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Deloitte’s private equity in sports playbook

Key strategies for capturing value beyond the scoreboard

As private equity reshapes the very fabric of sports ownership, the game plan for owners and investors is clear: Understanding the business world of sports can be a necessity for those seeking to capture value off the field. Deloitte’s private equity in sports playbook lays out some key considerations for making an informed decision before striking a deal.

Private equity’s playbook: The power of the pre-deal analysis

Before diving into the high-stakes world of sports team investments, private equity firms may benefit from assessing the playing field. Understanding the complexities and risks of owning a franchise or asset is important to making informed decisions. Firms may dive deeper into the areas of asset valuation, risk assessment, cash-flow dynamics, and tax structure in the lead up to a sports private equity deal.

Investing in sports assets isn't just about the game—it's a winning strategy for private equity firms looking to capture value. With the promise of hefty returns and growth opportunities, sports investments can be a lucrative way to create portfolio diversification in a firm’s investment strategy. Beyond the thrill of the game, these investments often offer a unique chance for capital appreciation with the bonus of shielding investors from market unpredictability.

Investing in sports presents its own set of unique challenges that differ from traditional private equity investments. With controlling shareholders calling the shots, private equity often finds themselves sidelined when it comes to crucial management decisions and exit strategies. And with valuations soaring across the industry, the competition among firms for noncontrolling ownership can be fierce. Despite the challenges, the allure of the sports industry remains undeniable.

Playbook for owners: Evaluating private equity’s fit

The decision to bring in outside investors is as varied as the game itself, with owners driven by their own unique visions and motivations. With valuations soaring in today’s market, owners may opt to sell a portion of their stake to capitalize on the top-dollar bids private equity firms are known for. And while private equity firms typically seek controlling stakes, noncontrolling interests are more common. For owners, finding the appropriate balance between financial gain and maintaining autonomy is a critical step in navigating the introduction of private equity investment to their team.

Private equity in sports is reshaping the landscape of team ownership, offering owners new financial strategies while maintaining their control. With private equity investments, owners can boost franchise value without giving up full ownership, injecting funds for growth and asset enhancement. The introduction of sports private equity has also ushered in an era of operational excellence, with teams investing in key areas like staffing and planning to stay ahead of the game.

The introduction of private equity investment into a franchise carries risks that stakeholders should carefully consider. When financial interests drive decision-making, there may be a fear that the team’s on-field pursuits could take a back seat to financial gains. Athletes may question whether investors have their best interests at heart, for instance, while owners may worry that private equity investments could be linked directly to on-field performance. The potential risks of private equity in sports underscore the need for a careful assessment of the mutual interests and goals of owners and investors from the start.

Understanding the business world of the sports industry

In the dynamic world of sports private equity, the game extends far beyond the field. Today’s business is no longer just about game day profits; it’s about understanding the business elements of sports that drives success in this arena. A multidisciplinary approach to sports investing that combines leading experts in sports with seasoned business advisors can change the game when it comes to establishing a holistic view of the industry, giving owners and investors alike an unparalleled edge for unlocking new revenue, identifying emerging trends, mitigating risks, and more.

As private equity continues to redefine sports ownership, those who adapt and embrace a strategic approach to investment are often well-positioned to succeed in this dynamic and lucrative industry. Download Deloitte’s complete private equity in sports playbook to read more about private equity in sports—and navigate your investments with confidence.

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