Its Game Time for Private Equity

Sports franchise values have skyrocketed, PE has come to major sports teams.

Private investors have been stepping up their interest in football, baseball, basketball, rugby as well as other sports over the past year.


According to data from PitchBook, the total value of private equity investment into the sports industry since 2010 in the US and Europe reached €61.8bn, of which €46.7bn in the US and €15.1bn in Europe.


Between the beginning of 2020 and the end of February 2021, €7.8bn was invested by private equity in sports in these two regions – up from €5.2bn in the whole year of 2019.


Why is it happening now?

 

Why are sports so attractive to investors during a pandemic?

The Covid pandemic and the absence of fans from live events has forced many sports clubs, such as those in the Bundesliga, Germany’s top football league, to seek alternative sources of revenue – such as tapping new audiences through the sale of broadcasting rights.


Financial Times reported that more than 20 private equity firms were in the running to invest €300m in the Bundesliga’s plan to roll out an international online subscription service.


Looking at different leagues, almost 50% of their income, on average, comes from media rights. In a world where streaming and on-demand are king, live content has increased in value and is likely to continue to do so going forward.


The pandemic also made sports teams think of new ways to grow and reach a wider audience. And the disruption of the sporting calendar has only accelerated this trend.


Clubs and leagues are looking for investors who can support them with international expansion, broadcast rights partnerships, new streaming distribution opportunities, betting, and digital.


Who is putting a serious game into Sports investing?

Biggest investors by deal value

PE Investments in Sports (2010 - Present)

 

 

What the future will look like?

The opinions differ when talking about what investment in sports means for the future and how fruitful it will be.


The iconic example for returns on investment in an already established sport is the CVC investment into Formula 1, where the firm turned a $952m investment in 2006 into more than a $6.7bn exit in 2016. This return on investment has been championed as the ideal case study for private equity.

 

Private equity must recognize the curiosity of the sporting landscape and take an open approach to enter the market. Due diligence is important for investors to be able to assess the feasibility of their growth strategies and to recognize where additional diplomacy is required, either to bring customers ‘on-side’ or to align key stakeholders behind a joint mission.


But opportunities within sports are clear, and successful case studies have already begun to validate the investment thesis.

 

Investors and clubs will need to be mindful of potential pitfalls, but collaboration under the right conditions has the potential to drive transformative change and growth within the industry.



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