Photo: Mark Cuban
Today, Bloomberg is hosting the Dealmakers Summit, where a bunch of private equity heavy-hitters talk about the nitty-gritty of the business.So far, one of the most fascinating panels has been about buying sports teams. How are they valued, what makes them a good deal, and most importantly, how do you know a team is up for grabs?
John Moag of Moag & Company had a quick answer to that last question. The tell-tale signs that your favourite sports team is up for sale are age, divorce, and a crumbling stadium.
And that’s where everything clear cut in this business seems to end.
The panel on stage couldn’t even come to a consensus as to whether buying a sports team was a good investment. One panelist, Peter Bynoe, partner and COO at Loop Capital Markets said that when he once spoke to one of his clients about buying a team they asked, “can we steal it?”
Here’s why: If you’re going to buy a sports team, you’ve got to forget concerns about annual cash-flow and expect to hold it for longer than your run-of-the-mill private equity investment before you start to make money.
You’ve got to love your new team.
That said, Moag also pointed out that the compound annual growth rate of major sports leagues has beaten the S&P for the last couple of years, and there are some sweet tax benefits to buying teams.
So how do you decide if a team is worth the billions shelled out?
You’ve got to think about ancillary assets like media rights and real estate. For example, today the New York Islanders started talks to move to the Barclay’s centre in Brooklyn. That, said the panel, makes them a much sweeter deal.
Of course, there are challenges ahead that are changing the game (of games). 80 inch plasma screens and multi-game NFL packages are impacting the value of NFL teams, for one. And as sports go global, dealmakers need to think about how to grow their teams in foreign markets.
Still, deal volume is picking up and valuations for teams are going higher and higher.
“The days of one family buying a NFL team have come to an end,” said Moag.
That means every league is going to have to reconsider its rules for corporate ownership and how much buyers can borrow in order to make a purchase.
As for whether or not more sports teams will IPO, the panel seemed pessimistic.
“I don’t think the public is the right place for sports teams because they’re looking for returns that are not appropriate for sports teams,” said Bynoe. “I don’t see many more of those deals happening because…the market is driven by reality. The numbers don’t work.”
So yeah, having your own sports team is still a billionaires game. Sorry if we crushed your dreams on that one.