2012 CFOs to Watch

Live Nation CFO Kathy Willard led the company through a massive,


Where does Kathy Willard find the time? As CFO of the giant entertainment and e-commerce company Live Nation Entertainment since 2007, Willard has handled the financial details of multiple divestitures, spin-offs and more than 200 acquisitions, including the prized though contentious acquisition of Ticketmaster in 2010. She then pulled off a complex post-merger refinancing and integration of two massive companies, forging a singular business that has no equal in the industry. Today, Willard manages an extraordinary global financial structure that supports more than 11,000 venue clients like New York’s Madison Square Garden for which Ticketmaster sells tickets, and supports the concert tours at these venues that Live Nation secures for more than 2,000 artists, about 20,000 shows each year.

Willard is also in charge of the finances of the 128 venues that Live Nation owns or operates as a concert promoter, such as the House of Blues franchise, the Fillmore brand and the Hollywood Palladium.

If only that was the extent of her job. She also must manage the financials related to the company’s 250 contracted entertainers, such as the Eagles, Jimmy Buffett and Christina Aguilera. Then there are artists like Madonna, Jay-Z and U2 that Live Nation does not manage but holds long-term contracts with in relation to their music properties. In the case of U2, the company signed a 12-year deal worth a reported $100 million to sponsor the band’s concerts, control related merchandise and market other rights such as fan sites and premium ticket packages.

Each of Live Nation’s 11,000 venue clients requires its own profit and loss statement, and each has a box office, which means oodles of cash that has to be accounted for and transported to hundreds of banks around the world. Just imagine 50 million people each year lining up to buy tickets using a wide range of currencies. On top of it all, Willard is in a business—entertainment—known for its outsized personalities. Live Nation’s chairman is Irving Azoff, the personal manager of Aguilera and other artists before becoming CEO of Front Line Management and then Ticketmaster. As the Wall Street Journal reported, Azoff “has long been known in the music industry for his short fuse.”

He’s also known for speaking his mind without necessarily conferring with people back at the store. In June, for instance, Azoff and John Malone, chairman of Liberty Media, Live Nation’s biggest shareholder, leaked to the press that they were thinking about taking the company private given the previous year’s concert slump and the usual post-integration blues following a major merger. But as Willard says, “Internally there have not been any official talks about privatization.”

Certainly, this is not a job for the fainthearted. Asked what she does in her off hours, Willard, an executive known for her razor wit, replies, “You mean I’m supposed to leave the office?”

In truth, she is married and has a yellow Labrador retriever that demands what little remains of her time once she gets home. The job does come with benefits beyond the usual, however—free tickets to enough concerts to deafen a teenager. Her personal favorites are U2, Madonna, Paul McCartney and Adele, and she confesses a recent crush on country performer Jason Aldean, the crooner behind “Dirt Road Anthem.”

Willard’s own road to success began in 1998, when she joined what was then SFX Entertainment, founded the previous year. It was acquired in 2000 by Clear Channel, which rebranded it Clear Channel Entertainment prior to spinning it off as a public company called Live Nation in 2005. At the time, the music industry was in free fall as it transformed from a business in which artists made money through sales of recordings to one in which concerts currently account for 80% of their earnings by Willard’s estimate. Record stores were closing across America as the public illegally shared songs or bought them for a dollar a pop online. Live Nation had found its niche.

Having lured major artists like Jay-Z away from their longstanding record labels in mega-million-dollar deals, the concert promoter-slash-ticket seller is so unique that some artists like Bruce Springsteen accuse it of being a near-monopoly. That didn’t stop the Department of Justice from approving the Live Nation-Ticketmaster merger in January 2010. After a year of twists and turns, Justice gave the thumbs up, so long as Live Nation divested Ticketmaster’s Paciolan ticketing operation and licensed its ticketing software to its closest competitor, AEG.

After acquiring Ticketmaster, Live Nation emerged as the world’s event-ticketing leader; one of the top five e-commerce sites on the planet, with more than 26 million unique visitors each month; the No. 1 artist management company; and the leading provider of entertainment marketing solutions that enable more than 800 advertisers to arrest the eyeballs of the more 200 million consumers that Live Nation delivers each year through its live event and digital platforms. Last year the Los Angeles-based company reported $5.1 billion in revenues and a workforce of 6,200.

Riding herd on this wide-ranging behemoth from a finance standpoint is Willard, assisted by “hundreds of accountants” around the world, she says, all of them full-time, salaried positions. “In a post-Sarbanes-Oxley world, we’re fully compliant, but it does take a lot of control processes to make it comfortable for me and Michael [Rapino, Live Nation’s CEO] to sign off on the financials,” she acknowledges.

Indeed, there are no comparable companies Willard can use to benchmark Live Nation’s performance. “American Airlines at least has United to look at, but we have no one,” she explains. “So we make sure we have more information in our hands than other public companies might have, just to be sure we can be as clear as possible. Fortunately, I took this job a long time ago and have grown up with it.”

Of the more than 200 acquisitions whose financial aspects Willard has overseen since coming on board, none were like Ticketmaster. As soon as the deal was announced, angry fans, artists and politicians weighed in with stern opposition. “This merger would give a giant, new entity unrivaled power over concert-goers and the prices they pay,” Sen. Charles Schumer (D-N.Y.) warned DealBook. “It must be viewed skeptically and scrutinized with a fine-toothed comb.”

Live Nation fired back, arguing that consumers would benefit because the combined entity would make it easier for ticket buyers to pick the seats they wanted online, thereby bypassing the “sticker shock” caused when ticket-handling fees are tacked on to the admission price. In testimony before a Senate Judiciary Subcommittee, Azoff disputed allegations of antitrust violations. In this era of technological innovation, he argued that Ticketmaster confronted greater competition from new ticketing software developed by the venues themselves to sidestep Ticketmaster.

Live Nation had just tapped technology to create its own ticketing business. “We had a real need to know who our customer was, and Ticketmaster, as our data provider, didn’t share that information,” Willard notes. “That’s why in 2008 we decided to start our own ticketing company, which we successfully launched the following year. That opened the door to useful conversations with Ticketmaster.”

Whether the merger would pass muster was a roll of the dice, with legal observers giving it a 50-50 chance of prevailing. Willard says the company didn’t know until two weeks before the acquisition officially closed that it was a fait accompli. “There was a lot of frustration and pain, but once we had the green light, we closed the transaction in five days,” she says.

The fast close was a testament to Willard’s copious due diligence in preparation. Each company’s functional heads and senior leaders were aligned with their counterparts to work through the details of what the combined company might look like. When the deal was given the thumbs up, all the documentation was in place and the integration moved forward without a hitch. “Planning aforethought made a huge difference,” Willard says, noting that within nine months Ticketmaster was running on Live Nation’s Oracle ERP system.

She makes it sound too easy. In fact, the companies were two very different businesses with not much overlap. And this was a very, very big deal—the first major merger to come before the Obama administration, at a time when the president was under the gun for bailing out big financial institutions. In addition to the Justice Department’s review, the Securities and Exchange Commission put the proposed transaction under the microscope. “We knew since this was a merger of equals that we would get a lot of SEC review,” Willard concedes.

From a regulatory standpoint, one of the companies had to be the acquirer. “We put more disclosures in our filing than a routine SEC filing,” Willard says. “We were cutting new teeth getting them what they wanted, developing some very interesting matrices that we put in the merger document.”

It was a ton of work, accompanied by additional anxiety because neither Willard nor the CFO at Ticketmaster knew which one would fill the position once the deal closed.

CEO Rapino gives Willard high marks for navigating the financial shoals of the difficult merger. “Kathy was instrumental in guiding our global financial processes and contributing to our strategy during a period of exceptional change and dramatic growth,” Rapino says. “She was a pivotal part of the planning and ultimate integration of our divisions following our merger with Ticketmaster. It’s safe to say that no other financial executive has the depth of Kathy’s experience and insight into the live entertainment industry.”

Once the two companies were one, the combined organization needed to refinance both companies’ debt obligations so it could make one public filing, rather than two. Willard worked with the company’s bankers and finance group to make sure that they were ready to move forward when the time was right.

Live Nation entered into a new $1.2 billion credit facility to replace the existing credit facilities, and also did a $250 million private offering of eight-year notes. “It actually turned out to be fortunate from a timing standpoint,” Willard says. “There was about a one-week window where the market opened up and we could get the entire credit facility refinanced at a good rate.

“We combined the debt and were oversubscribed, in fact,” she adds. “It was a huge win in terms of reducing the filing requirements, and it also allowed us to consolidate for tax purposes. Better to be lucky than good sometimes.”

Luck has nothing to do with it, says Colin Ryan, managing director in Goldman Sachs’ San Francisco-based technology, media and telecom practice. Ryan assisted Willard with the Ticketmaster acquisition, the recent divestitures and refinancing, and even the spin-off back in 2005 that gave birth to Live Nation.

“She was a principal actor in that spin-off, which was a very complex transaction, involving the creation of a public company,” Ryan says. “From there, she pruned the portfolio, selling off the non-core motor sports business and theater division, and went all the way through the Ticketmaster merger, right in the thick of the recession. There couldn’t have been a worse time to try to do a deal. Then, she pulled off a complex financing structure that managed to keep both companies’ capital structures intact. These are not easy things to do. Kathy is a very accomplished CFO. She’s also one smart cookie who is always up for having fun while in the trenches.”

Willard often is asked to make decisions beyond the purview of most big-league CFOs. “We’re a global company involved with the world’s greatest entertainers, so we get some unusual requests,” she says. “For instance, there might be a concert in a small country and I’ll get word that the king wants a handful of tickets—the best seats, of course. We have to ensure that we are giving him tickets just because he's the king, and we are not receiving cheaper police services in return, for example. After all, tickets are a commodity and have to be accounted for."

Obviously, Willard loves what she does—why else take on so much work? “I was sitting back recently at the Rose Bowl with 96,000 other people watching U2 perform,” she says. “I was there early and was just amazed at how all these people came into the venue so smoothly, sat down and then shared a communal experience. I had such an appreciation for all the people I work with every day. I thought, ‘My company does this.’”

Not so bad, after all.

 

Read about Siemens CFO Joe Kaeser here
and EADS CFO Hans Peter Ring here.

 

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