Ari Emanuel’s Endeavor is being taken private in a $13 billion deal with private equity firm Silver Lake, making it the biggest sports technology M&A deal in six months.
Jeff Bottari/Zuffa LLC
In February, Disney and Indian conglomerate Reliance agreed to merge media platforms Star India and Viacom18 in a $3.1 billion deal. Just a month later, private equity firm Silver Lake inked a $13 billion deal to take entertainment conglomerate Endeavor private, while Liberty Media acquired Dorna Sports, commercial rights holder of the MotoGP World Championship, for $46 million. agreed to pay $1 billion.
These deals were shocking, but they weren’t the only thing that rocked the sports technology industry. There were three mergers and acquisitions worth at least $1 billion in the first half of 2024, bringing the industry total to a record 225, according to a report released Thursday by investment bank Drake Star. The bank said total disclosures reached $27.3 billion, also the highest level in six months. This period far exceeded both the first half of 2023 ($16.1 billion with 165 deals) and the second half ($8.6 billion with 163 deals).
“Sports as an asset class is the hottest sector at the moment and one of the categories with the most activity,” said Mohit Pareek, principal at Drake Star and co-author of the report. says Mr. “Whether you talk about digital media rights or the entry of all the FAANGs like Apple and Amazon, everyone is trying to get a piece of the sports puzzle.”
It wasn’t always like that. “There’s an old adage in capital: ‘Nobody ever made a dime in sports,'” says Paul Martino, co-founder of venture fund Bullpen Capital, during his early days as an angel investor. Looking back on those days. But that narrative has changed over the past two decades as team values have exploded. For example, in Forbes magazine’s recent ranking of the NFL’s most valuable teams, the average value of a franchise was $5.7 billion, an increase of 11% from 2023 and 77% from 2020.
Still, as price tags soar and the league maintains strict ownership requirements, one of the few team shares on sale is becoming increasingly difficult to come by. And although some professional leagues have recently relaxed rules regarding private equity and other institutional capital, the path to team ownership also remains available only to a select few with vast resources. It is.
Instead, investors eager to get into the sports space are focusing on wearables and performance enhancement (99 of 225 M&A deals in a new Drake Star report), fan engagement and experiences (35), The company appears to be turning its attention to adjacent businesses in fields such as media. and broadcasting (20). Other categories of interest include data analytics, ticketing, venue management, and artificial intelligence, as well as all areas of technology investment.
The majority of mergers and acquisitions in Drake Star’s report involve early-stage startups, with deal values ranging from $30 million to $500 million. This coincides with a decline in private funding, with funding in the first half of 2024 dropping to $1.9 billion in 342 deals, compared to $3.3 billion in 354 deals in the first half of 2023, according to Drake Star. USD, it said, fell to $2.4 billion in 360 deals in the first half of 2023. Second half.
As a result, smaller startups are being forced to sell to larger competitors rather than try to grow themselves as consolidation increases across the sports world. Martino, who invested in FanDuel in 2010, cited the example of a fantasy sports startup he advises. While the concept may be exciting and the connection to the founders deep, the reality is that FanDuel and DraftKings now have overwhelming market share and customer acquisition costs are 10 to 100 times higher than before. It has become. “If you’re a young new entrant, you need to enter the market with existing support, otherwise you won’t build an audience,” says Martino.
Against this backdrop, and with the approximately $7.5 billion raised in 2023 still largely unutilized, Drake Star’s Parikh believes that the remaining sports technology M&A deals in 2024 will be We predict that the increase is likely to be about the same amount or slightly more. The price fell because there were no acquisitions on the scale of Endeavor. Although many industries are also doing well, this sector may continue to outperform others.
“The rest of the market is still sleeping at the switch,” Martino said. “While the rest of the world is a bit out of whack, our category is as it should be when growth is recognized and incumbents have large amounts of cash on their balance sheets and strong equity valuations. I feel like I’m acting on it.”
Verlinvest, a global holding company that typically handles deals between $50 million and $250 million, appears to be among the converts. The company, which traditionally comes from the food and beverage industry and has stakes in brands such as Vitamin Water and Oatly, recently made an undisclosed investment in electric go-kart racing business K1 Speed.
“What we have observed is a shift from[consumer packaged goods]to an experience where people earn disposable income,” says Clément Pointillart, managing director of Verlinvest. “Not only do we want to create great experiences with friends, family, colleagues, and communities, but in an increasingly digital world, we also want reasons to be together between our four walls and outdoors. And of course, as consumer investors, we want to go where consumers are going over the long term.
“Therefore, we believe there are very interesting opportunities here in the world of sport and lifestyle overall.”
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