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SMT Panel: Investing in Sports Media

Investing in Sports Business

Don Cornwell, Morgan Stanley
Peter Englehart, Falconhead Capital
Peter Kern, InterMedia Partners

On the heels of such deals as Guggenheim Partners’ purchase of the Dodgers and Providence Equity’s tie-up with the NFL for investing in startup ventures, investment in sports media was the topic of an afternoon panel on the first day of the 2013 Covington & Burling Sports Media & Technology conference. Falconhead Capital operating partner Peter Englehart, whose firm just exited ownership of Competitor Group in a $250 million sale, said “in the consumer space in sports, there are still lots of opportunities that have tangential media connections. But as long as consumerism remains 70 percent of our GDP, that’s an enormous playground in which you can look for opportunities.” Don Cornwell, managing director of mergers and acquisitions at Morgan Stanley, who recently advised the Ontario Teachers Pension Plan on the sale of its stake in MLSE to Bell Canada and Rogers Communications, said that “there is still lots of opportunity” in soccer abroad. Cornwell: “That’s a business where people can come in and actually buy the content themselves, buy the team. And they’re generally not well-run businesses.”

MORE DEALS LIKE GUGGENHEIM?: Englehart believes more deals like Guggenheim’s purchase of the Dodgers are coming, but “what this type of deal is emblematic of is that the acquiring entity — the investing entity — looks at these types of opportunities with professional sports franchises, and really the sector you can apply the most creativity to is the monetizing of the media rights. You can only be so much better than the pre-existing incumbent seller in operations, marketing, ticket sales. But if you have a special angle and know how to monetize or launch a network or do something with media rights, that’s where all the activity and creativity lies.”

CAN SMALL PROPERTIES GET INVESTMENT?: InterMedia Partners managing partner Peter Kern said money for smaller properties is a question of the “haves versus the have-nots.” Certain sports “have to buy their way onto TV.” But Kern added that “if someone were to persuade us that five-man touch football was going to be the next big thing, we’d put money in it.”

THOUGHTS ON THE NFL-PROVIDENCE EQUITY DEAL: Englehart said that “from the NFL’s perspective, it’s very good, because they get to preserve their own capital and let someone else take the risk. Providence is a very talented, deep-pocketed organization. … They have a game plan. This isn’t a blank slate.” Englehart: “Logic dictates to me that the investment horizon on this is a little longer because you’re really starting something that is pretty infantile and they’re going to try to grow this.” This “could set up a new model.” Leagues are probably “taking more meetings with private investment groups to explore this kind of stuff, because why use their owners’ capital?” Cornwell said this type of deal makes sense because “you’ve got 30 to 32 billionaires who are getting investment ideas all the time. To have a central place where they can evaluate and actually have some outside capital makes all the sense in the world.”

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Related Topics:

ING, Media, Morgan Stanley, GE, NFL, MLS, Soccer, Franchises, SEC

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