KKR's €1.3B Superstruct Deal: Private Equity Tunes into Festival Scene

In a significant move that underscores private equity's increasing interest in the live entertainment sector, KKR has acquired Superstruct Entertainment for €1.3 billion ($1.4 billion). This acquisition, completed in June 2023, brings 80 diverse live experience events across Europe under the management of one of the world's leading investment firms.

Superstruct's portfolio includes some of Europe's most prominent music festivals, such as Hungary's Sziget Festival, Germany's Wacken Open Air, and Spain's Sonar Festival. These events attract millions of attendees annually, with Sziget being one of the largest music and cultural festivals in Europe and Wacken Open Air holding the title of the world's largest heavy metal festival.

The trend of private equity firms investing in live experiences extends beyond KKR's recent acquisition. In the same month, Blackstone took a stake in Ambassador Theatre Group, known for productions like "Harry Potter and the Cursed Child." Additionally, EQT founder Conni Jonsson has invested in the innovative ABBA Voyage concerts, which feature digital avatars of the iconic Swedish pop group.

This surge in interest from private equity is backed by promising growth projections. Goldman Sachs analysts predict that live music revenues could grow at a 6.5% annual rate through 2030. The sector's appeal to private equity firms lies in its potential for high growth and diversification of risk.

"We see significant potential in the live entertainment sector and believe Superstruct's diverse portfolio of experiences aligns well with our investment strategy."

While the combination of private equity and music festivals may seem incongruous, the live entertainment sector aligns with several key investment criteria. Superstruct's EBITDA is expected to grow at a double-digit rate annually in the short to medium term. The company benefits from data-driven insights provided by music streaming platforms like Spotify, enabling better tailoring of events to consumer preferences.

Moreover, Superstruct boasts a loyal customer base, with about 80% of its seven million attendees being repeat customers. The diverse range of experiences offered by the company helps mitigate risks associated with individual events.

KKR's investment, while not inexpensive at 13 times Superstruct's projected EBITDA for the year, could yield significant returns. Assuming a 15% annual EBITDA growth and a sale at the same valuation multiple after five years, the internal rate of return could reach 25%, based on calculations that factor in debt, interest costs, and taxes.

As private equity firms continue to recognize the potential in live experiences, we may see more investments in this sector. The fusion of financial expertise and cultural events could reshape the landscape of live entertainment, potentially leading to more diverse and well-funded experiences for consumers.