The New York Jets and Cleveland Indians have more in common than putting themselves up for sale earlier this month: Both turned to Goldman Sachs & Co., an emerging sports finance power, to handle the transactions.
Long one of Wall Street's heaviest hitters, Goldman historically has shied away from the sports business, as the industry was too splintered and small-time to warrant its pricey attention.
That is why many in sports are closely watching Goldman's recent assignments to sell the two teams. Did Goldman merely win the lucrative deals through the investment banking relationships it already had with corporate America, or are the Indians and Jets evidence the financing powerhouse is entering sports in earnest?
If Goldman commits to the business, it would be yet the latest sign that Wall Street is waking to the potential of sports. Once an afterthought to the world of finance, sports has been transformed by billion-dollar media contracts, expensive new venues and expensive team sales into a big-time industry.
"A core strategy of Goldman Sachs is to create important relationships with important people," said Eric Grubman, a Goldman Sachs Group (NYSE:GS) managing director and the company's most senior executive who works on sports transactions. "Sports is playing an increasingly important role in the business strategies of our clients."
Those clients include some of sports' most notable names, including Seattle Seahawks and Portland Trail Blazers owner Paul Allen, Los Angeles Dodgers owner and News Corp.'s (NYSE:NWS) chief executive Rupert Murdoch, New England Patriots owner Robert Kraft and the National Football League itself.
In the Jets' case, Goldman had long advised Amerada Hess Corp. (NYSE:AHC), the company founded by recently deceased Jets owner Leon Hess, so it is a natural for the company to handle the auction of the team.
But as Goldman spreads its wings in sports, it is also winning deals like the Indians where there is no corporate connection.
"The safe bet is to go to a name like Goldman" when selling a company, said Sal Galatioto, head of the sports practice at Societe Generale. "But deals have to be a certain size for Goldman to do. The only deals big enough [in sports] are in the NFL and some in MLB, but basketball and hockey deals are not big enough."
Goldman is already the adviser of choice to the corporate world. Through early last week, the company was the top mergers-and-acquisitions adviser so far this year, after snaring the No. 1 spot in 1998, according to Thomson Financial Securities Data.
While Goldman does not have an organized sports group, it is believed that six executives work on sports deals when they arise, the most senior being Grubman (pronounced Groobman). It is also believed that Goldman will double the number of executives available to work on sports as the business grows. Grubman would not comment on his company's staffing or on specific deals.
Goldman's top sports deals to date include last year's auction of the Cleveland Browns and the sale of the New England Patriots five years ago to Robert Kraft, now head of the NFL finance committee. Goldman also advised News Corp. on its unsuccessful effort to buy Manchester United for more than $1 billion and the Dodgers on their sale to News Corp.
If Goldman pursues the sports business more aggressively, it would not be the first Wall Street heavyweight to enter this universe. Morgan Stanley Dean Witter & Co. (NYSE:MWD) focuses on the sector and handled the rocky sale of the Washington Redskins. Bank of America Corp. (NYSE:BAC) and Chase Manhattan Corp. (NYSE:CMB) have dedicated sports groups.
"You have a bunch of banks now entering sports," said Pat McAuliffe, a sports banker with Fleet Financial Group Inc. (NYSE:FLT), which was one of the first financial institutions to specialize in the field. "What has happened is a lot of teams have gotten new venues, and that has attracted a lot more players on the financing side."
The new venues and broadcast contracts have also raised the value of teams. Daniel Snyder agreed to buy the Washington Redskins for $800 million, and the Jets are expected to fetch more than $500 million and the Indians $350 million.
It is yet to be seen if Goldman will stick to high-profile team sales or will delve into the nitty gritty of sports finance.
