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UFC documents show WME-IMG plans to grow profits and cut costs

An investor document has surfaced which reveals some past details and illuminates plans of what is to come under WME-IMG’s new ownership of UFC in the years to come.

First and foremost, the $4.2 billion price tag which was reported when the UFC sale was made official in July was not quite on the mark. WME-IMG, backed by Silver Lake Partners and KKR, forked over $3,775,000,000 up front to the former owners of the UFC for the promotion, and about $200 million more was used on banker fees and various additional expenses, according to MMAjunkie.

There is big money to make over the next two years in the form of bonuses which have been set based on profit goals. In total, an extra $250 million of “earn-outs” is on the line — 6.2 percent of the reported $4.025 billion value of the UFC.

From June 2015 to June 2016, UFC claimed its EBITDA (earnings before interest, tax and depreciation) was $170 million.

In order to get $175 million of the $250 million bonus, the new owners have to step up the UFC’s earnings from the $170 million set in the last year to $275 million by June 2017 — about a 61 percent profit increase.

To get the remaining $75 million of the bonus, the new owners have to step that number up to $350 million from June 2017 to June 2018.

The document clarifies that the figure are not 100 percent accurate, rather “various estimates and assumptions” about “anticipated results.”

A full 13-PPV schedule is expected over the next year. UFC’s partnership with FOX and other sponsors will have increased rights fees that are expected to bring in about $48 million.

UFC is not just looking to grow though, and is also looking to cut costs. The first step of that process came last week when UFC laid off approximately 15 percent of its workforce. That was just the first phase in a process expected the save the promotion about $71 million. Also part of that, the new owners are looking to cut a $55.4 million payroll to $27 million. A onetime $5 million severance payout will be used to counteract the cuts.

The Ultimate Fighter reality show is taking a hit, with the new owners planning to cut the show’s budget from $27.6 million to $10 million.

The new owners are also not planning much use of the corporate jet the Fertitta brothers and Dana White used to travel around the world, citing, “The corporate airplane is not part of the acquisition and we do not expect such expenses on an ongoing basis.”

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