View
7
Download
0
Category
Preview:
Citation preview
Issues in Professional Sports Valuation | Bryce Erickson, Mercer Capital | Kevin Kane, Empire Valuation Consultants
ISSUES IN PROFESSIONAL SPORTS VALUATION
Bryce P. Erickson, ASA, MRICS Kevin G. Kane, CFA, ASA
Mercer Capital Empire Valuation Consultants
ericksonb@mercercapital.com kkane@empireval.com
214.468.8400 415.659.1860
Issues in Professional Sports Valuation | Bryce Erickson, Mercer Capital | Kevin Kane, Empire Valuation Consultants
What is Sports?
Sports is a Business
2
Issues in Professional Sports Valuation | Bryce Erickson, Mercer Capital | Kevin Kane, Empire Valuation Consultants
Current Events
3
Issues in Professional Sports Valuation | Bryce Erickson, Mercer Capital | Kevin Kane, Empire Valuation Consultants
Current Events
• Political statements
• Players as investors
• Sports gambling
• Fan experience• Attendance figures
• Cost of attending
• Fantasy teams
• Labor peace
• Media rights
• New Stadiums & Arenas
• Relocation
4
Issues in Professional Sports Valuation | Bryce Erickson, Mercer Capital | Kevin Kane, Empire Valuation Consultants
Impact of Legalized Sports Gambling
• Professional and Amateur Sports Protection Act of 1992
• May 2018, Supreme Court ruled it unconstitutional
• Eight states have legal sports betting
• Seven others have legislation pending
• A couple with partial
5
Issues in Professional Sports Valuation | Bryce Erickson, Mercer Capital | Kevin Kane, Empire Valuation Consultants
Impact of Legalized Sports Gambling
NFL MLB NBA NHL
$2.326B
$1.106B
$585M
$216M
2018 Nielsen Co. StudyCommissioned by The American Gaming Association
TV advertising, sponsorship, data/product revenue, media rights,
merchandise, and ticket sales
6
Issues in Professional Sports Valuation | Bryce Erickson, Mercer Capital | Kevin Kane, Empire Valuation Consultants
Impact of Legalized Sports Gambling
• Increased fan engagement
• New revenue streams
• New category of advertisers and sponsors
• Increased monitoring costs
• Will it impact the integrity of the game?
7
Issues in Professional Sports Valuation | Bryce Erickson, Mercer Capital | Kevin Kane, Empire Valuation Consultants
Fan Experience
• In-venue vs. at-home
• Multiple devices
• Fantasy teams
• Statistics
• Technology changing concessions, merchandise, and ticket purchases
8
Issues in Professional Sports Valuation | Bryce Erickson, Mercer Capital | Kevin Kane, Empire Valuation Consultants
What Will Sports Engagement Look Like in the Future?
• Virtual reality
• Digital streaming
• Facebook, Amazon, Apple, Netflix, Google (FAANG)
• Sports betting
9
Issues in Professional Sports Valuation | Bryce Erickson, Mercer Capital | Kevin Kane, Empire Valuation Consultants
Current EventsTransactions
Arizona Coyotes 2019 $300 million
Brooklyn Nets 2018 $2.3 billion
Carolina Panthers 2018 $2.275 billion
Carolina Hurricanes 2018 $420 million
Houston Rockets 2017 $2.2 billion
Miami Marlins 2017 $1.2 billion
10
Issues in Professional Sports Valuation | Bryce Erickson, Mercer Capital | Kevin Kane, Empire Valuation Consultants
Forbes Valuations
11
Issues in Professional Sports Valuation | Bryce Erickson, Mercer Capital | Kevin Kane, Empire Valuation Consultants
Forbes Value Comparison (NFL)
12
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
$5,000
$5,500
$6,000
$6,500
$7,000
$7,500
$8,000
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
$2,000
$2,200
$2,400
$2,600
$2,800
$3,000
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
TV
Co
ntr
act
Valu
e (
$ M
illio
ns)
Avera
ge F
orb
es
Valu
e (
$ M
illi
on
s)
NFL Average Forbes Value National TV Contract Annual Value
CBA Modified New CBA
Issues in Professional Sports Valuation | Bryce Erickson, Mercer Capital | Kevin Kane, Empire Valuation Consultants
Forbes Value Comparison (MLB)
13
0
100
200
300
400
500
600
700
800
900
1,000
1,100
1,200
1,300
1,400
1,500
1,600
1,700
0
100
200
300
400
500
600
700
800
900
1,000
1,100
1,200
1,300
1,400
1,500
1,600
1,700
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
TV
Co
ntr
act
An
nu
al
Va
lue
($
Millio
ns)
Ave
rag
e F
orb
es V
alu
e (
$ M
illio
ns)
MLB Average Forbes Value New CBA National TV Contract Annual Value
Issues in Professional Sports Valuation | Bryce Erickson, Mercer Capital | Kevin Kane, Empire Valuation Consultants
Forbes Value Comparison (NBA)
14
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
$2,000
$2,200
$2,400
$2,600
$2,800
$3,000
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
$1,000
$1,100
$1,200
$1,300
$1,400
$1,500
$1,600
$1,700
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
TV
Co
ntr
act
An
nu
al V
alu
e (
$ M
illi
on
s)
Av
era
ge F
orb
es
Va
lue (
$M
illio
ns)
NBA Average Forbes Value New CBA National TV Contract Annual Value
Issues in Professional Sports Valuation | Bryce Erickson, Mercer Capital | Kevin Kane, Empire Valuation Consultants
Forbes Value Comparison (NHL)
15
$0
$25
$50
$75
$100
$125
$150
$175
$200
$225
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
TV
Co
ntr
act
An
nu
al V
alu
e (
$M
illio
ns
)
Ave
rag
e F
orb
es V
alu
e (
$M
illio
ns
)
NHL Average Forbes Value New CBA Lockout National TV Contract Annual Value
Issues in Professional Sports Valuation | Bryce Erickson, Mercer Capital | Kevin Kane, Empire Valuation Consultants
Forbes 50 Most Valuable Teams
16
0
10
20
30
40
50
2012 2013 2014 2015 2016 2017 2018 2019
Number of teams
worth more than
$2 billion
1
5 6
15
24
39
4850+Ballmer
transaction
Issues in Professional Sports Valuation | Bryce Erickson, Mercer Capital | Kevin Kane, Empire Valuation Consultants
-
5
10
15
20
25
30
Forbes 50 Most Valuable Teams
17
NFL MLB NBA Internat’l Soccer
29
8
67
Issues in Professional Sports Valuation | Bryce Erickson, Mercer Capital | Kevin Kane, Empire Valuation Consultants
Forbes 50 Most Valuable Teams
18
Range of Values
From a low of
$674M - $2.2B in 2012
to a high of
$2.08B - $5.0B in 2019
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
2012 2013 2014 2015 2016 2017 2018 2019
Ran
ge o
f V
alu
es (
Mill
ion
s)
Ballmer
transaction
Issues in Professional Sports Valuation | Bryce Erickson, Mercer Capital | Kevin Kane, Empire Valuation Consultants
Sports Teams’ Economics
19
Issues in Professional Sports Valuation | Bryce Erickson, Mercer Capital | Kevin Kane, Empire Valuation Consultants
Sports Teams’ EconomicsNational Sources of Revenue
Television &
Radio
(Domestic &
International)
Sponsor-
ships
(Official providers,
uniforms, gambling)
Other
Media
Revenue
Sharing
20
Issues in Professional Sports Valuation | Bryce Erickson, Mercer Capital | Kevin Kane, Empire Valuation Consultants
North America media rights (Source: PwC Sports Outlook)
Nearly $21 billion in 2019
Projected at $24 billion by 2022
CAGR of 4.5%
Contracts locked up for several years
NFL : Through 2022 season (ESPN Monday Night 2021)
NBA : Through 2025 season
NHL : Through 2021 season
MLB : Through 2021 & 2028 seasons
Media Rights Deals
21
Issues in Professional Sports Valuation | Bryce Erickson, Mercer Capital | Kevin Kane, Empire Valuation Consultants
Media Rights Deals
• Will there be an increase in next contract?
• Who will be the bidders?
• Traditional broadcasters
• New distribution partners
22
Issues in Professional Sports Valuation | Bryce Erickson, Mercer Capital | Kevin Kane, Empire Valuation Consultants
Sports Teams’ EconomicsLocal Sources of Revenue
• Tickets
• Naming Rights
• Concessions
• Parking
• Advertising & Sponsorships
• Local Radio
• Suites
• Personal Seat Licenses
• Programs & Merchandise
• Non-Sports Events if Control
the Stadium/Arena
23
Issues in Professional Sports Valuation | Bryce Erickson, Mercer Capital | Kevin Kane, Empire Valuation Consultants
Recent or Proposed NFL Stadiums
LA Rams/Chargers 2020 $2.7 billion (Est.)
Las Vegas Raiders 2020 $1.8 billion (Est.)
Atlanta Falcons Mercedes-Benz Stadium 2017 $1.6 billion
Minnesota Vikings US Bank Stadium 2016 $1.1 billion
San Francisco 49ers Levi’s Stadium 2014 $1.3 billion
New York Giants/Jets MetLife Stadium 2010 $1.7 billion
24
Issues in Professional Sports Valuation | Bryce Erickson, Mercer Capital | Kevin Kane, Empire Valuation Consultants
Recent or Proposed MLB Ballparks
Tampa Bay 2023 $900 million (Est.)
Oakland Athletics 2023 >$1 billion (Est.)
Texas Rangers Globe Life Field 2020 $1.1 billion
Atlanta Braves Sun Trust Park 2017 $622 million
Miami Marlins Marlins Park 2012 $515 million
Minnesota Twins Target Field 2010 $555 million
25
Issues in Professional Sports Valuation | Bryce Erickson, Mercer Capital | Kevin Kane, Empire Valuation Consultants
Recent or Proposed NBA Arenas
Golden State Warriors Chase Center 2019 $1.4 billion
Milwaukee Bucks Fiserv Forum 2018 $524 million
Detroit Pistons Little Caesars Arena 2017 $863 million
Sacramento Kings Golden 1 Center 2016 $558 million
Brooklyn Nets Barclays Center 2012 $1 billion
Orlando Magic Amway Center 2010 $480 million
26
Issues in Professional Sports Valuation | Bryce Erickson, Mercer Capital | Kevin Kane, Empire Valuation Consultants
Recent or Proposed NHL Arenas
New York Islanders Belmont Park 2021 $1.2 billion (Est.)
Seattle Expansion Key Arena 2021 $900 million (Est.)
Detroit Red Wings Little Caesars Arena 2017 $863 million
Las Vegas Golden Knights T-Mobile Arena 2016 $375 million
Edmonton Oilers Rogers Place 2016 $480 million
New York Islanders Barclays Center 2012 $1 billion
Pittsburgh Penguins PPG Paints Arena 2010 $321 million
27
Issues in Professional Sports Valuation | Bryce Erickson, Mercer Capital | Kevin Kane, Empire Valuation Consultants
How Do You Pay for a New Facility
• Public or Private
• Tax Dollars
• Hotel Tax
• Food & Beverage Tax
• Automobile Excise Tax
• Sell Municipal Bonds
• Bank Loans
• Owners with Deep Pockets
• Personal Seat Licenses
• Naming Rights
• Increased Ticket Prices
• Surcharges
• Tiered Seating
28
Issues in Professional Sports Valuation | Bryce Erickson, Mercer Capital | Kevin Kane, Empire Valuation Consultants
Top Naming Rights Deals
Scotiabank Arena - $639 million for 21 years ($30/yr)
MetLife Stadium - $625 million for 26 years ($24/yr)
AT&T Stadium – Reported to be $17-$19 per year
Citi Field - $400 million for 22 years ($18/yr)
Chase Center - $300-400 million for 24 years ($12.5-17/yr)
Mercedes-Benz Stadium - $324 million for 28 years ($11.5/yr)
29
Issues in Professional Sports Valuation | Bryce Erickson, Mercer Capital | Kevin Kane, Empire Valuation Consultants
• Players’ Compensation
• Salary Cap
• Luxury Tax
• Collective Bargaining
Agreement
• Non-player Compensation
Sports Teams’ EconomicsExpenses
• Stadium Expenses/Rent
• Sales & Marketing, Ticketing,
Publicity
• League Assessments
30
Issues in Professional Sports Valuation | Bryce Erickson, Mercer Capital | Kevin Kane, Empire Valuation Consultants
CBA Comparison Between the Leagues
31
Collective Bargaining Agreements: A Comparison
League NFL NBA NHL MLB
End of Current CBA Term [1] 2020 2024 (2023?) 2022 (2020?) 2021
Salary Cap? Yes Yes Yes No
Type of Cap Hard Soft Hard None [2]
Top of Cap - 2019 (Millions) $177.20 $123.73 $79.50 NMF
Floor of Cap - 2019 (Millions) $157.71 $91.68 $58.83 NMF
Floor as a % of Cap 89% 90% 74% NMF
Cap Rule Exceptions & Variations [3] Limited Complicated - Luxury Tax Limited NMF
Revenue Sharing with Players Yes Yes Yes No [2]
Revenue Categories Subject to Sharing [4] NFL Total Revenue Basketball Related Income Hockey Related Revenue NMF
Revenue Sharing % 47%-48.5% 49%-51% 50% NMF
Revenue Sharing among Teams Yes Yes Yes Yes
Revenue Categories Subject to SharingNational TV Revenue / Home
vs. Away Tickets
Various - Excluded from
Basketball Related IncomeHockey Related Revenue
Net Local Revenue / Competive
Balance Tax
Revenue Sharing % Pro-Rata / 60-40
Formula: effect is buoying
small market teams to at least
70% of league average
revenue
6.055%31% to MLB Central Fund /
Formula
[1] NBA and NHL owners & player assocations have prior opt out clauses which could end them earlier than their term.
[2] MLB has a "tax" system on payrolls called the "competitive balance tax". It economically functions sort of as a soft salary cap. It's proceeds fund player benefits and retirement plans.[3] There is varying amounts of complexity and the terms "limited" and "complicated" are relative. All teams employ "capologists" to manage these issues.[4] These are defined terms. Not technically total revenue, but amasses most operating categories in these leagues.
Issues in Professional Sports Valuation | Bryce Erickson, Mercer Capital | Kevin Kane, Empire Valuation Consultants
Valuation
32
Issues in Professional Sports Valuation | Bryce Erickson, Mercer Capital | Kevin Kane, Empire Valuation Consultants
• Purpose
• M&A – Controlling Interest
• Gift & Estate
• Purchase Price Allocation• Stadium lease agreements
• Player rights
• Season ticket holder contracts
• Suite contracts
• Sponsorship contracts
• Media contracts
• Franchise value
• Other
• Litigation
• Control vs. Minority
Valuation of Sports Teams
• Define Engagement
• What are you valuing?
• Team
• Facility – Stadium, Arena, Ballpark
• Local Real Estate
• RSN
• What is the purchase price?
• Cash
• Assumption of debt
• Phased purchase
33
Issues in Professional Sports Valuation | Bryce Erickson, Mercer Capital | Kevin Kane, Empire Valuation Consultants
• Market Approach
• Guideline Transaction
• Guideline Company
Valuation of Sports TeamsValuation Methods
• Income Approach
• Discounted Cash Flow
• Capitalization of Cash Flow
34
Issues in Professional Sports Valuation | Bryce Erickson, Mercer Capital | Kevin Kane, Empire Valuation Consultants
• Illiquid Asset
• Limited Pool of Buyers
• Losing Money?
• Largest source of family wealth
• Only achievable upon sale
• Holding period
Valuation of Sports TeamsReality
• Why teams are sold:
• Financial Difficulties (Coyotes, MLB Rangers, Hornets)
• Next generation has different interest (Rams)
• Pay estate taxes (Bills)
• Forced sale (Clippers, Panthers)
35
Issues in Professional Sports Valuation | Bryce Erickson, Mercer Capital | Kevin Kane, Empire Valuation Consultants
About the SpeakersBryce P. Erickson, ASA, MRICSericksonb@mercercapital.com
214.468.8400
Bryce, along with Don Erickson, ASA, leads Mercer Capital’s Professionals
Sports Industry team. Bryce has experience in sports franchise consulting and
has been involved with a number sports valuation engagements over the past
several years, including for franchises in the NFL, MLB, NBA, NHL.
Bryce has participated and/or helped manage professional sports team
transactions and valuations from several standpoints including merger &
acquisition, financing, estate & gift taxes, and litigation. Consulting engagements
have included valuation of franchises – both on an enterprise and a minority
level, financial analysis of sports teams, and intangible asset appraisals.
In addition, he has been involved or managed hundreds of valuation
engagements since his entry into the valuation profession in 1998. These
engagements have been conducted for the purposes of mergers and
acquisitions, buyouts, buy-sell agreements, financial reporting, estate and gift
taxes, allocation of purchase price, litigation support, financing, and business
planning.
Kevin G. Kane, CFA, ASAkkane@empireval.com
415.659.1860
Kevin specializes in valuing professional sports franchises including those in the
National Football League, National Hockey League, National Basketball
Association and Triple-A and Major League Baseball. These valuations and
fairness opinions are generally prepared for teams in relation to estate planning,
recapitalizations and other corporate planning purposes.
Kevin has valued many businesses, ranging from large multi-national companies
to small local businesses, including household name product manufacturers,
large real estate holding conglomerates, private REITs, real estate development
companies, apparel manufacturers, restaurant franchises, movie theaters,
nightclubs and many others.
His intangible asset valuation assignments have included patents, literary works,
movie and music rights, guaranty fees, split dollar arrangements and insurance
products. Additionally, he has prepared valuations of in-process research and
development, technology and other intangible assets for financial reporting
purposes.
36
Issues in Professional Sports Valuation | Bryce Erickson, Mercer Capital | Kevin Kane, Empire Valuation Consultants
Questions?
37
Recommended