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In Mizuho | Greenhill’s Beyond The Obvious podcast channel, we uncover the value that others miss.
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00:00:08:10 - 00:00:09:23
Welcome to M&A Corner.
00:00:09:23 - 00:00:11:07
I'm pleased to
continue my
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conversation with
Stephen Amdur.
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Instead of talking about law,
and business, and finance,
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what if we just talked about sports?
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I'd love to talk about sports.
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It turns out though that sports
actually is a business.
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- It absolutely is.
- And a very big business at that.
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It absolutely is.
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I understand that you've basically developed one
of the leading practices at Pillsbury
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for servicing that deal environment
within the sporting universe.
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I would love just to hear how you became
involved with that in the first place
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because I'm sure that there are plenty of law students and business students who would like
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nothing more with their careers than to spend it
in the sports area.
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And you’ve found yourself there in your career.
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So how did that come about?
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So we as a firm have actually had a long history
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representing teams and leagues in a number
of different sports.
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And so it's been a really great place for us to be
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as we've seen the rise of private equity investments into sports teams and leagues.
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Given our work in private equity, given our work with sponsors, with interest in the space,
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it was a natural fit for us that as
transactions continue to emerge
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it was a natural fit for us that as
transactions continue to emerge
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that we would receive those calls from our clients,
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from sponsors, from interested participants
in the marketplace
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to understand what it means, what the rules are,
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how things are changing, how to negotiate and structure interests.
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All of the leagues in their own ways have effectively a regulatory oversight responsibility.
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And so it's not unlike doing a transaction in any other regulated industry.
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You have to understand the rules of the regulators,
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what they will and will not accept, and find a way
to craft a transaction
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that both accomplishes the outside investor's needs, that provides the leagues with the certainty
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of their counterparties and their participants because they do protect themselves,
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quite rightly, from risky transactions as
much as they can.
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And so certainly to your point, it's an attractive place for law students to go to
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to have a bit more fun possibly on transactions, but it still requires the same level of
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rigor and diligence as any other deal.
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And so if you actually take a look at a transaction and unpeel it and go behind the scenes.
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I assume that the legal documents, for instance, would look a lot like a corporate—
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- 100%
- deal document.
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And the financial analysis, which we would do and have done on behalf of our clients
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at Mizuho | Greenhill in the space, look a lot like the evaluation of a typical company
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because ultimately that's what these
businesses are, right?
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They are businesses at the end of the day.
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100%.
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I think there's been some element of, especially when it comes to the minority stakes
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of the rising valuations of leagues, the rising media rights that will ultimately lift up the individual team
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league stakes, as well as the fact that unlike
many other businesses,
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there's almost always a cohort of interested buyers for the Knicks, for the Rangers.
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I mean, they're not for sale as far as I know.
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But given the scarcity these days of must-see TV,
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of events that really draw people away from TikTok, and YouTube, and Netflix, and onto live television.
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The leagues and the teams are really capitalizing on that ability for rising valuations,
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greater opportunities to bring investors to the table
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and find ways to find good matches of teams that have a need for capital,
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whether it be because of long-term investors who are seeking liquidity or an opportunity for growth,
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and private equity investors who are looking for uncorrelated returns in a different industry
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that isn't necessarily tied in the same way to interest rates, or debt financing, or tariffs.
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The teams and leagues are accordingly finding really great synergies to bring it all together
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and find mutually beneficial relationships
to build and grow.
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One question for you, because a lot of these transactions tend to be minority rights transactions,
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One question for you, because a lot of these transactions tend to be minority rights transactions,
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Where a financial sponsor or an
institutional investor
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will come in and take a minority position in a particular team, in a particular league.
00:04:12:22 - 00:04:13:01
will come in and take a minority position in a particular team, in a particular league.
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Do you have a sense of what the endgame
for that looks like?
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Is there just going to be a secondary market for these stakes that starts to develop over time?
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Is that the exit for these folks, or is it more of a permanent vehicle?
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Many of the sponsors who have been approved to make these private equity minority investments
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in the individual teams are structured at the fund level to have longer-term hold periods.
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So it's not the typical five-to-seven year period.
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It could be seven to ten or even potentially longer.
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The teams and leagues obviously need that because nobody wants to be in a position of
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a forced liquidity sale, a forced total
exit for the teams,
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especially at a time where things are potentially
not at their best
00:04:53:02 - 00:04:56:07
or there are other reasons why it's just not a good marketplace for a sale.
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But what we're also seeing, obviously, is investors who come in at the right time and the right team
00:05:03:20 - 00:05:08:16
can capitalize pretty tremendously on a
total team sale event.
00:05:08:16 - 00:05:11:21
And we've seen a few of those, and some investors have made out very well.
00:05:11:21 - 00:05:16:10
I suspect in the long run, because we're
still pretty new with this,
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that you will start to see that
secondary market develop
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either with the individual teams buying
back those stakes,
00:05:23:18 - 00:05:26:19
with private equity investors coming in to
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take stakes that have matured a bit since
the original investment,
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or just as has always been the case, interested, wealthy individuals with a passion for the team
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and the locality have an interest in coming in
and taking the stake.
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Yeah.
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And you're a lifelong Yankees fan?
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Yankees, Knicks, Rangers, Giants.
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And your last transaction in the sector was for the San Francisco?
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Well, they once were the New York Giants,
so it counts.
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Okay.
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But it's a testament to you as a lawyer that you're able to put those biases aside
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and represent your client 100% to the fullest.
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Zealous representation of the client,
no matter who they are.
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Can I ask you about the international market?
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Because it almost feels like this might have
started in the UK
00:06:06:10 - 00:06:11:09
with some of the soccer/football franchises, depending on what part of the world you're from.
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Is that really the genesis of what's happened, and it's then come over to the States?
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I think, actually, it's been a bit more
the other way around.
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You did certainly see a number of the sovereign wealth funds taking stakes, large stakes,
00:06:22:09 - 00:06:26:17
controlling stakes in a number of teams
throughout European football.
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But most of those were, again, full-control stakes as opposed to minority stakes.
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I think we've been starting to see some of the U.S. investment groups take more of an interest in
00:06:38:02 - 00:06:45:00
finding the right opportunities in those European football clubs for a minority stake and opportunity.
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And I suspect that will continue.
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Can we talk a little bit about college sports?
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- Maybe I'm
00:06:49:10 - 00:06:51:00
slightly biased here,
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but I am a huge fan of the Michigan Wolverines
and Big Ten football as a whole.
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It clearly drives an enormous amount of activity from people watching on Saturday afternoons
00:07:02:16 - 00:07:06:01
and, if you're so lucky, into January
with the playoffs.
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How do you see this translate, the activity that we're seeing at the professional level
00:07:10:07 - 00:07:14:10
down to the university level, which is very, very large in and of itself?
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I think, similarly, you've got situations where people are looking for opportunities to grow and compete.
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You obviously don't have the same level of liquidity-seeking that you might have
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at the professional level.
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But college sports has become ultra-competitive in terms of financial capabilities
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to recruit and retain the best talent, both at the coaching level and the player level.
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Similarly, people are looking to build bigger and better stadiums and facilities to attract players.
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And conferences are looking to position themselves as the most desirable conferences
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for individual schools.
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All those requirements are things
that require capital.
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I think most of the private equity investment is going to be around things like media rights,
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which have obviously longer-term, predictable cash flows that can be built in and bought into
00:08:01:22 - 00:08:06:15
in a way that people can be more confident about, as opposed to some other areas
00:08:06:15 - 00:08:11:00
which still seem to be under a dynamic level of regulatory and legislative review.
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Yeah.
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I mean, these schools, really, at the end of the day, not only are they businesses, they're also brands.
00:08:15:22 - 00:08:19:09
I mean, you have a very prominent brand in the University of Michigan
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and so there's going to be different valuations and different outcomes as a result
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of those kind of distinctions that I'm sure the marketplace will sort through.
00:08:26:06 - 00:08:30:02
It is interesting how the space is
evolving and maturing.
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And we found ourselves representing clients as well in terms of not only the advisory side
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of what they should be doing, but also the financial aspect of supporting people
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who do want to make investments
into these teams,
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which tend to come at high valuations
and large check sizes.
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But the firm as a whole is standing
behind that practice,
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and with a Japanese parent, certainly would love to invest in baseball.
00:08:53:19 - 00:08:55:18
Stephen, I'd like to thank you for joining us—
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- It's my pleasure.
- today.
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I'm going to go out on a limb and say that was
one of our most,
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if not the most interesting conversation we've had on M&A Corner, if for no other reason,
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the fact that we could talk about sports—
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There you go.
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—in the context of law and finance where we both spend our time.
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So thank you again for joining.
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It was an absolute pleasure.
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Thank you, Kevin.