Sport M&A Scores High
Love it or hate it, sport is everywhere, not only featuring on the back pages of our newspapers, but also dominating the front pages too. The business of sport generates massive revenue – it is estimated the global sports industry is worth almost $600bn, so it is no wonder it has sparked interest from investors over recent years.
So, what makes a sporting deal different from a traditional acquisition?
Sport is huge
It is a busy summer for sport. The Euros in France, the Olympics in Brazil, the prestige of the Wimbledon tennis tournament, Formula One, golf and cricket to name a few. However, the combined revenues of these events pale in insignificance compared to the money generated by the richest sporting franchises – the US’ National Football League, Major League Baseball and National Basketball Association. Collectively, these three US sporting leagues produce an income of over £25bn each year. There are three basic income streams from sport: television rights, ticket sales and the revenue which is generated from stadia, and licensed goods. Last year, the global revenue from ticket sales, media rights and sponsorship deals was estimated to be worth around $80bn.
Several, recent, high-profile deals highlight the vast sums of money involved in the purchase of a sporting organisation. Italian Serie A team, Inter Milan, was recently purchased by a Chinese consortium for an estimated €400m; The Walt Disney Corporation has announced plans to buy a one-third stake in the video streaming division of Major League Baseball (MLB) – a deal which is expected to be approximately $3.5bn; Professional cycling team Cannondale has merged with Australian Pro Continental Drapac for an undisclosed multi-million dollar figure.
These deals highlight the main areas of potential to investors – sports teams, sports leagues, stadia and arenas, and media companies related to sporting activities, and reveal not only the great interest in sport from acquisition companies, but also the amount of money they are willing to invest in order to tap into the unique and fervent, global fan base of most professional teams.
Buying a sporting team, or investing in sport sponsorship rights is different from other, more traditional acquisitions such as a pharmaceutical or technology. Sport is an emotional activity for both participants and its viewers, and often involves a community, both locally and internationally. Issues such as naming rights for stadia or shirt sponsorship deals have ramifications beyond rationality and speak to the very soul of sports fans.
There is undoubtedly huge untapped potential in sport M&A, with Chinese investors for example becoming prominent in football recently. While their financial ambitions may be to reap the rewards of success with their newly-purchased clubs, it is also becoming clear that their long-term goals are also to increase the popularity of the sport in China and elevate the national league to be in a position to rival the rest of the world’s finest. It is an altruistic attitude which, despite its hard-headed financial reality, may set the pattern for sports M&A for many years to come.
With experience in a number of key sectors and representation throughout the Americas, Europe, Africa and Asia, Benchmark International can connect you with the right opportunity. To find out more, visit http://www.benchmarkcorporate.com.