I had a thought the other day. Are there any firms that have invested in a sports team/franchise as say a 'portfolio company'?
One example, although a bit different, is Elliot Management took control of historic Italian Football team AC Milan this summer after the past owner defaulted on the debt that Elliot lent to him. Instead of flipping Milan right away, Elliot has vowed to run the team at least until the near future. So maybe this will become a case study for this area?
I know there are firms that help raise capital or help match equity partners for some teams. There are also banks that help with the sale of these teams, but the parties in the transactions are usually individuals/families.
I do understand that sports teams aren't always up for sale, but with how quickly the value of a lot of sports franchises have been growing I don't see why one firm wouldn't try their hand at a bidding for control? Or, maybe a firm buys a lower league team (i.e. a non top division European football team) and invests capital to get them to the top league and then exit when the teams value is inflated?
I know I am not backing this with any data, and I also have no knowledge of the ins and outs of running a sports franchise or the economics of that, but being a sports fan myself and in the industry I thought this was an interesting topic.
I'm curious if anyone has any thoughts or insights into the subject.
For a major sport, the risk/returns profile is probably not there. This is just speculation from my end, but if the average hold period is 3-5 years for a fund, getting a 2x or 3x is challenging in a mature sport. If you're going to outbid Tepper on the Panthers (probably in the lower half of value in the league) and pay 2.5b, how likely is it they will be worth 5+b in 2022?
In developing sports or regions it could be more likely. I think there is some VC behind the new american football leagues.
Interesting topic. To answer your first question, yes. For an example take a look at Ontario Teachers and their stake in the Maple Leafs (NHL team).
https://www.forbes.com/sites/nathanvardi/2011/12/09/the-greatest-sports…
With a 3-5 year hold period for an investment, sport franchises are more difficult to realize at a 2x return. Notwithstanding the fallout the GP would have from LPs that the investment was made for vanity more than anything else.
Now you are seeing private equity firms get more creative. CVC most recently owned Formula One, and now is in talks to buy Premiership Rugby (England’s professional rugby competition). This is at the corporate level, similar to the MLS, where the league owns the teams.
At the end of the day, sports franchises are a better fit for longer duration investors, like the infrastructure asset class, as you are now seeing family offices, holding companies (Fenway Sports), and SWFs getting in on the action and buying one, two, or multiple teams.
I forgot to add, NFL and other top sports leagues are similar to exclusive memberships clubs. Just because you have money, it doesn't buy you entry unless the other members (owners) approve the deal as well. AKA, you need league approval to buy a team, it doesn't just go to the highest bidder.
Due to this, teams are less likely to go to PE firms, when the league and owners know the team will be flipped in a few years. This is why you'll more likely see PE or corporate owned teams in less prestigious leagues and conferences both in and outside the U.S.
You're also seeing more teams overseas (outside U,.S.) trade hands because in general this names are less professional managed but compete in sports more popular internationally. Buying a platform like Manchester City (in the EPL) and then expanding the media rights for this team across the globe while also buying bolt-on teams like New York City FC and Melbourne City FC gives meaningful valuation uplift for investors.