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The Rise of Sport-Related M&A and Private Equity Deals

In December 2023, Jim Ratcliffe, CEO of INEOS announced the purchase of 25% of Manchester United for $1.6 bn.

The 71-year-old billionaire was advised by Goldman Sachs and JP Morgan in the transaction.

Both investment banks opened sport-related divisions in 2024 which aim to tap into the $25bn Sport-related M&A market.

Since the pandemic, sport has been viewed as a lucrative investment in the entertainment sector bringing in various revenue streams: fan engagement, merchandising, sponsorship, and franchising.

However, the rationale behind an acquisition often goes beyond financial gains.

Purchasing a sports franchise is a symbol of wealth, and prestige and can also be driven by emotion and excitement, much like an art collector.

Some institutional funds are also looking to diversify their portfolio like Qatar Sports Investments, Saudi PIF, or Bahrain SWF. According to Deloitte, the year 2023 saw the rise of multi-club ownership (MCO).

With 300 clubs operating under MCO, their goal is to unlock synergies and relationships between clubs.

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The emergence of specialized actors in Investment Banking, Private Equity, VC, and Private Debt brings in liquidity and helps create a landscape boosting valuations.

On the sell-side, investment banks provide M&A advisory but also financing solutions when possible.

Goldman Sachs created synergies between its advisory and asset management teams to provide tailored solutions to its very-high-net-worth clients.

Active investment banks include Goldman Sachs, JP Morgan, Guggenheim Securities, The Raine Group, and boutiques like Lazard, Oakwell or Tifosy Capital & Advisory.

On the buy side, one of the most active players is Arctos Partners, an American Private Equity fund focused on sport, media, and entertainment.

The fund leverages its industry expertise to unlock value in sports franchises and related assets.

Its portfolio includes Golden State Warriors, Aston Martin F1, Liverpool FC, LA Dodgers, and a recently acquired 12.5% stake in PSG.

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Other major buy-side investors include Qatar Sports Investment (PSG, Braga, World Padel Tour), 777 Partners (Sevilla FC, Genoa FC, BBL, London Lions), Saudi Public Investment Fund (Newcastle United, Al-Nassr, LIV Golf, F1, Boxing, Horse racing), Ares Management (Miami FC, Eagle Football, Chelsea FC).

As a result of this increased activity, valuations have surged over the last decade.

The sport-related M&A activity reached its peak in 2021 with 284 deals and an overall deal value of $62.35bn.

The current average EV-to-EBITDA multiple range is 15x-20x.

The enterprise multiple, or EV-to-EBITDA ratio, assesses a company’s value by dividing its enterprise value by EBITDA, incorporating debt, cash, stock price, and cash profitability.

Elevated enterprise multiples are anticipated within rapidly expanding sectors, while subdued multiples are typical in industries experiencing sluggish growth.

The sports industry has found a sweet spot as part of the entertainment sector and seems to be there to stay.

The newly created sport-focused teams within investment banks and the increase of buy-side players have helped structure the market and created a fertile ground for further expansion.

Sport-Related Flagship transactions:

  • Qatar Investment Association (advised by Guggenheim) acquired PSG (advised by Goldman Sachs) for an undisclosed amount
  • ENDEAVOR (advised by Morgan Stanley) acquired a majority stake in UFC (advised by Raine) for $4bn
  • Liberty (advised by Morgan Stanley) acquired F1 (advised by JP Morgan) for $4.4bn
  • Clearlake (Advised by Robey Warshaw) acquired Chelsea (advised by Raine) for $4.5bn

To get in contact with feedback on this article please email us at publishing@krugmaninsights.com

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