Private equity investors are enticed by the seemingly never-ending growth in sports-franchise values.
Private equity firms are stuffed with billions of dollars to invest, and pro sports teams are selling for ever higher amounts, making them unaffordable for nearly all individuals.
So it makes sense that private equity firms would get into sports team ownership, and that’s exactly what’s happening, though leagues generally allow just minority stakes for the firms.
In 2021, private equity firms doled out $51 billion on sports deals worldwide, with $3 billion buying minority stakes in teams, according to Pitchbook, as cited by Bloomberg Businessweek.
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Arctos Sports Partners closed a $3 billion private equity fund in October, the biggest-ever first-time private equity fund.
Last year, the firm took a $275 million stake in the National Basketball Association’s Golden State Warriors and a $306 million stake in the NBA’s Sacramento Kings, according media reports.
Private equity investors are enticed by the seemingly never-ending growth in sports-franchise values. One PE manager told Institutional Investor that his firm expects annualized returns in the mid- to high-teens percent.
Why Media Rights Make Money
Stratospheric media rights deals help make sports franchises valuable, and the growth of legal sports gambling represents a relatively new source of revenue.
As for media money, the NFL signed deals with its broadcast partners in 2021 that will bring the league about $110 billion in revenue over 11 years. On the gambling front, legalized U.S. sports betting last year doubled to more than $52.7 billion, according to research firm Morning Consult.
In the past, major U.S. sports leagues kept private equity out of team ownership, worried about complicated and volatile ownership structures.
“But now the leagues have finally come around, and that has opened the floodgates for private equity investment,” Robert Caporale, co-chairman of sports investment bank Game Plan, in Miami Beach, Fla., told Institutional Investor.
In addition to the NBA, Major League Baseball, the National Hockey League, and Major League Soccer allow private equity team ownership stakes too. And the NFL may ultimately follow.
