Silver Lake Partners: The Technology Firm That Bet Big on MMA

The ordering process for Ultimate Fighting Championship pay-per-views has changed: UFC 241 is only available on ESPN+ in the U.S.

Back in July of 2016 When the Ultimate Fighting Championship was bought for a record $4 billion, one company was thrust into the spotlight of the sports world: Endeavor. Despite the organization sending an internal memo stating that the promotion was not for sale just three weeks earlier, Ari Emanuel and Patrick Whitesell’s talent agency managed to reportedly outbid three other firms to purchase the world’s largest mixed martial arts outfit, including the Dalian Wanda Group owned by Chinese billionaire Wang Jianlin. Leveraging a $1.3 billion loan and $500 million in unsecured notes to finance the deal so that their own debt would not be refinanced, Endeavor became the UFC’s operating partner, swiftly started making changes, and the rest is history.

But behind the scenes of one of the largest sports franchise sales in history, there was another player that played a crucial role in the purchase of the UFC: Silver Lake Partners.

Formed back in 1999, Silver Lake’s mission was to run an equity fund using leveraged buyouts of companies in the tech sector that could generate massive returns. While there is a high degree of risk involved in such a model, the firm secured $2 billion in commitments right out of the gate from high profile investors like Bill Gates and managed to grow total assets under management to a whopping $43 billion. Led by the founding “four amigos,” Silver Lake has become a major force in the investment world and is a partner with some of the biggest names in business.

Endeavor was one of Silver Lake’s earlier forays outside the world of technology. Originally acquiring 30 percent of the company in a deal with WME in 2012, the equity firm took a controlling stake in the company in 2014 during the WME merger with IMG, totaling its investment in Endeavor to $750 million. In 2016, months before Endeavor acquired the UFC, Silver Lake strategically opted to lose its majority shareholder status buy letting Softbank acquire 5 percent of the talent conglomerate. After the UFC was purchased, Silver Lake helped buy up the shares of smaller stakeholders in the MMA promotion, resulting in the equity firm becoming a minority stakeholder in the Endeavor-owned entity as well.

Although the purchase of the UFC was technically finalized after Silver Lake had lost its majority control in Endeavor, the equity firm no doubt approved of the purchase and helped facilitate it. Given that the ultimate goal of Silver Lake is a higher return on their investments, helping Endeavor purchase the UFC would make sense since the UFC had sizeable profits during the time of sale, which could help bolster Endeavor’s bottom line and make it more attractive in a public offering. Now a sizeable minority shareholder in both Endeavor and the UFC, Silver Lake holds executives and directors in both companies and continues to help with financial backing as needed for the parent and child organizations.

While Endeavor has plenty of responsibility for the UFC’s sale, the fact of the matter is that without Silver Lake’s backing and approval, that transaction likely would not have been possible. The equity firm led the talent media agency for the two years prior to Endeavor acquiring the UFC and relinquished that control of its own volition right before the sale occurred, knowing full well of the negotiations taking place. In the mini-documentary “Agents of Change: The Story of the Biggest Deal in Sports History,” Silver Lake is featured as a major catalyst for the deal between the Fertittas and Emanuel.

While it's clear that Silver Lake was critical to the initial sale of the world’s premier mixed martial arts promotion, its future involvement in both Endeavor and the UFC could get quite interesting. During WME’s 2014 acquisition of IMG, a strategic hiring plan and vision set forth by the equity firm gave strong indications that the now combined Endeavor group would eventually look to offer an IPO and go public. With cost-cutting being a major focus in the UFC since its new owners took the helm, guaranteed revenue flowing in from the ESPN deal, and language built in to Endeavor’s IPO that specifically mentions a separate UFC public offering, Silver Lake may be looking to help the MMA promotion follow in its parent company’s footsteps.

Over the past several years, Silver Lake has continued to expand its portfolio beyond technology into sports, media and entertainment. In December of 2018, the company purchased a 28 percent stake of AMC Entertainment from the Dailan Wanda Group, becoming a key partner in the movie theatre business, as well as partnering with IMG College, a collegiate sports marketing company. But there is no doubt that the firm’s biggest deal in the entertainment world was the one made with Endeavor all those years ago, and whether fight fans know it or not, that deal changed the course of the MMA industry --for better or worse.