Private Equity's Newest Target: Live Sports

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One might think that the allure and competition of owning a sports team has attracted investors such as Silver Lake, CVC Capital Partners and Clearlake Capital Group.

Instead, it’s the value of live sports content and its rights that have helped drive interest in this space.

this week,

Ares

Management (Ticker: ARES) has announced its first dedicated fund focused on investing in sports teams, leagues, franchises, media and entertainment companies.

Ares spent 18 months marketing the pool and raised $3.7 billion, including $2.2 billion in equity commitments and $1.5 billion in expected leverage and related trading vehicles, according to a Sept. 15 statement. .

Mark Affolter, Ares Partner and Co-Head of U.S. Direct Lending, said: “We invest up and down our balance sheet.”

Ares has several different businesses. It is one of the largest private lenders to mid-market companies in the US and Europe. We also have private equity businesses that take control and invest in distressed situations, as well as real estate and infrastructure divisions. In 2021, Ares will launch a wealth management business for high net worth individual investors and financial advisors.

The company’s shares are down 8% this year, trading 2% lower at $74.64 on Friday.

Affolter said Ares operates a sports, media, entertainment or SME fund out of its direct lending business and is looking to invest in European and American football clubs. It also covers Major League Baseball, National Hockey League, Rugby, and other sports.

In media and entertainment, Ares focuses on music catalog rights and songwriters. A company that provides lighting, grips and props to studios in North America. As with companies that own media-related assets, he said.

“From our perspective, we’re seeing incredible growth across these sectors, which is heavily driven by the ratings attributed to original content,” said Affolter.

Affolter said the company will offer senior, junior and mezzanine loans to teams and companies. Ares also intends to jointly invest preferred and common shares to acquire a minority stake, he said. (Preferred stock gives the investor preference over common stock but inferior to debt.)

To date, the fund has completed 19 transactions, including investments in football clubs. De Madrid and Inter Miami CF, San Diego Padres and McLaren Racing. About a quarter of the pool has been invested, according to a statement.

Private equity firms have been investing in sports teams for years. Management cited the value of live sports content as an attraction. According to the World Intellectual Property Organization, the sale of broadcast and media rights is currently the largest source of revenue for most sports organizations.

In 2021, the NFL will:

CBS
,

NBC, Fox, ESPN,

Amazon

worth about $110 billion in total over 11 years,

new york times

report. Affolter said his team’s media rights to the sport are one example of how the club generates regular revenue streams such as sponsorship income and attracts investors.

Streaming is also increasing the value of premium content, with live sports being one of the most popular assets. in June,

apple

has signed a 10-year deal to live stream every Major League Soccer game.

“We have witnessed tremendous demand for new original content among fans, streaming platforms and networks. We now need capital,” Affolder said in a statement.

As of Sept. 9, PE firms have made 221 sports investments so far this year, worth $31 billion, according to PitchBook data. This is considered a record-breaking year for mergers compared to his 440 deals totaling $58.4 billion in 2021.

Recent deals include CVC Capital Partners’ investment of $2.4 billion in La Liga, Spain’s professional football league, last year. This year, Todd Boehly, co-owner of Clearlake Capital and the Los Angeles Dodgers, led a consortium to buy Chelsea FC for his £2.3 billion ($2.6 billion). According to Bloomberg, Silverlake will increase its stake in Manchester City FC in 2022, becoming its second largest shareholder.

However, Ares is one of the few companies with a dedicated sports fund.

Unit of Dyal Capital

blue owl capital

(OWL) has a dedicated pool of minority investments in sports teams. The deal includes the Phoenix Suns, Sacramento Kings and Atlanta Hawks.

We also have Arctos Sports Partners, which makes passive minority investments in professional sports franchises. Arctos, who raised his $2.1 billion in the first fund, has invested in the Golden State Warriors, Tampa Bay Lightning, Chicago Cubs and Real Salt Lake.

Write to Luisa Beltran at luisa.beltran@dowjones.com.

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