Deloitte's outlook for sports investment in 2023 - Deloitte Sports Business Group March 2023
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Deloitte’s outlook for sports
investment in 2023
Deloitte Sports Business Group
March 2023
1
Deloitte Insight | Deloitte’s outlook for sports investment in 2023
Deloitte’s outlook for sports
investment in 2023
Investment trends across sports rights holders support a growing M&A market
with strong tailwinds. A larger number of sophisticated investors along with a higher
degree of capital availability has driven the market to record levels.
Global M&A experienced a turbulent ride Defining the sports sector
in the second half of 2022, and investment Sport is diverging as its own asset class
in sports assets mirrored wider market with multiple subsectors spanning
trends with the volume of transactions professional spectator sports, media,
falling by 27% in the second half of 2022. leisure and entertainment, and
complementary organisations.
While activity slowed towards the end of
2022, it was still a year of demarcation for In professional spectator sports,
sports investments, highlighted by the organisations focus on the delivery of,
landmark sales of Chelsea Football Club and participation in, elite sporting events
(England), AC Milan (Italy), and the Denver and competitions that are consumed by
Broncos (USA). There were also significant the greater public. Within this sub-sector,
investments in European football leagues, rights holders are the entities that own
second and third-division European and control these events including leagues,
football teams, Indian cricket teams, rugby competitions, governing bodies, clubs,
teams and competitions, and extreme and teams.
sports, amongst others.
Overall, we expect to see In recent years, increased external
increased investment In 2023, despite the challenging investment into the sports sector
macroeconomic climate, we are expecting has brought dividends to the growing
activity fuelled by a variety to see a new influx of capital flow into the professionalism and commercialisation of
of new industry entrants sports sector. This will be driven by investor these rights holders.
confidence in the predictable and improving
who are attracted to the revenue streams that premium sports
prestige, and potentially properties can offer, buoyed by growing Sports M&A metrics
media rights, globalisation of valuable Mature sports markets, such as the
compelling risk-adjusted content, and the resilience showcased Americas and Europe, are seeing a surge in
returns, to be recognized by sports assets subsequent to the initial investments as assets gain popularity and
COVID-19 pandemic and now during commercial value. Sports assets in these
from owning a sports asset. challenging macroeconomic conditions. regions drew approximately 80% of total
sports investments by volume in 2022.
Take a look at our Q1 2023 M&A market
outlook insights to learn how the In 2022, the sports sector saw over 220
macroeconomic environment may affect M&A transactions completed across the
M&A deals across other sectors in 2023. industry. American sports assets took
the lion’s share of larger deals, with twice
Overall, we expect to see increased as many tournaments, competitions
investment activity fuelled by a variety of and leagues in this region attracting
new industry entrants who are attracted investments in 2022, in comparison to
to the prestige, and potentially compelling Europe. However, almost five times as
risk-adjusted returns, to be recognized many deals were struck with mid-sized
from owning a sports asset.
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Deloitte Insight | Deloitte’s outlook for sports investment in 2023
Sports M&A Transactions in 2022
Deal Volume by Region of Acquired Deal Volume by Organisation Type (%)
Entity (%)
100%
38 52 48 55
Rest of World
Asia Pacific
80% 6%
6% 10%
10%
60% 47
44
38 41
52% Europe 40% 5
Americas 32% 32%
20%
15
10 4
8
0 Quarter 1 Quarter 2 Quarter 3 Quarter 4
Source: Refinitiv. (Tier 1) Competitions/Leagues/Governing Bodies Source: Refinitiv.
(Tier 2) Clubs/Teams (Tier 3) Other
assets in Europe – typically football clubs Some key overarching investment trends attractive investment characteristics
and teams – than in the Americas. Almost that have emerged are the influx of such as stable, contractual cash flows
half of investments made into mid-sized institutional private equity capital into from broadcasting and commercial
European sports assets in 2022 were premium sports assets, the emergence agreements, highly predictable ticketing
acquired by organisations outside of of sports focused investment funds, and revenue, high barriers to entry, resilience
Europe, highlighting the globalization investors employing a portfolio approach to macroeconomic downturns and high
trends in the sports sector. to sport investments. inflationary periods, strong profit margins,
and compelling value appreciation
Private equity capital flowing into the fundamentals driven by the scarcity of
Current approach to investment sports sector has, to date, primarily been premium sport assets. Investment in
in sport deployed into premium assets. Premium these assets also often provides a unique
Unlike other industries, investment in assets differentiate themselves in terms of opportunity to connect with fans and
sports assets has historically been driven maturity, quality of infrastructure, overall positively impact local communities.
by the ‘trophy asset’ rationale. Ultra-high commercial value, and risk profile relative
net worth individuals have at times been to less attractive peer assets. As sport formalises into its own asset class,
drawn to invest due to their interest as sports focused private equity funds are
fans and the prestige that comes with Examples of premium rights holders successfully raising funds from institutional
owning a sports asset, rather than by include direct investments into leagues sources (e.g. pension plans, sovereign
sound investment decisions based on an and competitions, investments in North wealth funds, insurance companies,
overriding desire for financial returns. American franchises across the “big university endowments, etc.) and deploying
five” leagues (NFL, NBA, MLB, NHL and capital exclusively or predominantly into
In more recent years, we’ve seen a new MLS) and investments in top-tier teams the sports sector. These funds have
universe of investors looking to explore the or clubs with large commercial appeal targeted strategies around how they invest
sector, primarily due to the attractive risk- and remote relegation risk. Premium and achieve strong risk-adjusted returns
adjusted returns on offer. assets provide private equity firms with for their investors within the sector.
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Deloitte Insight | Deloitte’s outlook for sports investment in 2023
As we enter the next wave Examples include funds focused premium assets continue to rise. Premium
on minority stakes in league and/or assets will have the opportunity to highlight
of mass investment in competition-level media rights, club-level their resilience and compelling investment
sport, we expect to see revenue streams, or control-oriented merits amidst current challenging
investments in clubs and/or teams. In macroeconomic conditions for ‘next
the most premium assets exchange for external investment, rights buyers’ and we expect that this will attract
retain high levels of interest, holders tend to gain operational and an evolving set of investors.
commercial expertise, strategic direction
which will drive an evolving and discipline at the ownership and This expanding set is likely to include
investor base. In addition, board levels that ultimately helps to drive institutional investors such as pension
growth and sustainable business models. plans, sovereign wealth funds,
women’s sports assets These funds are recognising the need for endowments, and insurance companies
will continue to offer a industry-specific knowledge and insight to that will invest both indirectly through
support their investment objectives. commitments to new and/or existing
compelling opportunity for private equity funds and directly into
new and existing investors The portfolio approach provides investors premium assets themselves.
with growth opportunities across a range
in the sports sector. of related, but defined, sports assets. As the next wave of buyers evolves,
These portfolios tend to be constructed so too will the portfolio strategies
across various sports and geographies, adopted by investors. We expect to
which has proven to be valuable when see a broadening of the portfolio
executed strategically. This approach can approach that incorporates additional
provide diversification benefits, de-risk sports, geographies, and complimentary
the portfolio, and unlock operational and businesses. Investors will look to
commercial synergies. Portfolios can span strategically invest in businesses that
a single sport across multiple geographies, provide synergistic growth, with sports
such as football clubs across Europe, North assets acting as the catalyst. When
and South America, and Asia; or they can broadening a portfolio in this manner, it is
cross sports and geographies, such as critical for investors to form a long-term
football in Europe and ice hockey in strategy that optimises the portfolio’s
North America. growth opportunity in each market. A clear
understanding of the global sports market
along with a strong understanding of the
What’s next in sports M&A nuances in local markets is necessary
As we enter the next wave of mass for investors to support responsible
investment in sport, we expect to see the investments, and ultimately generate
most premium assets retain high levels higher returns.
of interest, which will drive an evolving
investor base. In addition, women’s sports Women’s professional sports had a
assets will continue to offer a compelling record-breaking year in 2022, with growing
opportunity for new and existing investors awareness of the commercial returns
in the sports sector. that women’s sports assets offer. For
instance, the 2023 edition of the Deloitte
In the next wave of investment in the Football Money League reported average
sports sector, we will see continued high attributable revenues of €2.4 million to
demand for premium sports assets, and the women’s sides in the 2021/22 season
as such, returns will compress as prices for at the world’s top 20 revenue generating
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Deloitte Insight | Deloitte’s outlook for sports investment in 2023
clubs. In addition, clubs in the National
Women’s Soccer League (NWSL – USA)
and the Women’s Indian Premier League
(WIPL – India) achieved record-setting
valuations. As levels of interest, attendance,
viewership, and media coverage – not
to mention revenues – keeps building,
investor interest will inevitably follow.
Women’s sports offer new investors
an appealing entry point and an
opportunity to achieve attractive
returns. Investors can also engage with a
relatively untapped and growing fanbase
that typically represents a different
demographic to fanbases in men’s
sports. Such an opportunity is likely to
attract new entrants to the sports sector
that, in the short-term, will comprise of
investors that can strategically partner
with women’s sports rights holders to
execute on the segment’s strong growth
tailwinds. As women’s sports continue
to professionalise, commercialise, and
ultimately mature, financial investors are
likely to take note and become more active
in the sector.
A holistic approach to sports investing Ultimately, attractive returns can be made
As more capital flows into the sports in the world’s most exciting industry, but
sector, sustainable investment models that the biggest winners will be those that are
balance financial and operational viability informed by industry-specific knowledge
with spending on performance are front and insight which acts as the foundation of
and centre and gaining traction. What’s their investment and business decisions.
more, new investments are often the Sports, at the end of the day, will always
trigger to organisational transformation carry an excitement factor, but that
aimed at driving increased returns shouldn’t overlook the need for sound and
and success. rational consideration.
Investors must enter the sector in a
conscious and risk-focused manner,
considering all the factors that may impact
their future ability to be responsible
custodians of sport.
5Deloitte Insight | Deloitte’s outlook for sports investment in 2023
About Deloitte’s Sports M&A
Advisory and Transaction Support
Deloitte facilitates major global sports transactions; supporting client investment
and providing end-to-end M&A services to create value for private and institutional
investors. Our areas of expertise include:
M&A strategy Tim Bridge
Providing early-stage advisory services Lead partner, Deloitte Sports
regarding the potential to make an Business Group
investment/divestment. tbridge@deloitte.co.uk
M&A advisory Sam Boor
Project managing the negotiation and Director, Sports M&A Advisory
execution of acquisitions and divestments, and Transaction Support
including deal structure, holding periods sboor@deloitte.co.uk
and efficient exit periods.
Marco D’Elia
Transaction support Manager, Sports M&A Advisory
Providing a full range of commercial, and Transaction Support
financial and tax due diligence processes, medelia@deloitte.co.uk
including transaction implementation
services such as contractual protections
and management incentive plans. Jenny Haskel
Knowledge & Insights lead,
Deloitte Sports Business Group
Post-transaction support jhaskel@deloitte.co.uk
Providing strategic advisory services
including strategy development, operating
model review and digital transformation.
6Deloitte Insight | Deloitte’s outlook for sports investment in 2023
Deloitte’s Global Sports
M&A Leaders
Steven Amato Lakhbir Chhina David McCarthy
New York, USA Doha, Qatar Sydney, Australia
samato@deloitte.com lchhina@deloitte.com damccarthy@deloitte.com.au
Richard Bell Jeff Harris Bimal Modi
Manchester, UK Toronto, Canada Mumbai, India
ribell@deloitte.co.uk jeffharris@deloitte.ca bimalmodi@deloitte.com
Sam Boor Karsten Hollasch Martin Reilly
London, UK Dusseldorf, Germany Dublin, Ireland
sboor@deloitte.co.uk khollasch@deloitte.de mreilly@deloitte.ie
Tim Bridge Simon Howard James Walton
Manchester, UK Madrid, Spain Singapore
tbridge@deloitte.co.uk sihoward@deloitte.es jmwalton@deloitte.com
Robin Butteriss Stefan Ludwig
Dubai, UAE Dusseldorf, Germany
robutteriss@deloitte.com sludwig@deloitte.de
7Deloitte Football Money League 2021 |
Top 20 clubs
This publication has been written in general terms and we recommend that
you obtain professional advice before acting or refraining from action on any
of the contents of this publication. Deloitte LLP accepts no liability for any loss
occasioned to any person acting or refraining from action as a result of any
material in this publication.
Deloitte LLP is a limited liability partnership registered in England and Wales with
registered number OC303675 and its registered office at 1 New Street Square,
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Deloitte LLP is the United Kingdom affiliate of Deloitte NSE LLP, a member firm
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