a management buyout of the talent agency from private equity firm Rizvi Traverse Management, which acquired controlling interest six years ago.

The high-stakes move is designed to give top agents at ICM, which represents such stars as Al Pacino, Jodie Foster and Ellen DeGeneres, a financial interest in the business and empower a younger generation, led by ICM’s 43-year-old president, Chris Silbermann, to run the agency.

Silbermann and ICM Chairman Jeff Berg sent an email to the more than 400 employees of the Hollywood talent firm Friday afternoon saying that they and Rizvi had ‘agreed on principle terms to establish an agent-owned partnership for ICM.’

‘Our primary objective always has been to remain highly competitive as we turn to the next generation of leaders at our agency,’ the email said. ‘We are confident this new partnership will position the agency, its clients and employees well for the future.’

There has been much speculation about a power struggle within ICM between Silbermann and Berg, whose relationship has been described as chilly by some insiders at the Century City-based agency. However, the two men, both UC Berkeley graduates, worked together to design the new deal to return stability to the agency that has been rattled by recent news about a management shakeup.

Under the new structure, Berg, 64, will remain a key part of the management team and retain an ownership stake in the agency he has headed for more than three decades. However, people expect him to assume a diminished role.

ICM was formed in 1975 through a merger of Creative Management Associates, where Berg worked, and International Famous Agency.

Silbermann could take on a larger ownership stake in ICM. He is expected to work with the other partners to run the agency. Many of his former allies, including Bob Broder and Ted Chervin, are expected to become partners, which will help to fortify Silbermann’s control.

The proposed transaction resolves uncertainty that has been hanging over the agency in recent months as the senior agents tried to stitch together a package to buy out Suhail Rizvi, co-founder of the Michigan-based Rizvi Traverse Management.

The new partners will buy out Rizvi’s ownership interest as of Jan. 1, but he is expected to continue to participate in profits from some of the agency’s assets, including such TV hits as ‘Modern Family’ and ‘The Big Bang Theory.’

Rizvi, who declined comment, bought controlling interest in ICM in 2005 for more than $75 million. At the time, Rizvi’s purchase was described as a way to fund ‘strategic growth.’

A year after he took over, Rizvi bulked up ICM by acquiring boutique agency Broder Webb Chervin Silbermann, which was a powerhouse in the TV industry, for more than $70 million.

That move bolstered ICM’s financials because of Broder Webb’s representation of high-earning TV producers, including Chuck Lorre, who created such juggernauts as ‘Two and a Half Men’ and ‘The Big Bang Theory.’ The 2006 acquisition of Broder Webb also introduced a more aggressive management team at ICM, led by Silbermann, who became president and the executive responsible for ICM’s day-to-day management.

Meanwhile, ICM’s motion picture department has lost a number of key agents and key clients, including Julia Roberts, Eddie Murphy and Steve Martin, to rival agencies.

The new partnership is expected to include the heads of the various units, including feature films, music, touring and television.

The buyout comes amid great tumult in the media industry as audiences have scattered and social media and the Internet have become alluring entertainment destinations, particularly among young consumers. The dramatic changes in the media industry have left the once fat and happy major Hollywood talent agencies fighting for their survival.

Major Hollywood studios are making fewer movies and are forcing actors and producers to slash their upfront fees, which has negatively effected the traditional 10% commissions agencies collect on transactions.

At the same time, the TV networks have turned to so-called reality shows because they are cheaper and oftentimes more popular than the scripted TV programs that have long underwritten the operations of large talent agencies. Hollywood agencies make most of their money by ‘packaging’ television shows, lining up their clients — the writers, producers and actors — to produce and star in the programs.

In the last few years, the once dominant William Morris Agency merged with the smaller Endeavor agency, and industry titan Creative Artists Management last year sold a 35% stake in the company to private equity firm Texas Pacific Group.

Rizvi Traverse Management, which has offices in Los Angeles and New York, also has equity stakes in Facebook, Twitter, Playboy Industries and Summit Entertainment, the independent studio behind the “Twilight’ franchise, which is in talks to merge with Lions Gate Entertainment.

ICM’s return to its previous management structure — with agents owning and running the company — also illustrates how the lure of private money can be a blessing and a curse because outsiders often make investments for quick returns rather than to build the company for long-term gains.

ICM was unable to offer incentives — including the lure of a partnership — that rival agencies could, making it more difficult to hold onto top agents.

That disadvantage prompted Silbermann to assemble a group to buy out Rizvi’s equity interest so the agency could plow the profits back into the business to compensate agents and grow the business, according to two people familiar with Silbermann’s strategy.

— Meg James