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 00:00:11:07 - 00:00:13:09 conversation with Stephen Amdur. 00:00:13:09 - 00:00:16:23 Instead of talking about law, and business, and finance, 00:00:16:23 - 00:00:18:03 what if we just talked about sports? 00:00:18:06 - 00:00:19:05 I'd love to talk about sports. 00:00:19:08 - 00:00:21:21 It turns out though that sports actually is a business. 00:00:22:08 - 00:00:24:11 - It absolutely is. - And a very big business at that. 00:00:24:17 - 00:00:25:11 It absolutely is. 00:00:25:12 - 00:00:30:02 I understand that you've basically developed one of the leading practices at Pillsbury 00:00:30:02 - 00:00:34:00 for servicing that deal environment within the sporting universe. 00:00:34:00 - 00:00:38:04 I would love just to hear how you became involved with that in the first place 00:00:38:04 - 00:00:41:15 because I'm sure that there are plenty of law students and business students who would like 00:00:41:15 - 00:00:45:05 nothing more with their careers than to spend it in the sports area. 00:00:45:05 - 00:00:47:12 And you’ve found yourself there in your career. 00:00:47:12 - 00:00:48:09 So how did that come about? 00:00:49:00 - 00:00:52:03 So we as a firm have actually had a long history 00:00:52:03 - 00:00:56:14 representing teams and leagues in a number of different sports. 00:00:56:14 - 00:00:59:09 And so it's been a really great place for us to be 00:00:59:09 - 00:01:05:06 as we've seen the rise of private equity investments into sports teams and leagues. 00:01:05:06 - 00:01:10:00 Given our work in private equity, given our work with sponsors, with interest in the space, 00:01:10:00 - 00:01:13:02 it was a natural fit for us that as transactions continue to emerge 00:01:13:02 - 00:01:14:12 it was a natural fit for us that as transactions continue to emerge 00:01:14:12 - 00:01:17:22 that we would receive those calls from our clients, 00:01:17:22 - 00:01:21:01 from sponsors, from interested participants in the marketplace 00:01:21:01 - 00:01:24:02 to understand what it means, what the rules are, 00:01:24:02 - 00:01:29:06 how things are changing, how to negotiate and structure interests. 00:01:29:06 - 00:01:36:04 All of the leagues in their own ways have effectively a regulatory oversight responsibility. 00:01:36:04 - 00:01:40:21 And so it's not unlike doing a transaction in any other regulated industry. 00:01:40:21 - 00:01:43:05 You have to understand the rules of the regulators, 00:01:43:05 - 00:01:47:14 what they will and will not accept, and find a way to craft a transaction 00:01:47:14 - 00:01:54:00 that both accomplishes the outside investor's needs, that provides the leagues with the certainty 00:01:54:00 - 00:01:58:10 of their counterparties and their participants because they do protect themselves, 00:01:58:10 - 00:02:04:02 quite rightly, from risky transactions as much as they can. 00:02:04:02 - 00:02:08:20 And so certainly to your point, it's an attractive place for law students to go to 00:02:08:20 - 00:02:14:05 to have a bit more fun possibly on transactions, but it still requires the same level of 00:02:14:05 - 00:02:17:06 rigor and diligence as any other deal. 00:02:17:15 - 00:02:24:14 And so if you actually take a look at a transaction and unpeel it and go behind the scenes. 00:02:24:14 - 00:02:29:20 I assume that the legal documents, for instance, would look a lot like a corporate— 00:02:29:22 - 00:02:30:23 - 100% - deal document. 00:02:31:03 - 00:02:35:03 And the financial analysis, which we would do and have done on behalf of our clients 00:02:35:03 - 00:02:40:01 at Mizuho | Greenhill in the space, look a lot like the evaluation of a typical company 00:02:40:01 - 00:02:42:21 because ultimately that's what these businesses are, right? 00:02:42:21 - 00:02:44:17 They are businesses at the end of the day. 00:02:44:19 - 00:02:45:20 100%. 00:02:45:20 - 00:02:51:02 I think there's been some element of, especially when it comes to the minority stakes 00:02:51:02 - 00:02:56:21 of the rising valuations of leagues, the rising media rights that will ultimately lift up the individual team 00:02:56:21 - 00:03:00:20 league stakes, as well as the fact that unlike many other businesses, 00:03:00:20 - 00:03:07:18 there's almost always a cohort of interested buyers for the Knicks, for the Rangers. 00:03:07:18 - 00:03:09:10 I mean, they're not for sale as far as I know. 00:03:09:10 - 00:03:12:03 But given the scarcity these days of must-see TV, 00:03:12:03 - 00:03:19:07 of events that really draw people away from TikTok, and YouTube, and Netflix, and onto live television. 00:03:19:17 - 00:03:24:06 The leagues and the teams are really capitalizing on that ability for rising valuations, 00:03:24:06 - 00:03:28:03 greater opportunities to bring investors to the table 00:03:28:03 - 00:03:33:17 and find ways to find good matches of teams that have a need for capital, 00:03:33:17 - 00:03:38:19 whether it be because of long-term investors who are seeking liquidity or an opportunity for growth, 00:03:38:19 - 00:03:44:08 and private equity investors who are looking for uncorrelated returns in a different industry 00:03:44:08 - 00:03:51:20 that isn't necessarily tied in the same way to interest rates, or debt financing, or tariffs. 00:03:52:06 - 00:03:56:21 The teams and leagues are accordingly finding really great synergies to bring it all together 00:03:56:21 - 00:04:00:07 and find mutually beneficial relationships to build and grow. 00:04:00:12 - 00:04:00:16 One question for you, because a lot of these transactions tend to be minority rights transactions, 00:04:00:16 - 00:04:05:05 One question for you, because a lot of these transactions tend to be minority rights transactions, 00:04:05:05 - 00:04:08:11 Where a financial sponsor or an institutional investor 00:04:08:11 - 00:04:12:22 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. 00:04:13:01 - 00:04:16:08 Do you have a sense of what the endgame for that looks like? 00:04:16:08 - 00:04:22:16 Is there just going to be a secondary market for these stakes that starts to develop over time? 00:04:22:16 - 00:04:25:12 Is that the exit for these folks, or is it more of a permanent vehicle? 00:04:25:20 - 00:04:30:08 Many of the sponsors who have been approved to make these private equity minority investments 00:04:30:08 - 00:04:36:04 in the individual teams are structured at the fund level to have longer-term hold periods. 00:04:36:04 - 00:04:38:10 So it's not the typical five-to-seven year period. 00:04:38:10 - 00:04:41:03 It could be seven to ten or even potentially longer. 00:04:41:03 - 00:04:45:07 The teams and leagues obviously need that because nobody wants to be in a position of 00:04:45:07 - 00:04:49:13 a forced liquidity sale, a forced total exit for the teams, 00:04:49:13 - 00:04:53:02 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. 00:04:56:07 - 00:05:03:20 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, 00:05:16:10 - 00:05:19:09 that you will start to see that secondary market develop 00:05:19:09 - 00:05:23:18 either with the individual teams buying back those stakes, 00:05:23:18 - 00:05:26:19 with private equity investors coming in to 00:05:26:19 - 00:05:30:04 take stakes that have matured a bit since the original investment, 00:05:30:04 - 00:05:36:22 or just as has always been the case, interested, wealthy individuals with a passion for the team 00:05:36:22 - 00:05:40:06 and the locality have an interest in coming in and taking the stake. 00:05:40:10 - 00:05:40:23 Yeah. 00:05:40:23 - 00:05:43:00 And you're a lifelong Yankees fan? 00:05:43:05 - 00:05:45:19 Yankees, Knicks, Rangers, Giants. 00:05:46:03 - 00:05:48:19 And your last transaction in the sector was for the San Francisco? 00:05:49:02 - 00:05:51:01 Well, they once were the New York Giants, so it counts. 00:05:51:07 - 00:05:51:15 Okay. 00:05:51:22 - 00:05:55:20 But it's a testament to you as a lawyer that you're able to put those biases aside 00:05:55:20 - 00:05:57:17 and represent your client 100% to the fullest. 00:05:57:17 - 00:06:00:05 Zealous representation of the client, no matter who they are. 00:06:00:05 - 00:06:03:20 Can I ask you about the international market? 00:06:03:20 - 00:06:06:10 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. 00:06:11:09 - 00:06:15:21 Is that really the genesis of what's happened, and it's then come over to the States? 00:06:16:00 - 00:06:18:16 I think, actually, it's been a bit more the other way around. 00:06:18:16 - 00:06:22:09 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. 00:06:26:17 - 00:06:31:09 But most of those were, again, full-control stakes as opposed to minority stakes. 00:06:31:09 - 00:06:38:02 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. 00:06:45:00 - 00:06:46:15 And I suspect that will continue. 00:06:46:23 - 00:06:48:18 Can we talk a little bit about college sports? 00:06:48:22 - 00:06:49:10 - Maybe I'm 00:06:49:10 - 00:06:51:00 slightly biased here, 00:06:51:00 - 00:06:56:23 but I am a huge fan of the Michigan Wolverines and Big Ten football as a whole. 00:06:56:23 - 00:07:02:16 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. 00:07:06:01 - 00:07:10:07 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? 00:07:15:10 - 00:07:21:12 I think, similarly, you've got situations where people are looking for opportunities to grow and compete. 00:07:21:12 - 00:07:26:04 You obviously don't have the same level of liquidity-seeking that you might have 00:07:26:04 - 00:07:27:19 at the professional level. 00:07:27:19 - 00:07:32:23 But college sports has become ultra-competitive in terms of financial capabilities 00:07:32:23 - 00:07:37:06 to recruit and retain the best talent, both at the coaching level and the player level. 00:07:37:06 - 00:07:42:17 Similarly, people are looking to build bigger and better stadiums and facilities to attract players. 00:07:42:17 - 00:07:47:11 And conferences are looking to position themselves as the most desirable conferences 00:07:47:11 - 00:07:48:20 for individual schools. 00:07:48:20 - 00:07:51:13 All those requirements are things that require capital. 00:07:51:13 - 00:07:56:14 I think most of the private equity investment is going to be around things like media rights, 00:07:56:14 - 00:08:01:22 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. 00:08:11:08 - 00:08:11:15 Yeah. 00:08:11:15 - 00:08:15:22 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 00:08:19:09 - 00:08:22:20 and so there's going to be different valuations and different outcomes as a result 00:08:22:20 - 00:08:26:06 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. 00:08:30:02 - 00:08:36:01 And we found ourselves representing clients as well in terms of not only the advisory side 00:08:36:01 - 00:08:40:11 of what they should be doing, but also the financial aspect of supporting people 00:08:40:11 - 00:08:42:13 who do want to make investments into these teams, 00:08:42:13 - 00:08:46:11 which tend to come at high valuations and large check sizes. 00:08:46:11 - 00:08:50:02 But the firm as a whole is standing behind that practice, 00:08:50:02 - 00:08:53:19 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— 00:08:55:18 - 00:08:56:11 - It's my pleasure. - today. 00:08:56:11 - 00:08:59:13 I'm going to go out on a limb and say that was one of our most, 00:08:59:13 - 00:09:04:04 if not the most interesting conversation we've had on M&A Corner, if for no other reason, 00:09:04:04 - 00:09:05:13 the fact that we could talk about sports— 00:09:05:14 - 00:09:06:00 There you go. 00:09:06:01 - 00:09:08:21 —in the context of law and finance where we both spend our time. 00:09:08:21 - 00:09:09:21 So thank you again for joining. 00:09:10:04 - 00:09:11:01 It was an absolute pleasure. 00:09:11:01 - 00:09:11:11 Thank you, Kevin.