Comments (16)

  • Analyst 2 in IB-M&A
Jun 22, 2022 - 1:06am

Semi related but anyone know wtf Clearlake is thinking on the Chelsea deal?

They're paying an absurd price and the club is known to currently be bleeding money, and not sure how you grow it any more than it's already grown. Seems like a very expensive publicity campaign.

Also, sports teams seem pretty antithetical to a 5 year hold period? I'm sure they'll just do a continuation fund but seems like a weird one to me

  • Analyst 1 in IB - Gen
Jun 22, 2022 - 4:27am

Perhaps they'll have a Chelsea MLS team with the same branding. Could even franchise the Chelsea brand to different leagues 

  • Analyst 1 in IB-M&A
Jun 22, 2022 - 2:22pm

That is a pretty interesting thought but there is 0 chance for that, you would just dilute the brand of the European team for no real benefits

  • Analyst 1 in IB-M&A
Jun 22, 2022 - 2:20pm

You have to see all sports deals as growth investments, broadcasting revenues are set to increase massively in the next few years which explain why all sports assets are trading at such high multiples (>5x EV/Revenues, often much more) thanks to D2C streaming subscriptions. They are negotiated for 5 year periods and increase in a single step at once, but if you look you can see they have grown a lot each round. This is also a revenue stream you can lever the fuck up, as these are contracted and have to be paid by broadcasting organisations no matter what

You can add to that a variety of DTC initiatives (e-sports, betting, etc.) enabled by tech which are severely underdeveloped outside the US for additional top-line growth

Finally plenty of underserved markets for a club like Chelsea e.g. Asia/US, etc, to build and expand fandom

20 years ago sports teams in Europe were uninvestable and pure trophy assets, a lot of things have changed since then (financial fair play, better sharing economics within leagues, broadcasting/streaming revolution, etc.)

All numbers in sports are pretty public and plenty of stats for you to form an opinion, but it is no coincidence the asset class' popularity is booming amongst PE houses (CVC, Sixth Street, RedBird Capital, Dyal Capital Partners, etc.)

Jun 22, 2022 - 9:38am
arb432, what's your opinion? Comment below:

Their secret, like that of most other tech-focused PE funds, is that they've been levered long enterprise SaaS for the past decade. Hard to lose in the 2010s with that strategy. Time will tell if it holds up for their latest vintages.

Obviously that's not all of it. I know they are pretty aggressive with buy-and-builds, and they've done some harrier deals in the past as well which helps. 

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  • Principal in PE - LBOs
Jun 22, 2022 - 3:32pm

Being in the right place (tech) at the right time (2010) at scale.

More broadly, there is no alchemy in finance. Law of the conservation of energy also applies to investing. No return without risk. You can only outrun the risk for so long - in the moment it looks supernatural, but it's just an optical illusion.

In reality, all of that forgone risk hits you all at once.

The market is too efficient for any one participant to dramatically outperform everyone else. So the out-sized performance you typically see for star money managers is 99.9999% outsized risk-taking that is obscured by the current flavor of the day/marketing narrative.

There will be a violent mean reversion and then you'll see all the mediocre talents coming out of the woodwork taking a victory lap at someone else's misfortune.

Jun 22, 2022 - 4:48pm
throwawaybadabing, what's your opinion? Comment below:

With the exception of Renaissance Tech and Berkshire Hathaway - but the former is quite literally irreplaceable because of the dearth of true talent at that level and the latter should be more achievable for some firms but the inherent GP/LP structure misaligns incentives that allows BRK to take the long-term view and wait for that perfect pitch into the strike zone 

  • 1
  • Principal in PE - LBOs
Jun 22, 2022 - 7:38pm

Being in the right place (tech) at the right time (2010) at scale.

More broadly, there is no alchemy in finance. Law of the conservation of energy also applies to investing. No return without risk. You can only outrun the risk for so long - in the moment it looks supernatural, but it's just an optical illusion.

In reality, all of that forgone risk hits you all at once.

The market is too efficient for any one participant to dramatically outperform everyone else. So the out-sized performance you typically see for star money managers is 99.9999% outsized risk-taking that is obscured by the current flavor of the day/marketing narrative.

There will be a violent mean reversion and then you'll see all the mediocre talents coming out of the woodwork taking a victory lap at someone else's misfortune.

this man is a poet

  • Associate 2 in PE - LBOs
Jun 22, 2022 - 9:35pm

Ngl it feels like you're jerkin yourself off here... but you've 100% earned it if it is you, great comment lol

  • Intern in IB - Cov
Jun 24, 2022 - 9:31am

Consequatur quia minima temporibus sapiente suscipit rerum ab. Corrupti aspernatur atque corporis. Mollitia sapiente fugit nemo repellendus.

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