Pitch Perfect, Slam Dunk?

January 11, 2023 | Amy Miller, Senior Research Analyst

Combination column and line chart showing annual private equity deal activity in professional sports companies. Chart subtitle: Global private equity investment in professional sports has increased due to attractive investment characteristics. Chart visual description: Data is annual, with 2022 asterisked to note as of August 2022. Left y-axis is labeled Deal Value ($B) and spans $0-7B. Right y-axis is labeled Deal count and ranges from 0 to 60. X-axis is labeled with years from 2014 to 2022. Deal value data corresponds to tan columns. Deal count data is charted with a blue line. Chart data description: By year, 2014 had $0.5B and 17 deals; 2015 had $5B and 29 deals; 2016 $0.6B and 21 deals; 2017 $4B in 43 deals; 2018 $1.7B in 25 deals; 2019 $3.2B in 24 deals; 2020 $1B in 37 deals; 2021 $6.3B in 53 deals; 2022* $6.2B in 21 deals. Chart source: Pitchbook *as of August 2022. End chart description. See disclosures at end of document.

Some of the key hallmarks of an attractive private equity deal include businesses with a loyal and diversified customer base, recession-resistant and diversified revenue streams, and observable, steady growth in historic asset values. While this may be a mission-critical software company, it may also be the English Premier League or the National Basketball Association. A growing consortium of private equity funds has begun to recognize the inherent value of professional sports and is increasingly purchasing stakes in leagues, teams, media rights, and related real estate. As of August, $6.2 billion had already been invested in 2022, with the full year on track to exceed 2021’s $6.3 billion. Much of this can be attributed to the swell of activity in European football leagues, with the Chelsea Football Club comprising nearly half of the 2022 year-to-date total.¹

From an investor’s perspective, professional sports franchises provide economic exposure to a diverse set of assets, low correlation to broader equity markets, and recurring and predictable revenue streams. The observable growth in asset value has also added to private equity’s interest in the segment. In the 20 years ended 2021, the average cumulative price return for professional sports team franchises in the NHL (+467%), the NFL (+558%), the MLB (+669%), and the NBA (+1,057%) all outpaced the S&P (+458%), according to Forbes, Sportico, and Pitchbook data. While valuations have risen with a limited number of franchises available to buy, the numbers reflect the attractive characteristics of the assets, such as broadcasting rights, streaming, and the opportunity to further monetize a dedicated fan base. While still in the early innings (or first quarter, half, or period), this is a sub-segment within private equity worth a keen eye as investment continues to grow.

Print PDF > Pitch Perfect, Slam Dunk

 

¹How private equity is moving into the big leagues, Buyouts Insider, October 2022.

 

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

Amy Miller
Senior Research Analyst

Get to Know Amy

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

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