United States: A Practical Guide To Professional Sports Investments

Once investors find the right fit, sports can be an exciting addition to a diversified portfolio and provide a significant long-term return to those with the fortitude to be patient.

Of all the alternative investments, owning a professional sports team is one of the most coveted and elusive. Supply is scarce, valuations have exploded over the past two decades, and demand from the high-net-worth community outpaces supply considerably. Sports investment options are also starkly different than other alternatives – like art, real estate and hedge funds – both in the way they should be analyzed, and in the mentality required for a healthy return.

How does a sports investment differ?

Owning a sports team is both exciting and challenging, especially for investors who use rigorous and objective analysis to inform their investment decisions – such as hedge fund and private equity fund managers. One reason is that sports investments are partly objective and partly subjective. The objective part – items such as cash flow from sponsorships, payroll expenses and debt service costs – can be studied and predicted.

However, success often depends on variables that are not easily controlled. For instance, a baseball general manager can use objective sabermetrics to evaluate players, but whether or not those players "gel" on the field is almost impossible to predict. Likewise, a huge free agent signing, which was expected to increase ticket and merchandise sales could turn out to be a bust. Investors need to be prepared for operating within this subjective world, and be ready to constantly evaluate whether winning on the field, or winning on the balance sheet is a higher priority.

In addition, very few teams are cash flow positive. From an investment perspective, you should be prepared to put up a fair amount of money, typically via capital calls, to support the ongoing operation of the team, in the hopes that valuation increases will give you a very strong multiple on your investment when you exit the deal.

Being part of an ownership group

Unless you're a billionaire, you're probably not buying a MLB, NBA, NFL, NHL or MLS team on your own – you will be a part of a syndicated ownership group.

When an ownership group has many limited partners, you're really betting on the abilities of the general partner. In those situations, your due diligence should focus on that person and the team's financial prospects. Being a limited partner with a small stake is often a more passive investment, and many prefer this approach when doing their first sports deal.

Your other option is to join an ownership group with a few relatively equal investors. These groups typically consist of people who have had significant success in their chosen profession, whether in business, entertainment or as fund managers, who are now jumping into sports. Some of them will view sports as a trophy investment, while others will be activist owners who want to be involved in the team's day-to-day operations.

Before you join one of these syndicates, it behooves you to do a considerable amount of due diligence on your potential partners, and clearly understand the partnership structure and operating plan. That way you can ensure that your partners share your temperament, and your vision for operating the team and increasing its value.

The importance of corporate governance

Equally important is a clear delineation of responsibility among owners. That includes choosing someone to serve as the delegate to the league's governing body, and deciding how decisions get made within the ownership group. For example, who's responsible for determining the team's payroll, making player decisions, or pursuing stadium construction projects? Are you delegating those tasks to a paid employee, such as a general manager, or will a committee of owners oversee them? These corporate governance concerns are no different than those of your typical closely-held corporation. The way you address them and promote stability is with a strong operating agreement and a clear explanation of responsibilities among the syndicate members.

Avoiding friction among owners

Even if you have a strong operating agreement, great management and a clear delineation of responsibilities, friction may arise. When you're winning games and breaking even, or even winning games and losing a small amount financially, most owners are fine. But when you're losing games, and getting frequent capital calls, most owners will get disgruntled. Friction can also arise when a passive owner suddenly decides to become an active one. Similar to other activist investors, these investors can bring about positive changes that add value, or negative changes that lead to turmoil within the ownership group – turmoil which can quickly escalate and devalue a franchise.

Where are the opportunities?

When applying to colleges, applicants have their reach school, their hope school, and their safety school. For most sports investors, the NFL, MLB and NBA are their reach options. But skyrocketing valuations have taken these leagues off the table for all but the uber-wealthy. Moreover, these leagues often put strict limits on the number of owners – to avoid ownership drama and promote stability – thereby limiting opportunities for high-net-worth investors looking for a small piece of a team.

The hope options are most likely NHL or MLS franchises with current valuations in the $200 million to $1 billion range for NHL teams and less for MLS clubs.

For those looking at "safety" options, minor league baseball franchises can be very compelling opportunities. Most teams are valued at anywhere from $10-$40 million, which means there's flexibility to buy a team outright, or to syndicate ownership among many investors. Active investors can do very well here, partly because the affiliated major league team covers the minor league team's player salaries. That means investors can manage their costs and focus on revenue-driving activities, such as creating a great fan experience, which drives ticket, merchandise and concession sales.

Overseas soccer teams, particularly in Italy and outside the English Premier League, also present interesting opportunities.

Shepherding you through the process

On the surface, buying a sports team may seem like a regular M&A transaction. However, these deals often have complicated twists that require extensive due diligence and the guidance of advisors who are well-versed in sports business, have established relationships with the leagues to facilitate negotiations, and have helped investors exit previous investments when conflicts arise.

Once investors find the right fit, sports can be an exciting addition to a diversified portfolio and provide a significant long-term return to those with the fortitude to be patient.

Originally published by WealthManagement.com.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.