APPENDIX
8. Ingenious Media plc
8.1 Ingenious Media Group plc is the UK's
pre-eminent media investment and advisory group working with the
cream of British creative companies and talent. Since establishment
in 1998, Ingenious has introduced approximately £3 billion
of new capital to the sector, providing venture capital and production
finance, as well as originating market leading transactions through
its corporate finance arm. Ingenious is one of Britain's most
successful companies, being ranked a record number of times in
The Sunday Times' Fast Track for profit and turnover growth.
8.2 Ingenious is known for its specialist,
innovative approach to investment in the media sector including:
— investing behind Simon Fuller's 19
Entertainment, the creator of American Idol and Pop Idol,
subsequently acquired last year by US company CKX Inc for £100
million;
— creating Britain's newest and fast
growing music publishing company, Stage 3 Music Ltd, raising £50
million of acquisition capital and purchasing catalogues including
Gerry Raferty, Aerosmith and ZZ Top;
— investing in Lionhead Studios, one
of thre world's leading Games developers based in Guildford whose
2004 title, Fable, was one of the fastest selling games
in the US market;
— advising Shed Productions Ltd (Footballers
Wives) and RDF (Fakin' it) regarding their listing
on London's AIM market;
— devising, structuring and executing
on Robbie Williams' ground breaking multi-platform rights deal
with EMI;
— providing finance to leading British
film producers and talent behind Vera Drake, Girl with a Pearl
Earring, Shaun of the Dead, Kingdom of Heaven; and
— launching a £45 million music
fund to invest in new artists and bands.
8.3 Ingenious' objective is to be a provider
of independent capital to the creative industries, breaking the
traditional reliance of these companies on funding from large
international conglomerates or "majors". This enables
them to have greater economic autonomy within the global media
economy, encouraging value growth in the domestic sector.
8.4 Ingenious acts as a bridge between investment
and the creative industries through its unique network of media
contacts, professional intermediaries and investors. Our sphere
of influence is best summarised by the graphic below.
Ingenious' reach across the UK Media sector
8.5 Ingenious has been successful in attracting
investment to the UK media sector because the sector is dynamic,
fast growing and can generate potential returns better than other
industry sectors.
8.6 The Group was founded by Patrick McKenna,
formerly Chief Executive of Lord Lloyd Webber's Really Useful
Group and prior to that, head of media at Deloitte & Touche
Ross accountants. The principal ambition of Ingenious on foundation
was to be a new and significant source of independent investment
capital to the creative industries, a bridge between City financiers
and creative companies. Ingenious was uniquely positioned to achieve
this through its core management team, which combined senior media
professionals with senior professionals drawn from the banking,
finance and private equity industries, creating a powerful blend
of specialist media and financial knowledge.
9. Working with Britain's best creative companies
and talent
Ingenious has both invested in Britain's leading
creative companies and talent as well as originated market leading
transactions:
9.1 Ingenious Corporate Finance (ICFL) concentrates
on M&A and deal structuring within the media sector and has
been at the centre of many of the sector's most important transactions.
ICFL structured Robbie Williams' ground breaking new artist deal
with EMI in 2002, which has been widely recognised as the new
model for artist deals. Under this arrangement, Robbie created
his own company which owns his recording and publishing rights
and into which EMI invested. Previously Robbie had been contracted
under a recording agreement to EMI but under his new deal, he
retained greater control of his creative works, whilst EMI benefited
from participating in all of his works, including for the first
time live events.
9.2 ICFL has been the leading player in
the consolidation of the independent television production sector
following on from the changes in rights ownership announced in
the 2003 Communications Act and has represented Britain's leading
production companies. ICFL identified that the reversion of rights
to independent companies would enable them to more successfully
attract investment, but only if such companies could achieve sufficient
scale. ICFL represented Hat Trick productions (Have I got news
for you) in securing venture capital investment from Kleinwort
Capital and advised Shed Productions (Footballers Wives)
and RDF (Faking It) in their successful floats on the AIM
market. These transactions represented a growing interest and
confidence in the creative industries from both private and public
markets, demonstrating that companies that are properly structured
and advised can attract significant levels of finance without
recourse to the "majors".
Recent ICFL deals:
£68.5 million acquisition by Arqiva
(July 2005)
Ingenious Corporate Finance acted as a financial
advisor to the shareholders of the vendor (The Carlyle Group)
£194 million sale to Telewest Global Inc.
(May 2005)
Ingenious Corporate Finance acted as a financial
advisor to the shareholders of Sit-Up Ltd
£48.8 million AIM Flotation (May 2005)
Ingenious Corporate Finance acted as a financial
advisor to the shareholders of RDF Media Ltd
£100 million sale to CKX Inc. (March 2005)
Ingenious Corporate Finance acted as a financial
advisor to the shareholders of 19 Entertainment Ltd
£44 million AIM flotation (March 2005)
Ingenious Corporate Finance acted as a financial
advisor to the shareholders of Shed Productions plc
£37.5 million equity and debt capital raising
from Apx Partners and HSBC Private Bank
Ingenious Corporate Finance acted as arranger
and advisor to the shareholders of Stage Three Ltd
Ingenious Ventures (IVL), the private equity
division of the Group, was established in 2001, managing a venture
capital fund on behalf of UBS Capital and the Group. IVL uses
its specialist industry knowledge and connections to invest in
the best of British creative companies. Significantly out of its
first portfolio of five companies, only one came from the open
market, the majority being identified direct by IVL from the sector,
or created directly as an initiative of IVL.
9.3 IVL's first investment, 19 Management
Ltd, is one of this country's most successful creative companies,
lead by Simon Fuller, formerly the manager of Spice Girls. 19
was behind the globally successful TV format Pop Idol,
whose US version, American Idol, has been one of the most
successful network shows in the US ever. This format has brought
new British talent to the screen—from Simon Cowell to Will
Young —and has generated millions of pounds of overseas
revenues to 19. IVL worked with Simon Fuller to create a multi-rights
owning production company and then provided £5 million of
working capital to the company to enable it to execute on its
plan. In March 2005, 19 was acquired by the US media conglomerate,
CKX Inc, for over £100 million, a powerful indication of
the value US buyers put on successful British media companies.
9.4 In addition to 19, IVL has invested
in Cream, a live events and dance music companies that runs one
of the largest music festivals in the UK, Creamfields.
Lionhead Studios in which IVL invested in 2003, is one of the
world's best known computer games developers, producing games
for the worldwide market. Its release of Fable in 2004
was the fastest selling title on the X-Box games console in the
US for that year. Peter Molyneaux, the founder of Lionhead, is
widely regarded internationally as being one of the most important
figures in the games industry.
9.5 As a result of the changes to the rights
owning position for independent TV producers, IVL identified that
smaller to mid size producers would want to exploit these rights
independently from the broadcasters who had traditionally done
so. However, as a consequence of the reversion of rights, IVL
also recognised that broadcasters might provide less than 100%
of new production budgets on the basis that international rights
were not automatically acquired on commissioning. Accordingly
IVL established and funded ID Distribution, as an independent
international TV rights distribution company, to represent these
producers. By providing sufficient capital to ID, ID is able to
provide cash flow or deficit finance to producers to enable them
to close the gap budgets. IVL identified the management team to
operate the company, drew up the business and strategy plan and
has worked alongside management to develop the companies business.
ID was listed in its first year of trading as one of the top 12
distribution companies in the country.
9.6 Another example of IVL's generation
of investment propositions internally is Stage 3 Music Ltd. Stage
3 is a music publisher, acquiring music rights catalogues and
exploiting these internationally. When IVL came up with the idea
to create a new music publishing company (2003), market sentiment
was generally very negative about music rights due to the impact
of digital piracy. However, IVL recognised that music publishing
was not affected by piracy and that the value of music rights
would continue to appreciate. It located a manager for its concept,
Steve Lewis, a veteran music publisher, and funded the start up
costs of Stage 3. In 2004 Ingenious successfully raised a further
£50 million of acquisition capital from Apax Partners and
HSBC enabling Stage 3 to purchase a number of premium music catalogues—Gerry
Raferty, Aerosmith and ZZ Top. Stage 3 is now amongst
the leading independent music publishers worldwide.
10. Ingenious Investments provides production
finance to the film, TV, games and music industries. Its activities
underscore the original aim of Ingenious to break the stranglehold
of the major conglomerates on financing creative companies and
enable those companies to retain more of the value in their production.
Investments have financed many leading films,
including some of Britains most successful films and talent:
Director: Ridley Scott
Producer: Ridley Scott, Terry Needham
Cast: Orlando Bloom, Liam Neeson
Director: John Madden
Producer: John Hart, Jeff Shar, Alison Owen
Cast: Gwyneth Paltrow, Jake Gyllenhall
Director: Edgar Wright
Producer: Nira Park
Cast: Simon Pegg, Kate Ashfield
Director: Mike Leigh
Producer: Simon Channing-Williams
Cast: Imelda Staunton, Phil Davis
Director: Mike Nichols
Producer: Scott Rudin
Cast: Julia Roberts, Clive Owen, Jude Law, Natalie Portman
Director: Paul W S Anderson
Producer: John Davis
Cast: Sanaa Lathan, Paoul Bova
10.1 In 2005, Ingenious launched a new music
fund, the Ingenious Music VCT, specifically aimed at providing
investment in new acts and bands. Ingenious launched this as a
response to the needs of the music industry, particularly the
independent sector, whose traditional source of finance, the majors,
were reducing their levels of investment as a result of the impact
of piracy and technological changes on their businesses. The VCT
was the fastest selling VCT with investors in 2005, showing the
appeal creative industries can have to investors.
10.2 Ingenious represents the view of investors
10.3 Ingenious' views set out in this submission
are made in its position as a leading financier in the sector.
The Group works closely with the leading creative talent and organisations
in the country and its aim is to identify and invest in the best
opportunities available. This gives Ingenious a vested interest
in ensuring that the creative industries remain an attractive
place for investors to place their money and for the industry
to continue to grow.
10.4 Investment flows into the sector are
impacted by various factors, but changes in legislation, regulation
and technology are important drivers to the sector.
27 February 2006
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