Many of you know I used to write FORTUNE’s daily dealmaking newsletter Term Sheet, and when I saw that Reese Witherspoon was buying back her media & production company Hello Sunshine, I had to weigh in.
All the coverage I’ve read seems to be missing the point. Here’s how it went down: In 2021, Blackstone-backed Candle Media bought a majority stake in Reese Witherspoon’s Hello Sunshine at an eye-popping $900 million valuation. We all collectively lost our minds.
Here was an actress who built a company valued at nearly $1 billion to prove her thesis that women-led stories were, in fact, commercially valuable. The narrative in 2021 was that Witherspoon had outsmarted Hollywood. And for a while, it looked like that narrative was correct.
Five years later, Witherspoon and French media group Mediawan are buying it back for low-to-mid eight figures. We’re talking something like a 94% haircut. The press is calling it a homecoming.
It’s not.
It’s the market finally realizing what entrepreneurs (like me) know all too well: It’s really damn hard to scale a personality-driven business without the personality.
Hello Sunshine was no run-of-the-mill Hollywood studio. It was a studio whose most valuable asset was Reese Witherspoon herself. It was her book club, her recommendations, her taste, and most of all, her reputation.
When Blackstone bought in, they thought they were buying a scalable media company, buuuuut there’s a little problem with that: You can’t scale Reese Witherspoon.
The mistake is thinking you can take everything people love about a founder, slap a corporate logo on it, and expect the magic to continue. It’s possible, but it’s very, very hard.
I think about this constantly with my media company, The Profile (which, by the way you should subscribe to).
The Profile is not a content factory like some other media outlets. You, dear reader, know me, trust my writing, and likely know my point of view on most things. If I sold the brand tomorrow and walked away, what would be left? A logo and an archive?
That’s key man risk.
Every personality business has it — a newsletter has the writer/editor’s judgement, the book club has a specific person’s taste, a podcast has the host’s unique way of asking questions.
And it’s funny because private equity hates this, but founders romanticize it. A personality-driven business is somehow both powerful and fragile at the same time.
Witherspoon’s whole “homecoming” narrative is complete PR, in my opinion. She sold control of Hello Sunshine when money was dumb. She kept enough equity and creative influence to remain central to the business. And now she’s buying back control, alongside a new partner, at a fraction of its former valuation.
Oh and Mediawan, the Paris-based entertainment group she partnered with, isn’t exactly a white knight either. They’re collecting famous producers (ie: Brad Pitt’s Plan B, Chernin Entertainment, and now Witherspoon) the same way that private equity collected celebrity brands back in 2021.
Anyway, here’s my takeaway: If you’re building something based on your taste, opinion, curation, or skill, think very carefully about what exactly you’re selling. If people are buying your business because they believe in you, what happens if/when you’re no longer part of the deal? (Then again, maybe the savviest founders know how to make that someone else’s problem 🤣)
And I think that’s what makes Reese Witherspoon so brilliant. Hollywood praised her for building a $900 million company, but the real stroke of genius was knowing when to sell it.
Wait a minute, PE taking a big swing and miss on a company they were certain they could scale because they’re good at scaling and (checks notes), it didn’t scale? Call me shocked.
Sarcasm aside, good for her if she wants to run it again. I do kind of wonder why she didn’t just set up something new. Maybe her buyback price was too good to pass up?