Ricardo Bernard of Akerman is known far and wide for his legal work in the area of private equity, venture capital, M&A, and general corporate matters. Increasingly, however, Bernard has found himself pulled over to the firm’s sports practice.
To learn more about trends involving private equity in the sports industry, we sought out Bernard for the following exclusive interview.
Question: What is driving the buzz around private equity in professional sports and specifically the NFL?
Answer: Much of the buzz we are seeing is driven by the increasing valuation of sports properties. Franchise values, whether you look at the NBA or the NFL, have been consistently up and to the right, often times irrespective of the overall economic conditions. Not to say sports are completely insulated from macroeconomic events, but the industry has been incredibly resilient, at the top end, when you look at the valuations of the biggest sports franchises over the last 20-plus years. Along with the increasing asset prices, we’ve seen record media rights deals that allow teams and leagues to broaden their reach globally. The greater focus on data in sports offers another avenue for private equity to get involved vis-à-vis certain AI-driven products aimed at increasing sports productivity and efficiency. All of this offers greater long-term visibility on revenues. I think these tailwinds offer a great opportunity for private equity firms to diversify into a new asset class that hasn’t shown signs slowing down in terms of future valuations.
Q: Why is this a big deal for professional sports team owners and more broadly the teams?
A: From a strictly financial perspective, the inclusion of private equity in professional sports brings another source of liquidity. First, for owners who may be looking for an exit, private equity offers an additional pool of potential buyers. For leagues, new deep-pocketed owners and the capital injection can finance major infrastructure projects. It’s likely private equity sponsors will introduce innovative strategies on how to increase the value of leagues beyond traditional boundaries by expanding into related industries—sports betting, eSports, sports tech, etc.—to create new opportunities for interconnected portfolios that complement traditional sports.
Q: What trends are you following with regards to PE in the sports industry?
A: The convergence of women’s sports and private equity is emerging as a dynamic and rapidly growing industry. Overall, private equity is helping women’s sports evolve by injecting capital, bolstering their operations and skill sets, and expanding media reach. This momentum is transforming women’s sports into a more mainstream, profitable, and sustainable segment of the industry. I expect this trend to continue in coming years. Globally, we are seeing investors like Michele Kang—owner of the Washington Spirt and Olympique Lyonnais Féminin in France—connect the dots and creating synergies between teams across continents. Similarly, Billie Jean King has proven instrumental in funding and launching the Professional Women’s Hockey League in North America. The recent sale of Angel City FC for $250 million (the highest sale price for a women’s sports team) and Sixth Street Partners’ purchase of Bay FC, along with Carlyle’s $58 million purchase of Seattle Reign FC, all point towards a shift in viewing women’s sports as a profitable business.
Q: What aspects of PE should owners and teams be wary of?
A: While private equity investment in sports has become more common and has been a net positive for leagues, it does present a unique set of challenges that leagues will have to navigate. Historically, sports teams have not had a focus on maximizing profits, but rather long-term sustainability, fan engagement, and winning. How will leagues adjust to partners who want to drive profitability, sometimes at the expense of winning, or owners who have a shorter time horizon with respect to their exit from ownership? Could we see valuations actually decrease as private equity owners become forced sellers due to either terms of their fund agreements or the need for capital to fund other investments? The NFL has mitigated some of these issues by limiting private equity ownership to no more than 10 percent and requiring funds to hold their shares for at least six years. These measures may mitigate some of these potential issues. How professional leagues integrate private equity owners into the long-term vision of the leagues and the partnership that all the owners have a common interest in seeing the league grow and valuations increase over an extended period of time will determine whether they can navigate these challenges successfully.
Q: What qualities should owners and teams be looking for in terms of outside counsel that can assist them?
A: While industry-specific knowledge is a key component—knowing your way around issues related to player contracts, labor relations, and league governance—it’s important to have counsel that has a commercial and strategic mindset. Having counsel that can assist in assessing risks and opportunities, advising on financial implications of certain aspects of a deal and finding solutions that align with long-term strategic goals, is vitally important when weighing whether outside counsel is suitable for a particular matter.
