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Original title: The US sports industry ushered in a wave of private equity investment, the return rate of investment in the team is much higher than the stock market
With the explosive growth in the value of sports franchises, industry insiders have been predicting that large sports teams will have private equity for many years. And this prediction has come true, the US and European sports circles are ushering in a wave of private equity investment.
In the past year or so, Arctos Sports Partners, a private equity firm, has placed bets on 12 American teams, including MLB’s Boston Red Sox and American Pro. The Golden State Warriors of the NBA. In April of this year, the private equity fund acquired 5% of the Golden State Warriors for $275 million.
In addition, other private equity fund companies have also entered the market. Blue Owl Capital’s Dyal Capital (Dyal Capital) has acquired the NBA’s Phoenix Sun and Sacramento Kings. ), and Ares Management Corp. invested $1 billion in sports and related media this year, including Spanish football team Atlético de Madrid.
In addition to the NBA, other major sports also have huge investment potential. Major League Baseball (MLB), National Hockey League (NHL) and Major League Soccer (NFL) have allowed the entry of private equity. Major League Soccer (MLS) officials said that private equity transactions will occur this year.
According to data from the US Bureau of Economic Analysis, in the past 20 years, the income of MLB teams and top European football clubs has increased by more than 7% annually. Only the income of health care and education services can match the results.(The technology industry is excluded from the data).
According to Wylie Fernyhough, senior analyst of private equity at research services firm PitchBook, the target rate of return for high-quality American teams is between 15% and 20%. Compared with the historical return of the S&P 500, from 2000 to 2020, the annual return of the S&P 500 was 7%, and the return rate of top teams was significantly better than that of S&P 500 companies.
According to data from the data company Knoema, from 2010 to 2020, Forbes’s average valuation of NBA, NFL and MLB teams has risen by 276%, far exceeding the 199% increase in the S&P 500 index.
The sports world ushered in the PE era
Since 2019, multiple sports leagues, including the NBA and MLB, have changed the ownership rules-allowing private equity funds to invest in multiple teams. Therefore, more sports-related private equity funds have used this opportunity to enter the sports industry.
Robert Caporale, co-chair of the Sports Investment Bank’s Game Plan, said, “Now that the league has finally changed its mind, this opens the door for private equity investment.”
An investment expert said that in the next 20 years, the value of NBA teams on the Forbes rankings will rise from the current position of $1.3 billion to $5 billion to $5-10 billion.
Currently, private equity investors will not only invest in the team, but also in the league. Earlier this month, Spain’s top football league La Liga said it agreed in principle to reach an agreement with the private equity firm CVC Capital Partners. CVC will provide 2.7 billion euros ($3.17 billion) to the alliance in exchange for 10% of its revenue. The alliance will also form a company to carry out various business activities, and CVC will own 10% of the shares.
Blue Owl Senior Managing Director and Diar Investment Team Member Andrew Laurino (Andrew Laurino) said that the financial performance of the team has nothing to do with stocks and bonds, Diar’s goal is to achieve income by investing in different NBA teams Diversification.
Diar does not believe that the success of the investment depends on the team’s record on the court. The company believes that for teams with a higher market share, their revenue should come from local resources, not their share of the league’s revenue. Although the Sacramento Kings have not won many games recently, they have one of the most modern arenas in the league. The large amount of real estate near the arena, including hotels, retail stores and restaurant areas, is the part that adds value to the team.
Private equity firm Sixth Street Partners recently invested in the NBA’s San Antonio Spurs. The company is currently planning a $511 million real estate project that may include team training facilities, biotechnology research institutes, parks, and commercial and medical office space.
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Editor in charge: Yang Yalong
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