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The situation EMI now finds itself in exemplifies the present-day landscape, in which deep-pocketed private equity cowboys are increasingly eager to swoop in and snap up music industry assets at bargain prices.

BARBARIANS AT THE GATE

I.B. Bad on EMI’s Latest Suitors

Stories this week in the two most respected business dailies allege that EMI Music has been approached by various private equity groups about a possible sale of the company. The two reports appear to contradict each other, with the Financial Times claiming the prospective buyers are KKR and Goldman Sachs, while the Wall Street Journal names European-based Permira Advisors. Some hypothesize that both groups are in play, the second in league with EMI ruler Eric Nicoli, who is attempting to take the company private (as has been rumored), thus ensuring the incumbency of Nicoli and his management team.

The situation EMI now finds itself in exemplifies the present-day landscape, in which deep-pocketed private equity cowboys are increasingly eager to swoop in and snap up music industry assets at bargain prices.

The current feeding frenzy comes in the wake of the killing made by Thomas H. Lee Partners, et al., following their 2003 acquisition of Warner Music Group. But what some see as a vote of confidence in the business on the part of Wall Street can also be perceived as another serious threat to an already troubled industry, considering that the standard endgame of equity investors is to sell their acquired assets off.

In the case of EMI, some contend that EMI Music Publishing could fetch upwards of $4 billion, dwarfing the recent $2.7 billion valuation of EMI as a whole. This scenario inevitably causes industry watchers to fantasize about other possibilities. For example, could EMI’s labels be auctioned off in pieces? There are surely potential buyers out there for the master recordings of the Beatles, Frank Sinatra, the Rolling Stones, the Beach Boys, Norah Jones, Robbie Williams, Coldplay and Radiohead, among other catalog treasures.

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