Six years ago, an outspoken music executive named Merck Mercuriadis sparked a new wave of deals in the industry when his company, Hipgnosis, began buying up the music catalogs of artists like Neil Young, Shakira, Justin Bieber and the Red Hot Chili Peppers.
Now Mercuriadis, who once managed Beyoncé and Elton John, is leaving the company after its assets were sold to private equity giant Blackstone following a tumultuous year that involved a shareholder revolt, an accounting scandal and a bidding war.
In the company’s complex structure, the Hipgnosis Songs Fund is an “investment fund,” which is listed on the London Stock Exchange and holds the rights to tens of thousands of songs. A separate company, Hipgnosis Song Management — which has been run by Mercuriadis — is its “investment adviser,” doing much of the work of negotiating and managing those songs. In 2021, Blackstone invested $1 billion to take majority control of the advisory firm.
The board of Hipgnosis Songs Fund voted Monday to accept Blackstone’s $1.6 billion offer for the company’s assets, the firm announced Tuesday.
After going public in 2018, Hipgnosis got off to a flying start, embarking on a spending spree on artists’ music rights that eventually surpassed $2 billion and making a pitch to investors that pop music royalties could be “ more valuable than gold or oil .”
Mr. Mercuriadis also regularly attacked the corporate conglomerates that dominate the music industry, portraying them as owning too much content to manage properly. In particular, others in the industry complained that Hipgnosis was overpaying for catalogs, driving up prices across the board. In 2021 alone, the music industry had $5.3 billion in catalog transactions, much of it from deals with individual artists, according to an estimate by Midia, which studies digital media and the music industry.
“People see songs as inanimate objects; I don’t,” Mercuriadis told The New York Times in a 2020 interview. “I think they are the great energy that makes the world go round, and I think they deserve to be managed with the same level of responsibility as human beings.”
But last year, investors in the Hipgnosis Songs Fund became unhappy with the company’s share price, which had fallen well below the value of its assets, as calculated by third parties.
In October, shareholders voted against maintaining the company’s structure. That triggered a series of changes, including a drastic review by a new financial adviser that reduced the value of the company’s assets by 26 percent; the report also found that Hipgnosis Song Management had overpaid for much of its catalog and overstated the fund’s revenue and profits.
In April, Hipgnosis Songs Fund reached a tentative agreement to sell its assets for $1.4 billion to Concord, a major American independent music company whose portfolio includes labels such as Fantasy, Rounder and Loma Vista. But a bidding war with Blackstone ensued, with Blackstone coming in with the winning bid of $1.31 per share.
Last week, Mercuriadis announced that he would be leaving Hipgnosis Song Management once Blackstone’s acquisition of the full catalog was completed.
“This is a timely opportunity for me to undertake a strategic shift in focus,” he said in a statement , “and spend more time advocating for songwriters to ensure they are fairly compensated for their work.”
