How private equity is reshaping the future of sports
The sports industry is ever-evolving, as advancements are made in streaming, venues, and technology to benefit the viewer’s experience. Providing the sports industries with this support has been private equity firms, who have aided the growth of teams by utilizing professionalized management, giving the teams a corporate driven lead.
By buying a stake in a franchise, the private equity firms provide the franchises with capital; a financial asset used to fund daily operations and development. The capital derived from the private equity firms has allowed for the upkeep of training facilities, as well as the recruitment of talent. Private equity has also helped teams expand their sources of revenue, which includes streaming services. In Jul. 2024, the National Basketball Association (NBA) signed a 76 billion dollar deal giving media rights to Walt Disney Co., NBC and Amazon. The deal was to begin in the ’25-’26 season, and continue for 11 years.
Many teams have seen increases in their value as a product of private equity. A few notable examples include the worth of the New York Yankees increasing to 7.1 billion dollars from 4.6 billion dollars in 2019. By 2023, around two-thirds of NBA teams had established a connection to private equity or outside investment. Various NBA teams were also worth an average of 4 billion dollars as of 2024. By maintaining a high value, these teams amplify their attraction to investors, which puts them on the trajectory to grow further as they gain more financial support.
In a CityWealth article written by Karen Jones featuring investments in sports, Sports Facilities partner Daniel Render explains that the value of sports teams is maintained throughout times of volatility in the stock-market, emphasizing the stability in this avenue of investment.
“Interest in investing in sports has continued to grow in recent years in part because sports has to date tended to be recession-resistant, and valuations of teams have continued to climb regardless of how the stock market or the overall economy performs," Render said.
Although it now holds a prominent role in sports, private equity did not become a part of sports until the 2000s as leagues wanted ownership to focus on a passion for the sports. The rising value of franchises has made it difficult for single owners to expand. As a result of this, the role of an outside fund came into play. This caused feelings of hesitancy among fans, as they were worried that the focus of the industry would shift from the spirit of the game to profit-driven decisions and short-term returns on investment.
During the ’24 soccer season, German fans protested during Bundesliga matches to prevent the control of foreign investors of their favorite teams. These protests included throwing tennis balls and chocolate onto the field. These protests resulted in the German football league calling off its plans to sell a 1.2 billion euro stake in media rights to a private equity firm. Spokesperson for the German football league and CEO of Borussia Dortmund Hans-Joachim Watzke refers to the protests as hindering the entrance of private equity into the league.
“In view of current developments, a successful continuation of the process no longer seems possible.” Watzke said in a statement to author Kate Connolly in The Guardian on behalf of the German football league on Feb. 21, 2024.
As private equity’s role emerged, the franchises have implemented policies to maintain the minimality of private equity’s role in previous enstated ownership. By keeping stakes minor, private equity firms cannot assume control ownership of a franchise.
In 2019, Major League Baseball (MLB) allowed private equity firms to purchase stakes in the franchise. These stakes allow the firm to own up to 15 percent of the team, and allow it to sell its equity at 30 percent. The investor’s motive when investing is that their stake will grow in value during the time of their ownership, which is typically around five to ten years. This is beneficial to the investors because they can generate a profit from the increased value of the stake when they eventually sell it. This similar action was followed by other huge American sports leagues within a couple years. The National Hockey League (NHL) and NBA both allowed firms to own up to 20 percent of a team, and sell it equity up to 30 percent. The last major league to do so was the National Football League (NFL), allowing firms to own up to 10 percent of the teams and sell its equity at 10 percent.
In comparison to this minimality, a 55 percent stake was bought from Spanish soccer team Atletico de Madrid. On Nov. 10, New York City based firm Apollo Sports Capital purchased majority ownership of the Spanish soccer team worth 2.5 billion euros, and will assume this authority in the first financial quarter of 2026. In an interview with the Financial Times, Apollo partner Robert Givone explains how the firm also plans to use its position to support the building of the Ciudad del Deporte, a stadium in Madrid, which would include sports facilities as well as entertainment for civilians.
“Supporting the ambitious plans for the sports city can create significant value for both the club and local economy.” Givone said.
As private equity continues to hold a more prominent role in sports, it continually shows the growth of sports franchises as they implement new types of management.