Money Matters: How An Investor May Or May Not Help Your Business

Matthias C. Just
– Matthias C. Just
CEO of Mayland AG

Wacken Open Air promoter ICS, Spanish mega festival Primavera Sound and Sziget, one of the biggest festivals in Eastern Europe, are just a few events that partnered with a financial investor in recent years in order to further their business.

How is such a deal supposed to work out for both parties, what’s in it for the investor, and is there even a point for a lone promoter to enter this business on their own in 2020?

We found the perfect man to ask these questions: Matthias C. Just, CEO of Mayland AG in Düsseldorf, Germany, which specializes in mergers and acquisitions. 
Pollstar: What makes this industry so attractive for investors? 
Matthias Just: The entertainment business is very attractive for investors as the demand for festivals is still very high. Increasing ticket prices are being charged, which consumers are also willing to pay, as they rarely seem to be price sensitive in the leisure and entertainment sectors.  

How are the partnerships between companies and investors structured? 
In principle, an investor participates both in the profits and losses of his investment or partner in relation to the amount of his shares. The amount of the shares varies from case to case. 

De facto, of course, anyone who sells shares in a company loses some control over the company. However, the way in which this transfer of control takes place is a key factor that a seller can influence significantly before a transaction is concluded – a crucial point where we at Mayland come into action and determine together with the current owner and management of a company how this transfer should be structured from the seller’s perspective.
On the other hand, such a partnership also has enormous advantages. Besides the additional financial resources, there is certainly the network of an investor to be mentioned here, which the organizer can now access and thus partly improve his operative business.
Promoting events has always been risky. Combine that with increasing costs and the need to meet more and more regulations, and the question arises: Is it even possible to be successful in today’s live entertainment industry without financial backing?  
Of course it’s not impossible. Many examples, including Parookaville, have shown over the years that it can run perfectly well without a partner. Meanwhile, we assume that single players will become a rarity in the medium term and that the market will consolidate more and more in the future. 
In addition to the financial means, the know-how and the international network of a new partner should, of course, be mentioned here, with the help of which the entrepreneur can further strengthen the position in the domestic market.
Also, the marketing of the own festival abroad or even the establishment of a spin-off abroad seems to be easier to realize with rather than without a partner. So we definitely see the advantages of a joint partnership outweighing the disadvantages.  
With regards to 2020, you already mentioned that consolidation will only continue, right?   
With regard to the festival sector, we observe an increased pressure to consolidate. Small, up-and-coming festivals are facing difficulties in asserting themselves against the still growing, established festivals. 
On the other hand, the big players in the industry are trying to expand and diversify their portfolio in order to minimize risks and to be represented globally and across genres.
Will new investors enter the market this year?   
With the first signs of a recession now approaching, we are noticing increasing uncertainty among investors and assume that they will realign themselves in the course of an economic downturn and focus more strongly on anti-cyclical markets such as the events market. 
Is there still room for independent promoters in 2020?
In the future it will become increasingly difficult for single players to escape the pressure of consolidation, but they should not let themselves be unsettled by the question of independence. 
Even if an entrepreneur should sell the majority of his shares, this does not necessarily mean that he will leave the company directly or that he will no longer have any influence. On the contrary. Let us play this out. In many cases, the seller is interested in the responsible continuation of his company, the identification of a suitable successor, the need for additional financial resources or know-how, the development of further market shares or, in the case of an already very well-running company, simply in “bringing some of the money over the wall” – these are all perfectly understandable motives for dealing with the topic of investment from the entrepreneurial point of view. 
How the joint cooperation will then be shaped in the future is not fixed from the outset and can be defined more precisely within the M&A process, e.g. whether the entrepreneur wants to leave the company directly or whether he wants to continue for a few more years and which common goals are to be achieved. … In the end it is of course solely his decision with whom he wants to continue and how the “interdependent relationship” should be structured.