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The Evolution of Sports Franchise Valuations in North America
In recent years, the financial landscape of North American sports franchises has undergone a remarkable transformation, with team valuations experiencing an astronomical increase. According to a Forbes analysis, franchises in the NFL, NBA, and MLB have seen their worth rise by nearly 1,000% over the last two decades.
Take the Baltimore Ravens, for instance. This team was acquired for $600 million in 2004, and its current estimated market value exceeds $6 billion, as reported by CNBC’s NFL valuations. This stark increase exemplifies the lucrative nature of sports franchise investments in today’s market.
Despite the intense growth in valuation, a significant majority of these teams remain under private ownership, often handed down through affluent families across generations. For many of these owners, sports teams represent more than just businesses; they are cultural icons, symbols of prestige, and vehicles for social influence.
While going public could provide financial liquidity and open doors to new capital, it is not without drawbacks. Publicly traded entities must navigate stringent regulations, face pressures from shareholders, and maintain a level of financial transparency that can be uncomfortable for many owners. The potential for conflicting interests between shareholders and loyal fans also presents a challenge, as does the risk of relinquishing some degree of control through the sale of shares.
The Green Bay Packers stand out as a unique case in professional sports; they operate as a publicly-owned non-profit, where shares are largely treated as collectibles rather than traditional financial investments. In contrast, most teams are governed by a corporate ownership structure. For instance, MSG Sports is the owner of the NBA’s New York Knicks, while Rogers Communications controls significant portions of Canadian franchises like the Toronto Blue Jays. Recently, the Atlanta Braves made headlines by becoming a fully publicly traded entity in 2023, having separated from Liberty Media.
Rather than pursuing public offerings, many sports franchises are now exploring private equity and alternative financing avenues. Investment firms are increasingly permitted to acquire minority stakes—typically between 10% and 30%—in professional teams. Kansas City Chiefs owner Clark Hunt remarked on this trend, referring to it as “a great new source of capital.”
Some franchise owners opt to bypass private equity entirely, instead collaborating with sports investment bankers such as Salvatore Galatioto, who facilitate connections with wealthy individuals or limited partners eager to invest for the sake of exclusivity and a reduced level of control.
However, private equity investors generally have an expectation of exit, which may occur through a future sale or initial public offering (IPO). This anticipated timeframe could drive more franchises to contemplate public ownership as a viable option moving forward. Nevertheless, the leagues themselves maintain a cautious stance regarding public ownership, as they express concerns about the potential disruptions it could introduce, ranging from obligatory financial disclosures to more complicated labor negotiations.
To gain a deeper understanding of the dynamics that keep most professional sports franchises privately owned, consider watching the accompanying video.
Source
www.cnbc.com