Stage Entertainment hires Alvarez to review operations

03 February 2016 Consultancy.uk

Musical company Stage Entertainment is undergoing a considerable reorganisation. Over the past financial year, the company posted a €19 million loss due to inefficiency issues and the impact of a few underperforming productions. As part of the move to rectify the situation, Stage Entertainment has hired Alvarez & Marsal to oversee the restructuring of the organisation, which will include the loss of between 350 to 400 jobs.

Stage Entertainment was established in 1998 as a spin-off from the Dutch entertainment company Endemol. Under the leadership of Joop van den Ende the musical company grew to become the largest musical producer in Europe. Stage Entertainment is active in eight countries, including Russia and the US. The company not only produces musicals, but also has a network of theatres at its disposal and was until recently active in ticket sales. Well-known Stage Entertainment musicals currently running include Grease, The Bodyguard, The Twins and Robert Long.

In a deal announced in July and closed mid-September 2015, Van den Ende sold 60% of his shares to CVC Capital Partners, a British private equity house – the other 40% remained within his pockets. One reasons cited to sell his majority share of the company was that it needed a more professional hand. In an interview on the Dutch radio Van den Ende remarked that family business such as Stage Entertainment sometimes forget “to pull the organisational belt tight.” Following the closing of the transaction, Van den Ende stepped down from his role of CEO of the company and now serves as a part-time advisor. His place has been taken by Just Spee, who previously worked as CFO and later CEO of Endemol Group. 

Reorganisation plan
Around four months later the need for professionalisation indeed proved to be necessary. Of the approximately 2,650 jobs at the company, between 350 and 400 will be lost. This drastic reorganisation is necessary to return the profitability of the musical business back up above the line. In the past fiscal year, which ran from August 2014 to July 2015, Stage Entertainment posted a loss of €9.1 million, while revenues decreased by €32 million to €482 million. The year previous, the company turned a net profit of more than € 11.5 million. In a bid to recover profitability Van den Ende earlier decided to say goodbye to the firm’s ticketing activities.

Alvarez & Marsal
The reorganisation plan stems from an analysis conducted by Alvarez & Marsal, a consulting firm that gained worldwide fame for its role as the lead administrator of the Lehman Brothers bankruptcy. The board of Stage Entertainment and CVC Capital Partners hired the management consultants to examine the different divisions in performance, efficiency and potential cost savings and risk reductions. Little is known about the RFP process – a remarkable detail is that Stage Entertainment CEO Spee worked for Alvarez & Marsal between 2005 and 2013 as the Managing Director for Europe. During his time with the consulting firm he served for around two years as the Interim CFO of Endemol, after which he was tempted to make the switch to CEO of Stage.

Meanwhile, the reorganisation is in full swing. Temporary contracts, for a while now, are no longer being extended. 20 employees, including the Netherlands’ commercial director, were sacked on the 1st February. In Germany the musical Hinterm Horizont about pop artist Udo Lindenberg has been terminated (per August) and the theatre at Potsdamer Platz will be closed on 1 September. "We are now in the most painful phase of the reorganisation where it becomes palpable. It is now about our people, faces that you're going to miss. We know that this must happen. But it feels terrible," says Maarten van Nispen, spokesman of Stage Entertainment.

Across the board, under the current plans, between 350 and 400 jobs will disappear from the musical production company. On the basis of the Alvarez & Marsal research further decisions may still follow. The company for instance could exit from one or more countries in which it operates. The company will also consider whether always producing its own musicals and shows are the best way to go – outsourcing some activities could mean a reduction in the financial risk.

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