SBJ/July 17-23, 2017/Leagues and Governing Bodies

Aging ranks of NASCAR team owners raise questions of who will carry torch

Top series failing so far to lure new investors

Team Owners Jack Roush, Rick Hendrick and Joe Gibbs.
Photo by: GETTY IMAGES
Aging team ownership in NASCAR has primed the sport for consolidation and change in the coming years that could involve mergers, sales or family heirs assuming new roles.

Of the 12 people who own or co-own the eight biggest teams in the Monster Energy NASCAR Cup Series, 11 are at least 50, eight are at least 60, six are at least 70 and two are at least 80. While the owners’ ages may not differ far from those of other sports, their impact on the sport is arguably far greater. Those eight teams represent 22 cars, or more than half the maximum grid. While many of them say they have no current plans to retire, there’s still plenty of planning and jockeying going on that will determine the next chapter for their teams.

“It’s ripe for consolidation,” said David Morton, vice president of strategy and business development for motorsports at Fifth Third Bank, which sponsors and banks with several entities in the sport. “On the team side, there’s certainly a number of team owners who are reaching the age where they may be interested in merging with another team or outright selling to another team, so some of it is just based on the timing in the market.”

NASCAR introduced its charter system to the Monster Energy Series last year in a bid to grow enterprise value for current owners and entice fresh investment. So far, the biggest ownership moves have come from a few less competitive teams shutting down. And while JTG Daugherty added a car last season, a sign of strength from one of the sport’s mid-pack teams, others reduced cars. There also is renewed talk of some less competitive teams shutting down and of some bigger teams considering car reductions for next year.

Still, Brent Dewar, NASCAR’s president and an architect of the charter system, said the sanctioning body is content with where the sport is from a team owner perspective.

“We’re always looking, as the existing team owners are, for new owners to come into the sport,” Dewar said. “(But) we love the owners we have; that’s why we entered into the charter process. We recognize that time is a (factor); some teams will go on to sons, daughters and granddaughters like we’ve seen, and some won’t — some will transact and move to a different place, but we’ve provided a mechanism to do that and that’s the key.”

First Look podcast, with NASCAR discussion beginning at the 14:45 mark:


NASCAR's aging ownership ranks

Team Monster Energy NASCAR Cup Series cars Owner(s) Age
Hendrick Motorsports 4 Rick Hendrick 68
Joe Gibbs Racing 4 Joe Gibbs 76
Stewart-Haas Racing 4 Gene Haas
Tony Stewart
64
46
Richard Childress Racing 3 Richard Childress 71
Roush Fenway Racing 2 Jack Roush 75
Chip Ganassi Racing 2 Chip Ganassi
Rob Kauffman
Felix Sabates
59
53
71
Team Penske 2 Roger Penske 80
Richard Petty Motorsports 1 Andrew Murstein
Richard Petty
53
80

Source: SportsBusiness Journal research

Discussion in the garage frequently focuses on who will be the next generation of owners in a sport that has experienced little new blood. The concern is twofold: How much longer the current leaders of NASCAR teams will remain in the sport, and the lack of new investors interested in getting involved. The latter is of real concern, as some believe the challenging business model and high expense of team ownership is discouraging wealthy individuals from investing into NASCAR compared to other sports.

Bob Caporale, chairman of Game Plan, which advises on buying and selling sports teams but has only been involved in one deal in NASCAR, said he rarely hears from investors about looking at getting into NASCAR. He thinks the sport’s unique structure might be the biggest barrier to entry. Unlike in stick-and-ball sports, teams are independent contractors; moreover, teams in motorsports rely on corporate sponsorship, which is becoming increasingly erratic, for the majority of their revenue, as opposed to guaranteed league revenue.

“The structure is probably the most difficult [part], and then the other thing is, has anybody been able to identify new revenue sources?” Caporale said. “The teams are very dependent on sponsor revenue, so each team has the selling expense, and in a way they’re competing with one another for the sponsors, whereas in other leagues, the league can get sponsors who are league sponsors and the money trickles down to every team.”

The last major owner to come into one of those eight teams was about seven years ago, when Andrew Murstein, now 53, became one of the youngest owners in the sport by purchasing Richard Petty Motorsports. He bought the team in late 2010 for $12 million, a tenth of the $120 million that George Gillett reportedly spent in 2007 before he defaulted on a $90 million loan against the team.

Murstein said he has told NASCAR Chairman and CEO Brian France that he believes NASCAR needs a cap on expenses to rein in the sport’s research and development investments.

“I had dinner with Brian France and an NFL owner recently and I told Brian some of the things that make the NFL so successful is a spending cap and parity,” Murstein, who also owns the New York Lizards of Major League Lacrosse, wrote in an email. “I believe NASCAR needs both to take this great sport to another level. He seemed receptive.”

Other owners to get into NASCAR from other sports include Joe Gibbs, the former NFL head coach, and Fenway Sports Group, which owns the Boston Red Sox and EPL club Liverpool FC. Executives frequently dispute the accuracy of the numbers, but Forbes called Hendrick Motorsports the most valuable NASCAR team in 2016, with a value of $350 million on a reported $185 million in revenue. Joe Gibbs Racing was next at a value of $225 million on a reported $135 million in revenue, while Stewart-Haas Racing was third with a $180 million valuation on a reported $112 million in revenue. NASCAR teams typically require corporate sponsorship to make up about three quarters of their annual budget.

In a sport that’s often secretive, the issue of ownership succession is a sensitive one. In a survey conducted by SportsBusiness Journal with the majority owners of the eight previously mentioned organizations, only half responded to questions about their future in the sport. Out of those four, none said they had plans to retire.

Rick Hendrick, majority owner of HMS, said through a representative that he has a succession plan that he reviews annually. Among the people he expects to be involved include team president Marshall Carlson, his son-in-law, and Jeff Gordon, the broadcaster and former HMS driver who is an equity partner.

Dave Alpern, president of Joe Gibbs Racing, said that Gibbs has no plans to retire but that the team has a succession plan that involves keeping the team “in the Gibbs family, hopefully for generations.” Gibbs has eight grandchildren, Alpern noted, and the team has “every expectation that, if they choose, they will have this to be a part of.”

“We think about this a lot,” Alpern said. “We have 600 families that depend on us to make good decisions, so we wouldn’t be good stewards if we just woke up one day and said, ‘What would we do if Joe wasn’t here?’ We actually think about this all the time, (but) Joe plans to go nowhere — he will never retire; this is his life.”

RPM’s Murstein said he plans to be in the sport for multiple decades, while he said RPM co-owner and NASCAR Hall of Famer Richard Petty, 80, “focuses a little more on the short term.”

Richard Childress, majority owner of his eponymous team, also has no plans to retire, but does have a plan in place for retirement that is reviewed regularly. Those expected to be involved in the future of the team include Mike Dillon, who is senior vice president of business operations and is Childress’ son-in-law as well.

Another team whose future will be watched closely is Wood Brothers Racing, the Team Penske-aligned outfit that is the longest-running team in the sport, dating back to the 1950s. Jon Wood, director of business development for WBR and a current stakeholder, said the family has a structure set up to keep the team in the family for years to come.

Jack Roush, co-owner of Roush Fenway Racing, didn’t comment for this article, but he told the Arizona Republic this year that he was “probably down to a three-year window.”

Dewar said NASCAR helps teams pitch prospective owners and investors of the sport. He said that can range from a cold call from the investment community to supporting a team owner who is talking to a prospect about coming into the sport. But he would not offer any details of recent efforts at recruiting.

Most recently, RPM and Roush Fenway explored a merger last year because both teams were seeking greater stability, according to sources familiar with the matter. The deal was eventually called off, and whether either team is still evaluating mergers or sales could not be confirmed.

In any event, most executives agree that change is coming.

“I think there will be more activity [in the coming years] because people from an international perspective are more interested in NASCAR, owners set up a situation where there is now more enterprise value when someone is buying these teams, and there is an aging demographic,” said Andrew Kline, founder and managing director of Park Lane, a sports investment bank that works with several stakeholders in the NASCAR space. “People are worried about estate planning.”


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