Silver Says NBA Could Have LP Investment Vehicle By '20-21 Season
NBA Commissioner Adam Silver confirmed that the league is interested in creating a vehicle -- perhaps by next season -- that would allow private equity firms to buy multiple limited partnerships, giving them investment perhaps in a number of teams. "We, at least right now, are looking at an NBA-only vehicle, as opposed to a vehicle where investors could come in and buy a basket of interests in multiple teams and multiple leagues," Silver said while speaking at the '19 Dealmakers in Sports conference. He was unsure of other leagues' view on the idea but was confident the NBA could package a group of attractive teams -- "because of the market's view of the trajectory of our values" -- that would create liquidity for LPs. Silver: "It also creates new opportunities for people who want to invest in sports, and maybe not in a purely financial way. By that I mean that if it's an NBA-only vehicle, there are some sort of ownership accoutrements that we can add." Silver noted potential perks could be All-Star tickets or access to team owners and the league office. He said, "You get, frankly, some of the benefits of being a team owner. So it's not just a pure, 'what's my return financial investment.' Not that that's not important, but try to come closer to some of the same reasons that traditional franchise owners buy into teams. Part of it is financial, but part of it is the amenities, and the cachet, and the desire to be directly involved with these leagues." The matter will be on the agenda at the NBA's BOG meeting in April.
TRENDING UPWARD: The rise of LPs in pro sports was a key theme that emerged at the conference among several speakers. Causeway Media Founding Partner Mark Wan, a Celtics and 49ers investor, believes vehicles taking a minority interest in teams as a capital-raising opportunity is a good idea. "If you've looked at the value of these teams, there has been obviously very significant appreciation, to numbers where it becomes more and more difficult for an individual to buy these teams, especially given the debt limits," he noted. Wan added, "It's not terribly hard to find people who want to write a check for the right team in the right market to become part of those groups. But it's hard to get them when you need $50 (million) or $100 million checks, because you can only offer so much to a minority owner." On PE firms possibly becoming LPs, he said, "It makes sense, but with the caveat that not everyone wants to see these things appreciated. You're looking at multi-generational planning."
MAKE YOUR INTERESTS KNOWN: Islanders co-Owner Jon Ledecky offered his thoughts on what creates an ideal LP situation. "You want to go somewhere where your thoughts are taken into account," Ledecky said. "Where you're not just patted on the head and given some benefits, but where you're sitting in a room and having a discussion about the things that matter for the business. As long as you're being involved with folks who truly are going to include you, then it's a great investment." Ledecky was speaking alongside Alan Kestenbaum, who bought into the Falcons in March after a run at majority ownership of the NFL Panthers. Kestenbaum believes the continual rise of NFL team valuations is a good reason to become an LP. He called NFL teams "incredibly undervalued if you look at the traditional EBITDA, multiple metrics for a business, including the scarcity value."