Investing billions of dollars into professional sports is nothing new for private equity firms—especially now.
COVID-19, low-interest rates, and cash strapped sporting organisations are creating investment opportunities ripe for the picking. Big sports are underutilised and undervalued assets in the eyes of equity investors. But could this fever pitch investment extend to grassroots community sports?
Professional sports leagues
During COVID lockdowns, Professional Leagues and Clubs worldwide went to great lengths to ensure that their competitions continued by playing games in empty stadiums during the pandemic. Why? They needed the revenue from broadcast deals to operate and survive. And thanks to the digital age, loyal supporters and spectators continued to engage in games virtually via their TV, computers, tablets or phones despite COVID restrictions. As a result, private equity investors continued to see a return on their investment.
What do big league private equity investors seek?
Generally, private equity firms and private investment funds/consortiums seek cash strapped sports organisations with healthy assets like a large fan base, large membership, recognisable branding, and substantial media coverage.
For example, Rugby Australia is cash strapped and has been looking closely at private equity investment. The Australian newspaper (May 8-9, 2021) reported that Rugby Australia made a $27M loss last year and had debts of $30M. As a result, Rugby Australia has been looking at a couple of options – some commercial assets and its Super Rugby Clubs.
Rugby New Zealand is another example. The organisation recently sold a 12.5% stake in a new commercial entity for an incredible $360M. Whereas a Saudi-Arabian consortium recently purchased the Newcastle United Football Club for $568M.
Boosting cash-strapped community sport – is it possible?
Is it possible to attract private equity investors into cash-strapped grassroots community sports?
As a rule, no Big-league investors exist at this level of investment in the sports industry. But perhaps it’s possible to replicate the equity funding model on a smaller scale.
It’s no secret that some National and State Member Federations, Associations and Clubs at the Grassroots Community levels are cash strapped. So why aren’t they attractive to equity investors?
Unlike their big league cousins, smaller sporting organisations lack brand recognition and don’t have a sizable membership base. Nor do they have a big loyal fan base, or an extensive social media following. In short, small organisations don’t offer a a return on investment for equity consortiums.
But what if you scale that investment model down? And instead of aiming to attract wealthy sheikhs and cashed-up consortiums, grassroots sporting clubs target local entrepreneurs. After all, some grassroots community sports organisations have been around for many years, giving them a sizable membership database, a loyal community following, a strong local social media presence and growth potential. All of which are desirable assets to smaller local investors.
But attracting local equity requires sports management skills and a preparedness to change on a business and club level.
So, there is merit in smaller sporting ornaisations analysing the success of the big-league private equity investment frameworks and applying them on a smaller community scale. All it takes is a little business know-how, ingenuity and the willingness to think outside the ‘registration fees as the primary source of revenue’ square.