September 19, 2007

By Paul Feinberg

Mark LeetsMark Leets (’96) is the new principal/chief financial officer of VMG Partners. Leets has held the CFO title for nearly-six years at The Firm, arguably the most prominent entertainment management company in Hollywood, and will now join The Firm’s board of directors. Founded in 2005 by David Baram, president of The Firm, and Robert Schult, a member of UCLA Anderson’s Board of Visitors (among others) VMG Partners will maintain a strategic partnership with The Firm.

The Firm is best known for the high-profile talent they manage, including rock bands Korn and Linkin Park, rapper Snoop Dogg, actors Leonardo DiCaprio and Cameron Diaz and director Martin Scorcese. Somewhat less publicized is the company’s consumer brand development, though the two realms compliment each other perfectly.

“It was in about 2000 when Puma (the athletic shoe and apparel company) came to us to see if our clients would wear their products,” Leets said. “We went to Korn to see if they would wear Puma gear on tour and in their videos. The band bought into it, they were looking for something to set them apart. Puma stock shot up and we took a check.”

Not all of The Firm’s brand-building deals involved Firm clients. In 2001, the company bought the PONY brand. According to Leets, at the time PONY was a dead brand - no one was even making PONY shoes. The Firm licensed the shoe manufacturing to an outside agent and set about marketing the company. As it happened, then ‘NSYNC member Justin Timberlake was looking for a way to shed his “boy band” persona and wanted to be taken more seriously. And in some circles, “seriously” could mean the then-throwback look of PONY-gear. “In eighteen months, we saw the company go from zero to 50 million dollars in revenue,” Leets said. “And it proved that we could market and build brands not just with Firm clients. We got along well with the whole (entertainment) community.” PONY was sold by The Firm two years later for three times what they paid for it.

As executives at a major entertainment management company, Leets (and Baram) were already in the business of bundling people and products together. A film project, for example, might include putting together the right actors and director. It also could include putting the right (read: Firm clients) on the soundtrack album or on the accompanying video game. It was not a stretch, Leets said, to place the right product, like a sneaker, on the right client or into the right project. “The whole concept was to do brand building with the artists,” Leets said. He also points out that the needs of the client weigh in as well. “When we had (then Firm client) Kelly Clarkson’s tour sponsored by Vitamin Water, there were other beverage companies offering more money. But Kelly’s image worked better with Vitamin Water than it did with some other soft drinks and the relationship was mutually beneficial to her and to the water company.

“So, Dave and I said, ‘Well, this is great. We initiated the PONY deal and we made money on it. We put all this effort into this thing and sold it, but what we need to do is be able to do this on a much larger scale,’” Leets explained. “And private equity firms started coming to The Firm asking us to co-invest with them because they wanted our marketing help.” The feeling at The Firm was that they should be the investor and the owner, not a private equity firm. So, the pair began seeking out experienced private equity experts who had built up and sold consumer brands.

When they met Mike Mauze, a private equity expert with a successful track record building brands, they decided to form a new partnership, which eventually became VMG. Essentially, the partnership married the marketing experience of Leets and Baram with a group who had contacts at large, strategic corporations who might someday acquire the consumer brands VMG was building. That group included Anderson BOV member Bob Schult, who said of Leets, “Private equity requires a broad set of talents in problem solving, leadership skills, a strong background in marketing strategy, and financial acumen,” Schult said. “Not many people can check all the boxes. Mark can and is a great asset to VMG Equity Partners.”

VMG is particular about the type of companies they are seeking. “Whenever [we] look at buying a company, the first question we ask is ‘Who’s going to buy this in five years?” Leets said. “If it’s Vitamin Water, I just want to know ‘Is Coca-Cola going to buy this in five years, yes or no?’” (Coca-Cola bought Vitamin Water for 4.2 billion dollars.)

“And that’s the point. You find these companies and you use the entertainment marketing to build them up, to quickly turbo-charge their sales, their brand and equity. That process leads you to taking a brand at 50 million in sales to 150 million in sales or 200 million in sales in five years and now the big companies are interested in buying it.”

Leets began his post-MBA career as an investment banker at SG Cowan in their entertainment media practice. He then went to work for Merrill Lynch in their global media group. When Leets’ boss from SG Cowan moved to The Firm, Leets joined him there.

At VMG his primary responsibility is to source and find highly-branded consumer products with a large-cache; companies in the lower middle-market. (“Lower middle-market translates to companies with revenue of 10 to 100 million) He is looking for companies where entertainment marketing would potentially make a difference.

Leets believes that the entertainment platform can only “be used so many times.” The key is to find the eight or so companies where said platform can really make a difference. That difference is what Leets and VMG add to the equation. “What do most private equity firms bring to the table? Money. Or maybe they can help you a little operationally or with staffing. We can do that with guys like Bob Schult, too. Bob has unbelievable operating experience. But we also bring this platform that nobody else brings with them. Companies want us to buy them, because we bring such a value add to their company.”

The so-called platform is more complex than just knowing a few stars and getting them to wear a certain brand of shoes or clothing. Leets and company have access to writers and directors who can use a product in a television series or movie. They have inside information about what projects are being made and can match a product to the right project well in advance of its release or even prior to production commencing. These marketing avenues may be keys to building a brand in an ever-changing landscape. “Traditional marketing no longer works,” Leets said. “TIVO killed it. On the other hand, it’s amazing how much time people spend at (gossip web site) TMZ.”

“People want real stuff. They want authenticity. They don’t want to be sold to. What we’re doing is creating a scripted reality for them,” he said.

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