KKR doubles down on testing; Crestview hopes to repeat ICM success with Gersh

Good morning, Hubsters.

MK Flynn here with the Wire.

KKR just revealed an interesting deal. I’ve got the details below.

Iris Dorbian takes a close look at a recent investment in a Hollywood talent agency that was unveiled the day before the writers’ strike.

Also below, I’ll introduce you to a new reporter who joined the PE Hub team this week!

Testing and measuring
This morning, KKR announced it is acquiring Industrial Physics, a New Castle, Delaware-based maker of testing and measurement instruments for the food and beverage industry.

Following the close of the transaction, Industrial Physics plans to implement KKR’s employee ownership program, which will make all employees owners of the company alongside funds managed by KKR.

Industrial Physics’ products are used to test, measure, inspect and validate the quality of products and samples, aiming to ensure that they are made to specification and are safe for end users.

“Testing and measurement is an attractive market that is poised to continue growing as focus on product quality and supply chain transparency intensifies,” Brandon Brahm, partner at KKR and co-head of the firm’s Ascendant strategy, in today’s deal announcement.

The investment underscores KKR’s conviction in the attractiveness of the broader testing, inspection and certification industry.

Earlier this year, KKR launched a strategic partnership with Amit Agarwal, a former senior executive of Thermo Fisher and Omega Engineering, and Andy Silvernail, KKR executive advisor and the former chairman and CEO of IDEX Corporation, to acquire and build businesses in the Testing, Inspection, and Certification (TIC) industry. KKR committed $250 million in funding for the executive-led platform.

At that time, PE Hub spoke with Agarwal and Brahm to learn more about the TIC platform. You can read that interview here.

The Industrial Physics deal marks the third investment for KKR’s Ascendant Strategy, which backs middle-market businesses in North America. The previous two Ascendant investments are Alchemer and 123Dentist.

Hooray for ….
Although the short-term news in Hollywood may be focused on the writers’ strike, more long-term story lines have included private equity firms making headlines with enthusiastic bets on content creators. PE Hub recently tracked six deals in six months.

Whether the targets are celebrity-founded production companies or more traditional TV and film studios, buyout shops are cutting a swath across Hollywood, inking deals at a breathless pace and super high valuations, writes Iris Dorbian. It’s a trend fueled by the streaming phenomenon, but it’s also one that presents a quandary for some investors who like the space but may not want to incur undue risk.

For Crestview Partners, the solution is to invest not directly in the content creators but in the intermediaries, the agencies that represent the creative talent. Last week, the New York-based PE firm announced that it purchased a forty-five percent stake in talent firm The Gersh Agency.

Crestview is hoping the returns for this deal will echo an earlier one the firm sealed with former portfolio company ICM, Iris reports.

In 2019, Crestview made an initial investment of $100 million in ICM. When ICM was sold to TPG-backed Creative Artists Agency for $750 million in 2022, Crestview’s stake in the talent agency was worth close to $150 million, giving the PE firm a return of 2.2x, according to a source familiar with the transaction.

“We like the media theme of the growing value of high-quality content,” Brian Cassidy, Crestview’s co-president, told Iris. “This is a diversified and downside-protected way of playing that trend. It’s effectively a portfolio of creative assets without an overreliance on hits.”

Welcome aboard
This week, Rafael Canton joined our PE Hub team as a reporter. Like Obey Martin Manayiti and me, Rafael covers private equity-backed deals in North America.

Previously, Rafael has written for Fast Company and Adweek. He loves music and sports, especially the NBA. Fun fact: Rafael is an early-stage “sneakerhead” (shoe collector).
Please send a warm welcome to Rafael at rafael.c@pei.group

And, as always, you can reach Obey at obey.m@peimedia.com and me at mk.flynn@peimedia.com

We’ve still got an opening for a Senior Reporter.

Please feel free to recommend candidates to me! Reporters with experience covering private equity may apply here.

Tomorrow, Obey will be back with more, including insights gleaned this week from attending DealMAX in Las Vegas.

Note: I’ll be on vacation next week and the following Monday. PE Hub Europe’s Craig McGlashan and Nina Lindholm will be helping out with the Wire, along with the usual contributions from Obey and Buyouts’ Chris Witkowsky.

I’ll be back on the 23rd.

Happy dealmaking – and Happy Mother’s Day!

-MK