KKR's acquisition of KMR Music Royalties II portfolio for $1.1 billion reaffirms the value of music copyrights and the ever increasing multiples that are being paid. As we all know this is driven by streaming being the fastest growing sector in the music industry, so if you are thinking of joining the likes of Neil Young, Lindsay Buckingham, Paul Simon, Black Sabbath and Bruno Mars, what are your options as copyright owner?
The answer depends on your personal circumstances but a sale is not always the answer. It is fairly straight forward to obtain bank finance which is secured against the royalty income. You will need the supporting royalty statements and contracts.
If a sale is your preferred option then make sure you get the best possible price by preparing the catalogue for sale. A 10% increase in income by carefully reviewing how the income is collected can make a huge difference to the sale price especially if you are selling on a 25 time multiple. Don't rush the sale and make sure you have captured the pipeline income in the sale.
As this will be a once in a life time event make sure you maximise your after tax return. Review how you are trading and establish whether the sale proceeds will be taxed as income or as a capital gain. If you are trading as a company then try to sell the shares in the business. It could halve the rate of tax you pay.
Kobalt Capital has today (October 19) confirmed that investment giant KKR has acquired the KMR Music Royalties II portfolio for approximately $1.1 billion. KKR is teaming with co-investment partner Dundee Partners – the investment office of the Hendel family – to acquire the catalog, which contains over 62,000 copyrights across multiple genres. The transaction has been completed by Chord Music Partners, a platform established by KKR with Dundee Partners.
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