TKO's $21 Billion Merger of UFC and WWE

Endeavor pulled off a stone-cold stunner last week when they acquired World Wrestling Entertainment in a $21 billion merger with another Endeavor company, the Ultimate Fighting Championship. The two combat sports heavyweights combined to create a new publicly traded company called TKO. Endeavor will hold 51% of the controlling interest in the new company, which will exist as a separate entity from the UFC and WWE, allowing shareholders to have continuous partnerships between UFC and WWE individually while also making money off both. TKO will spend its first 18 months integrating the UFC and WWE, but the company plans to make more acquisitions and expand beyond combat sports later. While it’s doubtful that we will see Jon Jones versus Roman Reigns armed with a metal chair headlining UFC 300, the merger opens up a multitude of creative opportunities for licensing and promotion.

TKO’s biggest promotional asset is its celebrity fighters. From Conor McGregor to John Cena, UFC and WWE boast megastars with audiences beyond the combat sports fanbase. These athletes could be used as brand ambassadors, shooting commercials for UFC and WWE, appearing at major events in the crowd, and promoting the organizations on their social media platforms. Influencer marketing is a highly effective way to cut through the noise and connect with an audience. Using UFC fighters to promote WWE events and vice versa, TKO can convince fans of one organization to tune in to the other.

The benefits of this partnership aren’t exclusive to TKO shareholders. The fighters stand to profit significantly from the merger as well. TKO majority shareholder Endeavor is one of the biggest talent agencies in the world, and their expertise in licensing and global partnerships will open up countless avenues for fighters to sign merchandising deals, appear in commercials, and more.

Showing up at events and appearing in ads is just the tip of the promotional integration iceberg for TKO. UFC CFO Lawrence Epstein has speculated that the two organizations could hold major events in the same city on the same weekend. The combined prowess of UFC and WWE gives TKO immense leverage when negotiating with tourism authorities if they sell the two as a package deal.

TKO’s first challenge will come sooner than later. UFC’s deal with ESPN is up in 2025, WWE’s TV deals with NBCUniversal and Fox are up in October 2024, and WWE’s digital rights agreement with Peacock ends in 2026, leaving Endeavor to negotiate new contracts for both properties. Some have suggested that TKO will create a streaming service of its own, described by ESPN as “a one-stop shop where you could watch WrestleMania and the UFC’s big pay-per-view events in the same place.”

Since streaming now accounts for 39% of all TV viewing in the U.S., it makes sense that TKO wants to get in on the action. But experts are skeptical. Robert Mitchell, founder and principal of content strategy consulting firm Mitchell Partnership Alliances, thinks creating a new streaming service is unnecessary.

“A streaming service is unlikely because it is so capital investment intensive,” Mitchell said. “I think they can do quite well in licensing the rights. Look at the NFL and the NBA. They do not have to absorb all the infrastructure and overhead costs needed for streaming.”

Endeavor's merger of UFC and WWE demonstrates the power of identifying and capitalizing on synergies between businesses. When two entities with complementary strengths come together, it can create a stronger, more competitive entity. Emerging entrepreneurs would do well to learn this lesson early.