Due Diligence Steps When Considering Buying a Music Festival Entity.

There are numerous reasons why a festival entity will become available for acquisition typically including ownership retirement or financial struggles. Corporate players like Live Nation make regular acquisitions of large festivals but independent event organisations can also make acquisitions of smaller festivals. What due diligence steps are taken in considering a purchase.

Music festivals have a reputation as very high-risk investments and are not recommended for those without extensive industry experience. Despite this there are sometimes situations where a festival becomes available for purchase which may be an attractive proposition for an existing event organisation looking to expand their business. Many festivals are run on an informal basis making it very difficult to conduct thorough due diligence. There are, however, essential data and information that a potential purchaser should look for. 

Legal Status. 
Many festivals can have complex ownership structures, so it is essential to establish which legal entity owns the brand and assets along with who the shareholders are. Typical legal structures can include Partnerships and Limited Liability companies. All these have a legal obligation to submit shareholder information, dividend payments and annual financial accounts for example. This data must match that provided by the individuals selling. 

Financial Data. 
The selling entity must be able to submit comprehensive financial data including profit and loss statements, balance sheets and cash flow statements from at least the last 3 years, all of which must have been correctly audited. This data will indicate the financial health or otherwise of the entity. In addition, there should be evidence of tax returns showing if any tax payments are outstanding. A comprehensive report on creditors and debtors can also show the current financial health of the company. A deep dive into financial data should show the revenue streams for ticket and merchandise sales, sponsorship deals and vendor pitch space sales. More importantly an analysis of costs incurred can quickly indicate if the event is viable. Costs can include staff, artist curation, production, marketing, insurance, licences and event suppliers or contractors. Finally, it’s essential to establish if the entity has any outstanding legal disputes with festival-goers, suppliers or artists for example. 

Assets. 
A festival entity rarely has valuable physical assets as they often work out of rented office space and buy in all the services they need to operate events. Aside from some office furniture, computer equipment and software, the key assets of the festival will be the festival-goer and ticket buyer data along with the brand and reputation. This makes valuation very subjective, and the data is only valuable if it is recent (last 12 months) and has been collected and kept up to date in accordance with GDPR compliance. The selling entity may be able to provide some evidence of their brand presence and reputation through media coverage statistics along with social media channel followers and reviews for example. 

Ongoing Contracts and Deals. 
A deep dive into existing contracts and deals can indicate long term financial commitments and revenue streams. This can include staff employee contracts, deals with artists, sponsorship agreements and venue or site lease contracts. It is essential to understand if any contracts and agreements will transfer to new owners in the event of a business sale and can often make or break a deal. 

Other Factors for Consideration. 
Potential buyers need to understand the accuracy of any long-term projections and growth potential for festival-goer attendance and ticket sales revenues. Does the event have good sustainability credentials and corporate governance guidelines? What are the relationships with local communities like and are local authorities seen as favourable partners. Owners of music festival entities wishing to sell their events will always overvalue the asking price, for potential buyers the key value lies in the festival-goer data and brand reputation. Any new owner may continue the festival using their own operational procedures but with access to festival-goer data from their own existing event giving them a wider audience to target. Equally a new owner can use the purchased festival-goer data to target ticket sales for their own events. 

For festival organisers planning their next event using a software management platform like Festival Pro gives them all the functionality they need manage every aspect of their event logistics. The guys who are responsible for this software have been in the front line of event management for many years and the features are built from that experience and are performance artists themselves. The Festival Pro platform is easy to use and has comprehensive features with specific modules for managing artists, contractors, venues/stages, vendors, volunteers, sponsors, guestlists, ticketing, site planning, cashless payments and contactless ordering.

Image by Arkius Robson via Pexels

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