Rising Private Equity and Venture Capital Investment in Sports
By Ryan Little, Michigan PEVC Analyst
Private Equity and Venture Capital are often associated with small to large financial acquisitions usually in the form of leveraged buyouts structured as mergers, equity purchases or asset purchases. However, in recent years Private Equity has become extremely active within the Sports Industry. This uptick in activity has been observed specifically through the purchases of the Los Angeles Dodgers and the Alliance of American Football (AAF) League, a recent professional football league formed in the United States.
The Los Angeles Dodgers, one of the best teams in Major League Baseball who have appeared in the past two World Series, were bought for $2.3 Billion with Private Equity financing in 2012 by Earvin “Magic” Johnson and Guggenheim Partners (#1 Dowd, 2019). On the sell side of the deal, Blackstone, one of the world’s leading investment firms with 2,500 employees across the world, represented the Dodgers throughout the transaction. Two of the largest investment firms handled the selling of one of the most prestigious teams in all of sports history. This is not an anomaly for the sports industry and this has, in fact, happened many times before. However, in the majority of cases, it has been individuals representing Private Equity firms that have bought shares in sports teams such as Apollo Global Management, Ares Management, Platinum Equity, and many more. The Philadelphia 76ers basketball team, a prime example highlighting just how profitable sports team can be, was bought by Apollo for $280 million in 2011 and are now valued at $1.65 billion (#1 Dowd, 2019).
Venture Capital investment has also played a major role in the formation of the Alliance of American Football League. The unique aspect of this sports league is that it is almost entirely Venture Capital backed, one of the first of its kind. The league was originally back by VCs such as Founders Fund and Slow Ventures and recently received a $250 million investment from Dundon Capital Partners (#2 Dowd, 2019), another large Private Equity firm. It will be interesting to see how this investment develops over time because its primary competition, the National Football League (NFL), has established deep-rooted dominance within the football industry. The AAF faces an uphill battle when it comes to usurping a portion of the NFL market share.
The Private Equity and Venture Capital Industries have undergone immense changes in the past decades when it comes to investment portfolios. Professional sports teams represent extremely valuable assets and have proved extremely profitable, as seen by the recent investments of Private Equity and Venture Capital Firms.
Sources:
#1 Dowd, K. (March 29, 2019). “This day in buyout history: Magic Johnson and the Los Angeles Dodgers meet PE.” PitchBook. https://pitchbook.com/news/articles/this-day-in-buyout-history-magic-johnson-and-the-los-angeles-dodgers-meet-pe
#2 Dowd, K. (March 27, 2019).A”AF owner says league might shut down without NFL participation.” PitchBook. https://pitchbook.com/news/articles/aaf-owner-says-league-might-shut-down-without-nfl-participation
