June 30, 2025 • 43 mins
Anthony, Stephen, and Silvia break down the $10 billion blockbuster sale of the LA Lakers. Why did the Buss family cash out after 40 years and what makes the Lakers the world’s most valuable sports franchise? From brand power and valuation layers to the media rights behind the deal.
Then, Chelsea FC quietly sells off its women’s team… to itself? Stephen exposes the dark arts of private equity and how Chelsea dodged FFP rules with some creative accounting.
Finally, ESPN buys into lacrosse, and English rugby looks to American-style franchising to stay alive.
Is sport just business now and what does it mean for the future of valuations?
(00:00) Intro and Farewell
(04:57) Welcome Silvia to the Show
(05:57) The LA Lakers Record-Breaking Valuation
(27:15) Private Equity in Women's Soccer
(37:09) Emerging Trends in Lacrosse and Rugby Investments
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
All right, welcome to the show and we've got a special one for
you. And if you're watching a video
format, not just because there'sthree of us, we'll get to that
in a in a moment, but because we're going to talk about
sports. And I love sports and
particularly basketball, which Iknow we're going to talk about
amongst other things. But sports is big business,
bigger than it's ever been. And within the stories today,
(00:23):
we're going to cover everything from LeBron James to the dark
arts of private equity, all the valuation techniques, the
strategies behind it. And you probably would have seen
some headlines that the billionaire Mark Walter is to
buy the LA Lakers from the bus family.
We're also going to touch on women's soccer.
Look comparably between men's and women's teams and the
(00:44):
valuation techniques there. ESPN buys a stake in Lacrosse
League and they're having a bit of a strategy shift.
And then also English rugby was covered in the FT at the
weekend, right? For international investment
after overcoming crisis. There's a common thread of
private equity within today's conversation as well.
(01:06):
But as I said, top of the show, there is three of us.
So, Stephen, Sylvia, how are you?
Yeah, good. Thank you and delighted to be
here and delighted to be here with Sylvia as well.
Hi, everyone. Thanks and thanks, Stephen.
Yeah, really great to be back onthe pod.
I made a special appearance a while ago now, but always great
(01:26):
to be here. Yeah.
And then I'm, I'm just going to come out with the news, the
breaking news straight up just to to clean the slate.
But Stephen is no longer going to be a consistent feature on
the show. I'm in negotiations with his
sports agent at the moment, trying to secure him on a a
quarterly contract deal, but he's I don't know if I can fit
(01:48):
him in my salary cap at the moment.
But no, Stephen, who I know you know is being amazing having
these conversations with you. I know I've learned a ton and
I've been in markets now for 20 years.
So I'm pretty sure I can speak on for everyone on behalf of our
community. What an amazing insight strategy
(02:09):
teacher you are. And I know teacher runs in your
family genes. And so it comes as no surprise
that you've been an awesome contributor to the show.
So big thank you from me. Oh, thank you so much, Ann.
And yeah, it's a it's a, it's a little bit sad, actually.
I don't know. I was, I was trying to figure
(02:29):
out how many episodes we've donetogether.
It must be at least 100. So 100 of these conversations
where I, you know, chat a lot and you, you, you play, you play
dumb. And I don't think, I think that
I definitely think that's playing dumb as opposed to
actually being dumb. So that's it's a very so it's a
fine line, But but yeah, you mentioned, you mentioned
(02:52):
teaching and that's obviously something that we do a lot of
amplify. I'm actually moving on from
amplify to to pursue a bunch of interesting things and have a
kid and all of those amazing things that one tends to do when
they get a little bit older. But I do, you know, I think that
word teaching is so important and anyone that can get
themselves from a career perspective into a position
(03:15):
where they can teach, it's such a good profession and it's such
a rewarding thing. Even getting the comments on
YouTube saying thanks for the episodes or, you know, some of
the more interpersonal teaching that we do day-to-day, it's
always, always rewarding. So it's been an absolute
delight. But I'm also delighted to to
(03:37):
hand over to Sylvia. Yeah.
And so Sylvia is someone you've worked with for a number of
years also, right? She was pretty much within your
team here. Amplify.
Yeah. So I've been amplified for the
last just over three years now. And Sylvia joined just over 2
years ago to support me with allthings investment banking, IBD.
I'll let Sylvia introduce herself formally.
But we've worked really, really closely together.
(04:00):
We've built out The Client List,which includes everyone from
Goldman Sachs to Jeffreys to Evercore to Bank of America.
So Sylvia's done a brilliant jobthere.
We work with some of the biggestand the best universities in the
world as well. So Sylvia has been a brilliant,
a brilliant person to work with and and and a delight to take on
(04:22):
this podcast into the hot seat. Yeah.
And perhaps Sylvia there just before we begin, a bit about
your background, just a bit of context then we got a little bit
there from Stephen, but from your side.
Yeah, of course. And thank you, Stephen.
That was really kind. Now it's been like beautiful two
years again working on all things corporate finance.
(04:43):
This is the next step. Definitely.
The competition is really harsh,but I know you may be coming
back again maybe once a quarter.Let's see if Anthony can close
this deal. So you'll still see Steven
again, I'm sure sooner or later.But yeah, just about myself, my
name is Sylvia and you will see my face more often here in the
podcast now going forward, talking about all things
(05:05):
corporate finance. So I work here at Amplify me on
corporate finance side of the business with our corporate
clients. So hopefully I will be able to
like sneak in some advices for all students out there trying to
get an internship or a gradual like what you should be focusing
on. And I've been working again,
just like developing our suit ofcorporate finance simulations,
(05:28):
everything from M&A to private equity to IP OS, etcetera,
etcetera. And actually my background is
from Goldman Sachs. So I used to work there as an
equity research analyst. I was focusing on tech
companies, which is pretty much OK.
I'm really passionate about. So you will see like tech deals
coming up here and there of course.
(05:49):
But yeah, super excited to be here and looking forward to it.
Cool. Yeah.
And, and look, I know you sent me over some notes and I got
excited when you started talkingabout the Lakers.
So yeah, hit me. What?
What's the headlines here with this LA Lakers story in the bus
family? Yeah, absolutely.
I would like for my first appearance, I had to like find
(06:11):
something that would excite. So today we're starting out just
like talking about the LA Lakersdeal.
This is one of the most well known and iconic sport teams in
the world, which is but just being valued at a
record-breaking 10 billion U.S. dollars, which is huge.
It's setting a new record in this sphere.
(06:31):
And this happened as after it has been selling a controlling
stake to the BNA investor Mark Walker.
So it's an interesting deal likefrom number of different
perspectives, like from the structure of the deal, we like
the bus family, just like takinga step back in a sense doing a
partial exit, not really a full on exit.
But also again, like from a student's perspective, like
(06:53):
looking to develop more like their valuation skills.
Again, understanding how brands value actually plays a role into
these media rights, how we change the game and how the
sports franchises really are becoming some of the hottest
assets in the market. I, I guess a question then on,
(07:13):
on like timing, was this a foreseen thing that was
happening? I guess a genie bus.
I know it's, it's, it's quite often appears in the press, the
mainstream media and stuff like that.
So was this, did people expect that this deal was, was going to
happen or I guess there's no, I remember their father originally
(07:34):
in the Magic Johnson days, back in the late 70s, eighties when
he turned the Lakers around. I don't remember any of the
children, IE the now owners of the business, having children to
bring through. Yeah, that's an interesting one
actually, if we think about it, because again, it's been
basically like the like public face of the brand for the past
(07:54):
like 40 years. It says always been like in the
family and now we're seeing theminstead just like making the
shift, which is something I would like to discuss with you.
Like what do you think about it?Because we're not seeing a full
exit as we said. So the bus family will still
keep like a 15% share, which essentially means we are
switching. We're changing like the control,
(08:16):
which is now going to Mark as aninvestor, but we are also trying
to keep like some continuity with the brand and the family.
I'll say, what do you think, Stephen?
Do you think it's a great idea? Would you have gone for like a
full exit instead? What do you think?
Yeah. So it's a really interesting
question. So it's over 50% that has been
(08:37):
sold by the bus family to Mark Walter.
And it's a really interesting one because if I was the bus
family, yes, I'd probably still want to have some skin in the
game. Again, upside from a financial
perspective. But also I think if you have if
you remain A minority shareholder, you probably still
get the associated intangible benefits of being connected to
(09:00):
the LA Lakers. I courtside is what I'm
thinking. I'm sure they've got lifetime
access to, you know, to the player's locker and all of that
kind of good stuff. So they want to keep that
association. It might end up being a little
bit problematic from Mark Walter's perspective.
And I'm sure that there's structures that are being put in
(09:20):
place to make sure that Walter actually has the ability to push
through the changes that he wants to within the organization
and actually to lead from a strategic perspective with the
bus family mainly as a silent minority partner.
The danger is when egos both getinto the boardroom together,
(09:41):
especially one that's owned the company for 45 years.
They're not going to be wall flowers, right?
They're not going to be. And and you might need some some
back story on this. You know, you know basketball
better than us, but I can imagine there's some egos
floating around, right? Yeah, I don't, I don't know how
that works because I, I have a superficial understanding of
this character, Mark Walter. And I'm pretty sure he's
(10:04):
ambitious in terms of the changehe wants to to bring.
Yeah. Having Jeanie there I would see
as a huge problem. I guess the relationship needs
to be that I'd only sign the deal if she's there on paper and
has all those other little, you know, upside privileges but has
absolutely 0 ability to have anyday-to-day influence or exert
(10:29):
any control on anything. But that in itself would make me
very uncomfortable. I'd want her out and gone.
Yeah, it's all feeling a bit like succession, right.
And, and, and or whether it's the paramount, you know, the
complexity around family owned businesses.
I think Sylvia, you mentioned inyour notes, she's going to
(10:50):
remain on as the team's governing owner.
Is that right here? But I don't even know what that
means. Yeah, exactly.
Like from what we can see from the news, essentially seems like
they would like to keep the day-to-day unchanged, just
keeping a bit of continuity withthe brand, just like keeping the
main like face that the public knows really well.
But yeah, I would probably agreewith you.
(11:11):
Like this could become a little bit problematic.
So yeah, it may be like, not exactly the reality what you can
see just from these first few days in the news, I guess.
Yeah. I mean, I was having a think
then about this, this $10 billion kind of valuation, this
price tag because in my head a being English, therefore I think
(11:31):
football or soccer and I think, OK, Man United or I think
further afield in Europe, Barcelona, Real Madrid, and I
think they have international appeal.
There's a lot of Asia continent appeal.
But am I right there like Man U's probably, what, half that
valuation? I mean, at best, I mean, they do
bounce about a bit, but they're valued at 10 billion.
(11:55):
And I know basketball is a big sport in a lot of these Far East
countries with big populations like the Philippines or
Indonesia, places like that. But I'd just like to get into
the nuts and bolts of how is theLakers like this record-breaking
sum of money where they feel a little bit more orientated
(12:15):
towards North America? Or is this where you have these
like brand individual giants like LeBron James, who has a
global appeal that helps sell the team as a secondary thing?
Yeah, I know that's a really good point to think this is one
of those deals which is like really interesting to try to
value because we it's not something that we can just like
(12:38):
do the cash flows into like DCF.That's just that because there
is much more like on the intangible side of things.
So first of all, I think there are like 3 key main pillars we
can analyze. So we have meteorites which are
definitely like the core cash machine for the team.
So they guys have like a huge local TV deal as well as like
(13:00):
big opportunity with like big media contractor on the national
and also global level. Like these are estimated to be
worth 70 to 75 billion U.S. dollars next few years.
So essentially, when you're thinking about it, you're not
just selling A-Team like a sports team, but you're selling
a global broadcast access to a top tier product essentially.
(13:23):
And as you were saying, and there is a lot of like the
branding around it. I think that you're right in the
sense that probably like with respect to football perhaps or
like other sports is not like sonot so popular like in every
country around the world, but those big names everyone knows
about. I think 1 interesting thing is
like if you just walk out here in London, you can see a lot of
(13:46):
people with jerseys, but like ifyou can stop them and ask them
all right, are you a huge fan? Are you like following it?
The answer would probably be no,just because like there is like
a just a huge brand around it. Like there is, it has become a
global cultural icon in a sense.So we can also think about it
just as a bit of a luxury type of company, like a premium
(14:09):
fashion type of company. There are a lot of opportunities
again, not just like as pure football team, but like with
merchandising, sponsorships, lifestyle brands, partnerships.
So there's like this additional element that we can add on top
of it. And maybe like, and again, as
you are really passionate about this, you can probably share
like what do you think about like the value of like this
(14:30):
intangible element of owning a sports team?
Yeah, I mean, from the perception of like, we just had
the NBA Finals, it's just happened.
And it was the Oklahoma City Thunder against the Indiana
Pacers that would either could be any more the opposite of what
the Lakers is from like a thoroughbred championship
winning team. These are both fairly, you know,
(14:53):
not second tier, but definitely they're not the Boston Celtics
and the LA Lakers, which is likethe staple of like the history
of the thoroughbreds of of basketball.
So that has shifted quite a lot.But I think what LA has is
location. LA, there's this intersection
that basketball and Los Angeles has always had of like fashion,
(15:13):
music, hip hop, celebrity. It brings together this cocktail
that creates a very unique brandthat basically can't be
replicated. So I think given that there's
only so many teams in a league, it brings together a really
unique set of components that can't be imitated by the others.
(15:34):
So yeah, they're not quite they're not quite the team they
used to be, even though they've probably secured a very good
player in dodge in the last in the last season.
They're they're they feel like they're perhaps one of these
teams where in the post Kobe Shaq era of when they were
(15:58):
champions in the early noughties, they've got the best
player, but perhaps not the bestteam.
And as we've just seen for the last NBA Finals, teams have
built on teams. And both of these are exactly
that. There's, yes, a few superstars
here and there, but I guess in the end, for a brand to be
(16:19):
successful and why the Lakers were really successful in the
80s was because they were serialwinners.
They are no longer serial winners.
And I just wonder, yes, they've got this unique brand and it has
this cool X Factor, but without winning, I don't know how far
that actually travels. Yeah, just a, just a, a by the
(16:41):
way, and I think this is your second pit to run your own
basketball podcast. So I'm going to bring us right
back into finance. I do want to cover Dodge in a
second, but I think the other thing that that would provide a
significant acquisition premium or evaluation premium to
American sports teams relative to, to football clubs is, is
(17:04):
the, is the nature of the franchise, right?
These guys can't get promoted, they can't get relegated.
Their cash flows are relatively easy to forecast from a media
rights perspective. You know, you, we're going to
talk about Chelsea in a, in a little bit, but they will get a,
a, you know, £80 million boost if they make the Champions
League and if they don't, they don't get it.
(17:25):
And you know, worst comes to worst, they could get relegated.
So that is why that's one of thereasons why you get a
significant acquisition premium or evaluation premium.
But I also want to ask Ann. So we talk about the the fact
that the the NBA has stayed somewhat within the US.
If you compare that to NFL, which is another kind of Great
(17:49):
American sport, we're seeing more and more matches being held
here in the UK even I think there might be 1 slated to
happen in the Middle East at some point over the next couple
of years. So what's going on with the
export value or the export effort?
Is it just, is it, is it not happening?
I know we've got superstars likeDodge as you, as you mentioned,
who are not from the US So yeah,what's going on there?
(18:11):
Yeah, I mean, I don't have the figures to hand, but basically
the viewership, game seven of the NBA Finals, I think was the
most watched finals that they'vehad in seven years.
Taking that aside, viewing figures for the NBA are
absolutely plummeting and it's almost like a vicious circle
(18:31):
where the more it plummets, the more desperate the league
becomes to try and re galvanizedthe game.
And they've started to think of all these other creative ways to
change like the All Star game that they have all these
different sort of rules and things around it.
And I think that's just degrading the game.
So I don't know. And This is why I question like
(18:53):
this, this valuation. The NBA is on a downward
trajectory in its popularity, both in America as a watched
viewership base, and also globally.
It's become so dramatized and the the the game is so far
removed from what it was that actually it's just really not
interesting to watch because it's super uncompetitive.
(19:15):
And it's all about then lifting up stars to make them characters
and brands and offshoots of Netflix series to monetize it
that way rather than the grass roots of the beautiful game.
And so, yeah, I don't I don't think it translates particularly
well. It used to in the 90s, but maybe
that's because he had Jordan as the linchpin that acted as the
(19:39):
global ambassador where people bought into him.
And the Bronze never had that same quite global appeal, I'd
say. So Sylvia, 11 for you in terms
of these valuations, right? So at the moment, we're seeing
this almost arms race every six months or so, we get the world's
most valuable team and there's anew record, whether it's the
(19:59):
Boston Celtics or the LA Lakers or the Golden State Warriors or
whatever it might be. What is this just going to keep
going forever? Are we just going to keep
breaking these new records or are they going to be?
What kind of headwinds could there be that might?
See the wheels come off a littlebit and maybe you know, these
(20:19):
were the heady days and valuations will start going
down. Yeah, that's a good question
actually. Because like what I was thinking
about when I was like seeing this transaction and like
comparing it with like most recent ones, which always seemed
we're always getting like higherand higher.
It is just like a bubble evaluations of like sport teams
or is there definitely some intrinsic value in these which
(20:40):
is will keep going higher and higher?
I don't know, I would say I definitely see it crossing the
ceiling and just like maybe given a halt at a certain point
if we're keeping seeing these valuations consist of going
higher and higher. This also could trigger a bit
for red flag to investors willing to invest in this, like
is the opportunity really there?Or maybe they just over
(21:04):
evaluation, which may be also like a good talking point for a
student to think about. Just like try to get down to
your valuation of this company and understand, is it 10 billion
really for you? Like with all the different
elements that we can include being like branding, being like
scarcity because like, right, it's like we just get as many of
these teams and usually they're not sold like this one is being
(21:26):
sold after 40 years essentially.But even considering all of
these elements, is it really a 10 billion deal or not?
So break it down for me in stepsthen.
So do you not look at the brand aspect and just focus on the
standardized process, looking atfinancials first and then you
(21:47):
start to bolt in this associatedbrand value into that already
first part analysis? Or do you start from the
beginning and then incorporate everything all in one pot?
Yeah, No, that's a good question.
Actually. It's really timely as we're
currently running our summer analyst training program.
So we're currently in the banking week and we talked about
(22:08):
valuation yesterday and some of the students were asking me
like, OK, so is it just like as straightforward as it is build
my model, build my little table with ITCF and that is the
valuation of the company? Well, there is flavour to it, of
course. Like especially like when we
were thinking about deals like this one, you will need to kind
of like build layers in a sense.So I think a good starting point
is definitely like starting fromyour most traditional method in
(22:30):
a sense. You can try to do ADCF even if I
would reckon probably like thesetype of companies like this poor
steam are not run really for cash flow maximization.
So you could get like a bit of an undervalued type of valuation
in this case. So you may also want to take
some multiples. But again, I think like taking
the starting point, then the important thing will be just
(22:53):
adding some layers kind of like taking into account those
elements that maybe you can really not reflect fully your
evaluation. Even if you can definitely take
into account some of the intangibles of the branding.
Or maybe something like adding apremium multiple for the
branding of the company and thentaking into account media
rights. May want to assume like some
(23:13):
perpetuity stream in that case and find it again for your
scarcity element. Either you can adjust your work
or you can apply like another acquisition premium on top of
it. If you were another team
thinking about doing something similar, because you've just had
the Boston Celtics, you've now had the Lakers and each number
(23:33):
we said the bars going up and upand up.
How, how do you, how as an advisor, like a banker do you go
right? We need to get a deal in now.
If you guys want to do a deal, you've got to go now.
Or do you risk being that bankerwho pushed that team to get top
of the market and then actually the market falls because the
(23:54):
Lakers was the pinnacle? Like how would you, how do you
make that judgment call as the advisor?
Yeah, I mean, this is an interesting one.
I would definitely say if I was one of the other 28 franchises
that's not the LA Lakers or the best Boston Celtics, I would be
not necessarily rubbing my handstogether, but I'd think, OK,
check. Interesting comp.
(24:14):
Love that valuation ceiling that's just been smashed.
If I was a banker, I wouldn't be, you know, I'd be discounting
that comp quite significantly because it looks, I don't know
enough about this deal, but it looks like a bilateral, right.
It doesn't look like the LA Lakers were going out to market
with a huge competitive process and private equity is involved
(24:37):
with that kind of very, very rational view on valuations.
It looks like, OK, here's a, youknow, Angelion, Mark Walter, he
already owns the Dodgers. They've probably known of each
other for many, many years. And this was, you know, this was
this was a deal that got done. And the and the number was
(24:58):
probably the only number that the bus family would have
accepted because they didn't need to sell the asset.
So, you know, a good moment in terms of smashing through
valuation caps, if I was advising any one of the other,
the Indiana Pacers, for example,I would say, look, you're not
going to get 10 billion unless you've got a Mark Walter lined
(25:19):
up who's willing to pay whatever, whatever the asking
price is, right? Yeah, and if you're the Pacers,
I think you were the sixth seed and you got to the Finals.
So time, time is of the essence.Did you just say Angelion as
well? I.
Think that is please any listener or viewer correct me if
(25:40):
I'm wrong is that did I just make that up?
Did you? Know what you said it and I
thought it's just one of those words where you're just clearly
more intelligent than I am and Iwas I was just like, I'm just
going to accept it or I going tomention it for.
Look, the key. The key to sounding intelligent
is to say it with complete confidence.
It's sounding confidence, so I'mgoing to take.
It and then check it later. Yeah, exactly.
(26:01):
All right. Well, maybe we could just wrap
up then this. So, So what?
What's some some key takeaways, Sylvia with this one then to
finish. Yeah, I think like there are a
couple definitely. So again whenever we're looking
like at this type of companies, we need to make sure like we are
valuing them as not really like what they are innocence.
Like we're thinking like about base basketball team.
(26:25):
You maybe think like, OK, I willvalue it like stadium, I don't
know, something similar, not really.
Like you would go more towards like a streaming, broadcasting
platform type of valuation. You need to take into account a
lot of different elements on topof what would be your basic cash
flow generation because it's notat all like a company based on
that at the end of the day. And also, again, from a banker's
(26:48):
perspective, when you would liketo pitch to your client like
such a deal, you really need to kind of like sell it to the
potential buyers. Like you'd kind of just like
show them the financials becausethe financials probably will
make sense. OK, Yeah.
But not for a time being. You will not pay that much.
You really need to kind of like tell the story, build the story
and kind of like sell them. What is the growth opportunity
(27:11):
there and why they should be interested?
All right, well, look, let's talk a little bit about, you
know, whenever I think maybe I'mbiased because here in England,
I remember actually I unknowingly was taking my
daughter. I think it was an inset day, and
I went into Charing Cross, went off into Trafalgar Square.
(27:31):
And it just so happened it was the day after.
It was the parade where England,the women's team won the EUR.
And then I was just like, wow, this seemed massive because it
was busy. And I was like, I mean, probably
not to the scale yet of what? Well, I'm not going to say
because England's men are never going to win the EUR it would
seem, but it felt like a different feeling at that point.
(27:55):
And, you know, we we continue tosee success in the European
game. I think it was Arsenal, wasn't
it, with the with the women's. And so I just wanted to get a
sense of, yeah, let's move this over to soccer, football, Let's
talk Chelsea, bring it closer tohome, but talk about the women's
game. And how does that compare as a
sports team? How do you even approach that?
(28:16):
Yeah, this is this is so interesting.
And I, I looked at this headline.
It's not even a particularly newheadline, but it's it's
something that just kind of caught my interest.
The headline was how, how much is the Chelsea women's team
actually worth? Actually, it produced quite a
lot of interesting little subplots about, as you mentioned
at the top of this episode, the dark arts of private equity.
(28:38):
So, so we hear obviously a lot about the valuation of the
world's premier football teams, soccer teams.
Real Madrid value close to $7 billion, Man United 6.6
according to Fortune. I think it's a little bit lower
than that now. And obviously Chelsea were
acquired. Chelsea men's football team were
acquired for 4.25 billion by Todd Boley and Clearlake back in
(29:02):
2022 post Abramovich. Now, the way that the Women's
Premier League has been set up is derivative as a derivative of
the men's Premier League. So historically Chelsea women's
football team would be owned by Chelsea and Arsenal women's
(29:22):
football team would be owned by Arsenal and they would be either
a separately owned subsidiary, sorry a wholly owned subsidiary,
or they would just be included in the day-to-day running of the
business. What this story has told me is
that these these stand alone entities, Chelsea Women's
(29:43):
Football Club, have quite significant valuations and are
attracting interest from outsideinvestors.
So the one that I wanted to talkabout before I get onto the dark
arts is the Minority Investment by Alexis Ohanian, the founder
of Reddit, my favorite company, which recently bought an 8%
(30:07):
stake valuing Chelsea Women's Football Club at 245,000,000
lbs, which is not insignificant.Obviously it's way below the
4.25 billion of the men's football club, but bearing in
mind Chelsea Women's Football Club, their revenues were only
about £12 million last year. So this is valuing them on an 18
(30:31):
times revenue multiple more thandoubled the average multiple of
male Premier League football clubs.
So that's worth considering. Now when you see those massively
high multiples, the 18 times revenue multiples, the first
thing you need to look at is revenue growth because again, if
you've got a big, if you've got a high revenue multiple, your
(30:51):
goal is to grow into that revenue multiple 18 times.
So Chelsea grew from 8.8 millionof revenue the year before to
just over 12 million. So pretty good revenue growth.
And obviously Hanian is is betting on the fact that women's
sport, well, women's football isgoing to go from strength to
(31:14):
strength. And if you are going to back an
asset within women's football atthe moment, it's got to be
Chelsea, right? They've won the last five
Women's Premier League in a row I believe and I think 7 of the
last eight or something ridiculous like that.
It was actually mooted last yearthat they were going to sell
that Chelsea was going to sell aminority stake at a £160 million
(31:38):
valuation. So the valuations are going up
and up and up, but they're stillmaking massive losses, right?
So in 2324 Chelsea women's team made a pre tax loss of 5.2
million. And actually what's super
interesting, so if you dig a little bit deeper, there are
(31:58):
football clubs in the second tier of women's football that do
not want to get promoted, that have actively asked not to be
promoted because of the requirements from a stadium
perspective, the requirements from a salary perspective of
being and competing in the Premier League.
It's just going to put these, you know, small semi
(32:19):
professional clubs out of business.
So what do you need to do? You either need to, as the
overall company, Chelsea FC thatowns the whole thing, you either
need to massively commit to a multi year project of investment
within the the women's team, or you need to siphon it off as a
(32:43):
separate subsidiary that has theability to attract outside
investors and start to get that,you know, upside the, the, the
rest of the sporting world is here.
So you explain to me a little bit more than about the the
private equity relationship here, the involvement, what is
it that they're looking at? I mean as some of the numbers
(33:04):
here are making sense, but if you could unpack that.
Yeah, this is super interesting.So back in April, remember,
Chelsea FC is owned by Clear Lake and Todd Bowley.
Private equity guys, they know their stuff, right?
And if anyone knows football, Chelsea went on a massive buying
spree over the last couple of years.
(33:24):
If anyone knows football as well, you'll know that if you
suffer multiple years of significant losses, you are
subject to regulations and sanctions.
So I'm a Nottingham Forest fan, we spent too much money in the
first two years, incurred too much of a loss and we got a
points deduction. So Chelsea who have spent so, so
(33:47):
much money, reported a £90.1 million loss last year and they
have actually reported a 128 million pre tax profit this
year. Why have they reported a 128
million pre tax profit? Because they sold Chelsea
Women's Football Club to themselves.
(34:12):
So they basically sold Chelsea Women's Football Club to a
subsidiary. So it's, it's recognized by
Chelsea FC as a gain from a disposal of an asset, turning
them from a loss making company to a profitable company, which
means that they don't get done by the sanctions, they don't get
done by the regulations. They still own this subsidiary,
(34:34):
maybe indirectly, maybe there's more control outside of the
organization. And by the way, just to compound
this, I told you that they made a loss of 90.190 point 1,000,000
the year before. That loss would have been
167,000,000. But they got rid of two of the
(34:54):
hotels that are on the Stamford Bridge site.
They didn't get rid of it. They didn't get rid of the the
hotels to an outside party. They got rid of it to a sister
company that that still is part of the same entity.
So think about this just to get our heads a little bit straight.
You've got the Topco, which is owned by Todd Bowley and
(35:16):
Clearlake, you know, Chelsea management company.
Then underneath you have ChelseaFootball Club, men's football
club, subject to sanctions and regulations that previously
owned all of the assets, the hotels, the women's football
club, etcetera. So what they've done over the
last few years to avoid a pointsdeduction is say new subsidiary
sitting underneath management code, new subsidiary women's
(35:40):
club, new subsidiary hotels. And they've and they've, they've
gone, they've gone away with. One, how is that even possible?
I mean, how is that not, I mean,it's so like obvious what's
happening here? Like, is there not some sort of
governing body that works on behalf of the the English
Football League that can like, step in here and just say, look,
(36:03):
this is not this isn't right? Yeah, I mean you, I think.
And you know this as well as I do, the the smartest people are
on the on the sharp edge of making money, right?
So they will do things, they will exploit loopholes that were
previously open. And those loopholes in the next
(36:24):
few years might get closed. But Chelsea would have done what
they've done, right? So they're not doing anything
illegal. They're not doing anything that
is outside of the letter of football regulations and the
football law, certainly outside the spirit.
And I'll just end this little piece by a little quip from a
from an unidentified Chelsea fanwho says next year we're going
(36:46):
to be selling ourselves the lawnmowers for £90,000,000.
Create a new subsidiary Lawn Mower Limited £90,000,000.
Done. Easy.
Oh, you've got to love it. You've got to love the ingenuity
of making money. All right, well, look, just
(37:06):
conscious of time. So maybe we could just have a
quick tuck on these last two stories involving lacrosse and
rugby. Yeah, this is super interesting.
And, and the reason why I put these two stories in and and
I'll deal with them together even though they're very
different stories, is to explaina little bit about the direction
(37:26):
of travel and the valuation trends in sport in general.
So ESPN buying stake in lacrosseleague, ESPN, obviously ESPN
plus a streaming platform, ESPN owned by Walt Disney.
You know, ESPN getting involved in the product as well as in the
(37:46):
distribution and the media rights of that product makes
sense and is important in the context of understanding just
how just how necessary and intrinsic the likes of ESPN and
the media rights are to the clubs themselves.
And obviously that probably wouldn't fly in a small in a
(38:07):
much bigger league. You're not likely to get Sky
Sports or Sky buying a 40% stakeof Wolverhampton Wanderers.
It's probably not going to happen.
But in the smaller leagues whereESPN can can increase the value
of the lacrosse league by putting it front and center in
(38:28):
some of its streaming assets, there is this classic synergies
that you can that you can get there.
So that's number one. This kind of commingling of the
distribution and the ownership of the product #2 this relates
to the headline English rugby ripe for international
investment after overcoming crisis.
(38:49):
This is and we've discussed earlier on, this is the
Americanization of sport. And when I say the
Americanization of sport, what Imean is the franchising of
sport. Now, as a British purist, I love
relegation and promotion, right?I love, you know, historically
(39:11):
family owned teams that are liketied to their communities and
all of this stuff. But that means that a, you trade
at a discount to franchise to franchisees and B, you you end
up getting into financial trouble.
So in the Premier League, in in the Rugby Premier League, three
(39:35):
of the 13 companies in the Premier League went bust a
couple of years ago because theyjust didn't have the investment
firepower. They were locally owned
etcetera. What is going to happen what
what we think is going to happenis that Premiership Rugby is
going to be franchised. So these teams, Wasps,
Harlequins, Saracens, etcetera are going to become franchises.
(39:58):
No promotion, no relegation, Open to in, no to external
investment. In the same way as the 100
cricket has been franchised and just raised £550 million by
selling its franchises after a couple of years of of running of
running the product. The other interesting franchise,
(40:19):
obviously you've got the Indian Premier League in cricket.
The other interesting franchise which I would encourage everyone
to check out is Sale GP. This is the Intercontinental
Sailing franchise which has I believe 12 teams from different
countries. My favorite teams firstly are
(40:39):
the British team, which is ownedby Ben Ainsley, the legend of
the Olympics. But the second is the Bonds
Flying Ruse. Must have heard of these.
And Bonds Flying Ruse owned by Hugh Jackman and Ryan Ryan
Reynolds. And I believe the that Bonds is
AI don't know is it an underwearcompany or something like that?
(41:01):
You've not got a pair of bonds. I don't have a pair of bonds.
I'm far too pale and northern for that.
So yeah, franchises, it's super interesting and it makes sense,
right? No promotion, no relegation, you
know, you certainty of media rights, predictability of cash
flows. It's not sport from my
(41:23):
perspective, but it's it's definitely business.
So. So maybe it's a close then if I
were a student going into interview applications, these
sorts of things, trying to demonstrate my interest and
knowledge about something like DCFS and more, more corporate
finance terms. Am I right in saying then the a
(41:44):
good place to go is find something you love?
Could be Chelsea Women's Football Club, it could be the
LA Lakers. There's always something,
whether it's a sports team, a brand, a product, and then you
can almost lean into that enthusiasm for your for that
thing and then have all those technical components around it.
Is that something you've seen orthat you'd advise?
(42:06):
Yeah, I think like especially I would say probably from my
experience, like just having interviews, talking about deals
and valuations, going with what you like is the way to go.
Because if you're talking about like a company, an industry
you're really passionate about, honestly, just like you're
passion sparks out a little bit more.
Like they can actually feel likeyou did your research because
(42:29):
you were generally interested and not just like you search a
random, I don't know, insurance company you absolutely don't
care about. Because maybe it's like just not
your field, but you thought like, yeah, this could be
interesting for my interviewer and not for me.
And you're just like reading a form of script or kind of like
just know it by heart. So yeah, my advice probably
(42:50):
would be, yeah, find something which is relevant in the news
right now because you need to talk about something which is
happening right now, not just like five years ago deal, but
those are something you can relate to so that you can also
add in like your personal flavour.
Cool. All right, well, we will finish
the episode there. We will say a huge thank you to
(43:10):
Stephen and a big welcome to Sylvia and we'll see everyone
next week. Thank you both.
Thanks, Ant. Thank you very much.
Thanks Ant.
All right, welcome to the show and we've got a special one for
you. And if you're watching a video
format, not just because there'sthree of us, we'll get to that
in a in a moment, but because we're going to talk about
sports. And I love sports and
particularly basketball, which Iknow we're going to talk about
amongst other things. But sports is big business,
bigger than it's ever been. And within the stories today,
(00:23):
we're going to cover everything from LeBron James to the dark
arts of private equity, all the valuation techniques, the
strategies behind it. And you probably would have seen
some headlines that the billionaire Mark Walter is to
buy the LA Lakers from the bus family.
We're also going to touch on women's soccer.
Look comparably between men's and women's teams and the
(00:44):
valuation techniques there. ESPN buys a stake in Lacrosse
League and they're having a bit of a strategy shift.
And then also English rugby was covered in the FT at the
weekend, right? For international investment
after overcoming crisis. There's a common thread of
private equity within today's conversation as well.
(01:06):
But as I said, top of the show, there is three of us.
So, Stephen, Sylvia, how are you?
Yeah, good. Thank you and delighted to be
here and delighted to be here with Sylvia as well.
Hi, everyone. Thanks and thanks, Stephen.
Yeah, really great to be back onthe pod.
I made a special appearance a while ago now, but always great
(01:26):
to be here. Yeah.
And then I'm, I'm just going to come out with the news, the
breaking news straight up just to to clean the slate.
But Stephen is no longer going to be a consistent feature on
the show. I'm in negotiations with his
sports agent at the moment, trying to secure him on a a
quarterly contract deal, but he's I don't know if I can fit
(01:48):
him in my salary cap at the moment.
But no, Stephen, who I know you know is being amazing having
these conversations with you. I know I've learned a ton and
I've been in markets now for 20 years.
So I'm pretty sure I can speak on for everyone on behalf of our
community. What an amazing insight strategy
(02:09):
teacher you are. And I know teacher runs in your
family genes. And so it comes as no surprise
that you've been an awesome contributor to the show.
So big thank you from me. Oh, thank you so much, Ann.
And yeah, it's a it's a, it's a little bit sad, actually.
I don't know. I was, I was trying to figure
(02:29):
out how many episodes we've donetogether.
It must be at least 100. So 100 of these conversations
where I, you know, chat a lot and you, you, you play, you play
dumb. And I don't think, I think that
I definitely think that's playing dumb as opposed to
actually being dumb. So that's it's a very so it's a
fine line, But but yeah, you mentioned, you mentioned
(02:52):
teaching and that's obviously something that we do a lot of
amplify. I'm actually moving on from
amplify to to pursue a bunch of interesting things and have a
kid and all of those amazing things that one tends to do when
they get a little bit older. But I do, you know, I think that
word teaching is so important and anyone that can get
themselves from a career perspective into a position
(03:15):
where they can teach, it's such a good profession and it's such
a rewarding thing. Even getting the comments on
YouTube saying thanks for the episodes or, you know, some of
the more interpersonal teaching that we do day-to-day, it's
always, always rewarding. So it's been an absolute
delight. But I'm also delighted to to
(03:37):
hand over to Sylvia. Yeah.
And so Sylvia is someone you've worked with for a number of
years also, right? She was pretty much within your
team here. Amplify.
Yeah. So I've been amplified for the
last just over three years now. And Sylvia joined just over 2
years ago to support me with allthings investment banking, IBD.
I'll let Sylvia introduce herself formally.
But we've worked really, really closely together.
(04:00):
We've built out The Client List,which includes everyone from
Goldman Sachs to Jeffreys to Evercore to Bank of America.
So Sylvia's done a brilliant jobthere.
We work with some of the biggestand the best universities in the
world as well. So Sylvia has been a brilliant,
a brilliant person to work with and and and a delight to take on
(04:22):
this podcast into the hot seat. Yeah.
And perhaps Sylvia there just before we begin, a bit about
your background, just a bit of context then we got a little bit
there from Stephen, but from your side.
Yeah, of course. And thank you, Stephen.
That was really kind. Now it's been like beautiful two
years again working on all things corporate finance.
(04:43):
This is the next step. Definitely.
The competition is really harsh,but I know you may be coming
back again maybe once a quarter.Let's see if Anthony can close
this deal. So you'll still see Steven
again, I'm sure sooner or later.But yeah, just about myself, my
name is Sylvia and you will see my face more often here in the
podcast now going forward, talking about all things
(05:05):
corporate finance. So I work here at Amplify me on
corporate finance side of the business with our corporate
clients. So hopefully I will be able to
like sneak in some advices for all students out there trying to
get an internship or a gradual like what you should be focusing
on. And I've been working again,
just like developing our suit ofcorporate finance simulations,
(05:28):
everything from M&A to private equity to IP OS, etcetera,
etcetera. And actually my background is
from Goldman Sachs. So I used to work there as an
equity research analyst. I was focusing on tech
companies, which is pretty much OK.
I'm really passionate about. So you will see like tech deals
coming up here and there of course.
(05:49):
But yeah, super excited to be here and looking forward to it.
Cool. Yeah.
And, and look, I know you sent me over some notes and I got
excited when you started talkingabout the Lakers.
So yeah, hit me. What?
What's the headlines here with this LA Lakers story in the bus
family? Yeah, absolutely.
I would like for my first appearance, I had to like find
(06:11):
something that would excite. So today we're starting out just
like talking about the LA Lakersdeal.
This is one of the most well known and iconic sport teams in
the world, which is but just being valued at a
record-breaking 10 billion U.S. dollars, which is huge.
It's setting a new record in this sphere.
(06:31):
And this happened as after it has been selling a controlling
stake to the BNA investor Mark Walker.
So it's an interesting deal likefrom number of different
perspectives, like from the structure of the deal, we like
the bus family, just like takinga step back in a sense doing a
partial exit, not really a full on exit.
But also again, like from a student's perspective, like
(06:53):
looking to develop more like their valuation skills.
Again, understanding how brands value actually plays a role into
these media rights, how we change the game and how the
sports franchises really are becoming some of the hottest
assets in the market. I, I guess a question then on,
(07:13):
on like timing, was this a foreseen thing that was
happening? I guess a genie bus.
I know it's, it's, it's quite often appears in the press, the
mainstream media and stuff like that.
So was this, did people expect that this deal was, was going to
happen or I guess there's no, I remember their father originally
(07:34):
in the Magic Johnson days, back in the late 70s, eighties when
he turned the Lakers around. I don't remember any of the
children, IE the now owners of the business, having children to
bring through. Yeah, that's an interesting one
actually, if we think about it, because again, it's been
basically like the like public face of the brand for the past
(07:54):
like 40 years. It says always been like in the
family and now we're seeing theminstead just like making the
shift, which is something I would like to discuss with you.
Like what do you think about it?Because we're not seeing a full
exit as we said. So the bus family will still
keep like a 15% share, which essentially means we are
switching. We're changing like the control,
(08:16):
which is now going to Mark as aninvestor, but we are also trying
to keep like some continuity with the brand and the family.
I'll say, what do you think, Stephen?
Do you think it's a great idea? Would you have gone for like a
full exit instead? What do you think?
Yeah. So it's a really interesting
question. So it's over 50% that has been
(08:37):
sold by the bus family to Mark Walter.
And it's a really interesting one because if I was the bus
family, yes, I'd probably still want to have some skin in the
game. Again, upside from a financial
perspective. But also I think if you have if
you remain A minority shareholder, you probably still
get the associated intangible benefits of being connected to
(09:00):
the LA Lakers. I courtside is what I'm
thinking. I'm sure they've got lifetime
access to, you know, to the player's locker and all of that
kind of good stuff. So they want to keep that
association. It might end up being a little
bit problematic from Mark Walter's perspective.
And I'm sure that there's structures that are being put in
(09:20):
place to make sure that Walter actually has the ability to push
through the changes that he wants to within the organization
and actually to lead from a strategic perspective with the
bus family mainly as a silent minority partner.
The danger is when egos both getinto the boardroom together,
(09:41):
especially one that's owned the company for 45 years.
They're not going to be wall flowers, right?
They're not going to be. And and you might need some some
back story on this. You know, you know basketball
better than us, but I can imagine there's some egos
floating around, right? Yeah, I don't, I don't know how
that works because I, I have a superficial understanding of
this character, Mark Walter. And I'm pretty sure he's
(10:04):
ambitious in terms of the changehe wants to to bring.
Yeah. Having Jeanie there I would see
as a huge problem. I guess the relationship needs
to be that I'd only sign the deal if she's there on paper and
has all those other little, you know, upside privileges but has
absolutely 0 ability to have anyday-to-day influence or exert
(10:29):
any control on anything. But that in itself would make me
very uncomfortable. I'd want her out and gone.
Yeah, it's all feeling a bit like succession, right.
And, and, and or whether it's the paramount, you know, the
complexity around family owned businesses.
I think Sylvia, you mentioned inyour notes, she's going to
(10:50):
remain on as the team's governing owner.
Is that right here? But I don't even know what that
means. Yeah, exactly.
Like from what we can see from the news, essentially seems like
they would like to keep the day-to-day unchanged, just
keeping a bit of continuity withthe brand, just like keeping the
main like face that the public knows really well.
But yeah, I would probably agreewith you.
(11:11):
Like this could become a little bit problematic.
So yeah, it may be like, not exactly the reality what you can
see just from these first few days in the news, I guess.
Yeah. I mean, I was having a think
then about this, this $10 billion kind of valuation, this
price tag because in my head a being English, therefore I think
(11:31):
football or soccer and I think, OK, Man United or I think
further afield in Europe, Barcelona, Real Madrid, and I
think they have international appeal.
There's a lot of Asia continent appeal.
But am I right there like Man U's probably, what, half that
valuation? I mean, at best, I mean, they do
bounce about a bit, but they're valued at 10 billion.
(11:55):
And I know basketball is a big sport in a lot of these Far East
countries with big populations like the Philippines or
Indonesia, places like that. But I'd just like to get into
the nuts and bolts of how is theLakers like this record-breaking
sum of money where they feel a little bit more orientated
(12:15):
towards North America? Or is this where you have these
like brand individual giants like LeBron James, who has a
global appeal that helps sell the team as a secondary thing?
Yeah, I know that's a really good point to think this is one
of those deals which is like really interesting to try to
value because we it's not something that we can just like
(12:38):
do the cash flows into like DCF.That's just that because there
is much more like on the intangible side of things.
So first of all, I think there are like 3 key main pillars we
can analyze. So we have meteorites which are
definitely like the core cash machine for the team.
So they guys have like a huge local TV deal as well as like
(13:00):
big opportunity with like big media contractor on the national
and also global level. Like these are estimated to be
worth 70 to 75 billion U.S. dollars next few years.
So essentially, when you're thinking about it, you're not
just selling A-Team like a sports team, but you're selling
a global broadcast access to a top tier product essentially.
(13:23):
And as you were saying, and there is a lot of like the
branding around it. I think that you're right in the
sense that probably like with respect to football perhaps or
like other sports is not like sonot so popular like in every
country around the world, but those big names everyone knows
about. I think 1 interesting thing is
like if you just walk out here in London, you can see a lot of
(13:46):
people with jerseys, but like ifyou can stop them and ask them
all right, are you a huge fan? Are you like following it?
The answer would probably be no,just because like there is like
a just a huge brand around it. Like there is, it has become a
global cultural icon in a sense.So we can also think about it
just as a bit of a luxury type of company, like a premium
(14:09):
fashion type of company. There are a lot of opportunities
again, not just like as pure football team, but like with
merchandising, sponsorships, lifestyle brands, partnerships.
So there's like this additional element that we can add on top
of it. And maybe like, and again, as
you are really passionate about this, you can probably share
like what do you think about like the value of like this
(14:30):
intangible element of owning a sports team?
Yeah, I mean, from the perception of like, we just had
the NBA Finals, it's just happened.
And it was the Oklahoma City Thunder against the Indiana
Pacers that would either could be any more the opposite of what
the Lakers is from like a thoroughbred championship
winning team. These are both fairly, you know,
(14:53):
not second tier, but definitely they're not the Boston Celtics
and the LA Lakers, which is likethe staple of like the history
of the thoroughbreds of of basketball.
So that has shifted quite a lot.But I think what LA has is
location. LA, there's this intersection
that basketball and Los Angeles has always had of like fashion,
(15:13):
music, hip hop, celebrity. It brings together this cocktail
that creates a very unique brandthat basically can't be
replicated. So I think given that there's
only so many teams in a league, it brings together a really
unique set of components that can't be imitated by the others.
(15:34):
So yeah, they're not quite they're not quite the team they
used to be, even though they've probably secured a very good
player in dodge in the last in the last season.
They're they're they feel like they're perhaps one of these
teams where in the post Kobe Shaq era of when they were
(15:58):
champions in the early noughties, they've got the best
player, but perhaps not the bestteam.
And as we've just seen for the last NBA Finals, teams have
built on teams. And both of these are exactly
that. There's, yes, a few superstars
here and there, but I guess in the end, for a brand to be
(16:19):
successful and why the Lakers were really successful in the
80s was because they were serialwinners.
They are no longer serial winners.
And I just wonder, yes, they've got this unique brand and it has
this cool X Factor, but without winning, I don't know how far
that actually travels. Yeah, just a, just a, a by the
(16:41):
way, and I think this is your second pit to run your own
basketball podcast. So I'm going to bring us right
back into finance. I do want to cover Dodge in a
second, but I think the other thing that that would provide a
significant acquisition premium or evaluation premium to
American sports teams relative to, to football clubs is, is
(17:04):
the, is the nature of the franchise, right?
These guys can't get promoted, they can't get relegated.
Their cash flows are relatively easy to forecast from a media
rights perspective. You know, you, we're going to
talk about Chelsea in a, in a little bit, but they will get a,
a, you know, £80 million boost if they make the Champions
League and if they don't, they don't get it.
(17:25):
And you know, worst comes to worst, they could get relegated.
So that is why that's one of thereasons why you get a
significant acquisition premium or evaluation premium.
But I also want to ask Ann. So we talk about the the fact
that the the NBA has stayed somewhat within the US.
If you compare that to NFL, which is another kind of Great
(17:49):
American sport, we're seeing more and more matches being held
here in the UK even I think there might be 1 slated to
happen in the Middle East at some point over the next couple
of years. So what's going on with the
export value or the export effort?
Is it just, is it, is it not happening?
I know we've got superstars likeDodge as you, as you mentioned,
who are not from the US So yeah,what's going on there?
(18:11):
Yeah, I mean, I don't have the figures to hand, but basically
the viewership, game seven of the NBA Finals, I think was the
most watched finals that they'vehad in seven years.
Taking that aside, viewing figures for the NBA are
absolutely plummeting and it's almost like a vicious circle
(18:31):
where the more it plummets, the more desperate the league
becomes to try and re galvanizedthe game.
And they've started to think of all these other creative ways to
change like the All Star game that they have all these
different sort of rules and things around it.
And I think that's just degrading the game.
So I don't know. And This is why I question like
(18:53):
this, this valuation. The NBA is on a downward
trajectory in its popularity, both in America as a watched
viewership base, and also globally.
It's become so dramatized and the the the game is so far
removed from what it was that actually it's just really not
interesting to watch because it's super uncompetitive.
(19:15):
And it's all about then lifting up stars to make them characters
and brands and offshoots of Netflix series to monetize it
that way rather than the grass roots of the beautiful game.
And so, yeah, I don't I don't think it translates particularly
well. It used to in the 90s, but maybe
that's because he had Jordan as the linchpin that acted as the
(19:39):
global ambassador where people bought into him.
And the Bronze never had that same quite global appeal, I'd
say. So Sylvia, 11 for you in terms
of these valuations, right? So at the moment, we're seeing
this almost arms race every six months or so, we get the world's
most valuable team and there's anew record, whether it's the
(19:59):
Boston Celtics or the LA Lakers or the Golden State Warriors or
whatever it might be. What is this just going to keep
going forever? Are we just going to keep
breaking these new records or are they going to be?
What kind of headwinds could there be that might?
See the wheels come off a littlebit and maybe you know, these
(20:19):
were the heady days and valuations will start going
down. Yeah, that's a good question
actually. Because like what I was thinking
about when I was like seeing this transaction and like
comparing it with like most recent ones, which always seemed
we're always getting like higherand higher.
It is just like a bubble evaluations of like sport teams
or is there definitely some intrinsic value in these which
(20:40):
is will keep going higher and higher?
I don't know, I would say I definitely see it crossing the
ceiling and just like maybe given a halt at a certain point
if we're keeping seeing these valuations consist of going
higher and higher. This also could trigger a bit
for red flag to investors willing to invest in this, like
is the opportunity really there?Or maybe they just over
(21:04):
evaluation, which may be also like a good talking point for a
student to think about. Just like try to get down to
your valuation of this company and understand, is it 10 billion
really for you? Like with all the different
elements that we can include being like branding, being like
scarcity because like, right, it's like we just get as many of
these teams and usually they're not sold like this one is being
(21:26):
sold after 40 years essentially.But even considering all of
these elements, is it really a 10 billion deal or not?
So break it down for me in stepsthen.
So do you not look at the brand aspect and just focus on the
standardized process, looking atfinancials first and then you
(21:47):
start to bolt in this associatedbrand value into that already
first part analysis? Or do you start from the
beginning and then incorporate everything all in one pot?
Yeah, No, that's a good question.
Actually. It's really timely as we're
currently running our summer analyst training program.
So we're currently in the banking week and we talked about
(22:08):
valuation yesterday and some of the students were asking me
like, OK, so is it just like as straightforward as it is build
my model, build my little table with ITCF and that is the
valuation of the company? Well, there is flavour to it, of
course. Like especially like when we
were thinking about deals like this one, you will need to kind
of like build layers in a sense.So I think a good starting point
is definitely like starting fromyour most traditional method in
(22:30):
a sense. You can try to do ADCF even if I
would reckon probably like thesetype of companies like this poor
steam are not run really for cash flow maximization.
So you could get like a bit of an undervalued type of valuation
in this case. So you may also want to take
some multiples. But again, I think like taking
the starting point, then the important thing will be just
(22:53):
adding some layers kind of like taking into account those
elements that maybe you can really not reflect fully your
evaluation. Even if you can definitely take
into account some of the intangibles of the branding.
Or maybe something like adding apremium multiple for the
branding of the company and thentaking into account media
rights. May want to assume like some
(23:13):
perpetuity stream in that case and find it again for your
scarcity element. Either you can adjust your work
or you can apply like another acquisition premium on top of
it. If you were another team
thinking about doing something similar, because you've just had
the Boston Celtics, you've now had the Lakers and each number
(23:33):
we said the bars going up and upand up.
How, how do you, how as an advisor, like a banker do you go
right? We need to get a deal in now.
If you guys want to do a deal, you've got to go now.
Or do you risk being that bankerwho pushed that team to get top
of the market and then actually the market falls because the
(23:54):
Lakers was the pinnacle? Like how would you, how do you
make that judgment call as the advisor?
Yeah, I mean, this is an interesting one.
I would definitely say if I was one of the other 28 franchises
that's not the LA Lakers or the best Boston Celtics, I would be
not necessarily rubbing my handstogether, but I'd think, OK,
check. Interesting comp.
(24:14):
Love that valuation ceiling that's just been smashed.
If I was a banker, I wouldn't be, you know, I'd be discounting
that comp quite significantly because it looks, I don't know
enough about this deal, but it looks like a bilateral, right.
It doesn't look like the LA Lakers were going out to market
with a huge competitive process and private equity is involved
(24:37):
with that kind of very, very rational view on valuations.
It looks like, OK, here's a, youknow, Angelion, Mark Walter, he
already owns the Dodgers. They've probably known of each
other for many, many years. And this was, you know, this was
this was a deal that got done. And the and the number was
(24:58):
probably the only number that the bus family would have
accepted because they didn't need to sell the asset.
So, you know, a good moment in terms of smashing through
valuation caps, if I was advising any one of the other,
the Indiana Pacers, for example,I would say, look, you're not
going to get 10 billion unless you've got a Mark Walter lined
(25:19):
up who's willing to pay whatever, whatever the asking
price is, right? Yeah, and if you're the Pacers,
I think you were the sixth seed and you got to the Finals.
So time, time is of the essence.Did you just say Angelion as
well? I.
Think that is please any listener or viewer correct me if
(25:40):
I'm wrong is that did I just make that up?
Did you? Know what you said it and I
thought it's just one of those words where you're just clearly
more intelligent than I am and Iwas I was just like, I'm just
going to accept it or I going tomention it for.
Look, the key. The key to sounding intelligent
is to say it with complete confidence.
It's sounding confidence, so I'mgoing to take.
It and then check it later. Yeah, exactly.
(26:01):
All right. Well, maybe we could just wrap
up then this. So, So what?
What's some some key takeaways, Sylvia with this one then to
finish. Yeah, I think like there are a
couple definitely. So again whenever we're looking
like at this type of companies, we need to make sure like we are
valuing them as not really like what they are innocence.
Like we're thinking like about base basketball team.
(26:25):
You maybe think like, OK, I willvalue it like stadium, I don't
know, something similar, not really.
Like you would go more towards like a streaming, broadcasting
platform type of valuation. You need to take into account a
lot of different elements on topof what would be your basic cash
flow generation because it's notat all like a company based on
that at the end of the day. And also, again, from a banker's
(26:48):
perspective, when you would liketo pitch to your client like
such a deal, you really need to kind of like sell it to the
potential buyers. Like you'd kind of just like
show them the financials becausethe financials probably will
make sense. OK, Yeah.
But not for a time being. You will not pay that much.
You really need to kind of like tell the story, build the story
and kind of like sell them. What is the growth opportunity
(27:11):
there and why they should be interested?
All right, well, look, let's talk a little bit about, you
know, whenever I think maybe I'mbiased because here in England,
I remember actually I unknowingly was taking my
daughter. I think it was an inset day, and
I went into Charing Cross, went off into Trafalgar Square.
(27:31):
And it just so happened it was the day after.
It was the parade where England,the women's team won the EUR.
And then I was just like, wow, this seemed massive because it
was busy. And I was like, I mean, probably
not to the scale yet of what? Well, I'm not going to say
because England's men are never going to win the EUR it would
seem, but it felt like a different feeling at that point.
(27:55):
And, you know, we we continue tosee success in the European
game. I think it was Arsenal, wasn't
it, with the with the women's. And so I just wanted to get a
sense of, yeah, let's move this over to soccer, football, Let's
talk Chelsea, bring it closer tohome, but talk about the women's
game. And how does that compare as a
sports team? How do you even approach that?
(28:16):
Yeah, this is this is so interesting.
And I, I looked at this headline.
It's not even a particularly newheadline, but it's it's
something that just kind of caught my interest.
The headline was how, how much is the Chelsea women's team
actually worth? Actually, it produced quite a
lot of interesting little subplots about, as you mentioned
at the top of this episode, the dark arts of private equity.
(28:38):
So, so we hear obviously a lot about the valuation of the
world's premier football teams, soccer teams.
Real Madrid value close to $7 billion, Man United 6.6
according to Fortune. I think it's a little bit lower
than that now. And obviously Chelsea were
acquired. Chelsea men's football team were
acquired for 4.25 billion by Todd Boley and Clearlake back in
(29:02):
2022 post Abramovich. Now, the way that the Women's
Premier League has been set up is derivative as a derivative of
the men's Premier League. So historically Chelsea women's
football team would be owned by Chelsea and Arsenal women's
(29:22):
football team would be owned by Arsenal and they would be either
a separately owned subsidiary, sorry a wholly owned subsidiary,
or they would just be included in the day-to-day running of the
business. What this story has told me is
that these these stand alone entities, Chelsea Women's
(29:43):
Football Club, have quite significant valuations and are
attracting interest from outsideinvestors.
So the one that I wanted to talkabout before I get onto the dark
arts is the Minority Investment by Alexis Ohanian, the founder
of Reddit, my favorite company, which recently bought an 8%
(30:07):
stake valuing Chelsea Women's Football Club at 245,000,000
lbs, which is not insignificant.Obviously it's way below the
4.25 billion of the men's football club, but bearing in
mind Chelsea Women's Football Club, their revenues were only
about £12 million last year. So this is valuing them on an 18
(30:31):
times revenue multiple more thandoubled the average multiple of
male Premier League football clubs.
So that's worth considering. Now when you see those massively
high multiples, the 18 times revenue multiples, the first
thing you need to look at is revenue growth because again, if
you've got a big, if you've got a high revenue multiple, your
(30:51):
goal is to grow into that revenue multiple 18 times.
So Chelsea grew from 8.8 millionof revenue the year before to
just over 12 million. So pretty good revenue growth.
And obviously Hanian is is betting on the fact that women's
sport, well, women's football isgoing to go from strength to
(31:14):
strength. And if you are going to back an
asset within women's football atthe moment, it's got to be
Chelsea, right? They've won the last five
Women's Premier League in a row I believe and I think 7 of the
last eight or something ridiculous like that.
It was actually mooted last yearthat they were going to sell
that Chelsea was going to sell aminority stake at a £160 million
(31:38):
valuation. So the valuations are going up
and up and up, but they're stillmaking massive losses, right?
So in 2324 Chelsea women's team made a pre tax loss of 5.2
million. And actually what's super
interesting, so if you dig a little bit deeper, there are
(31:58):
football clubs in the second tier of women's football that do
not want to get promoted, that have actively asked not to be
promoted because of the requirements from a stadium
perspective, the requirements from a salary perspective of
being and competing in the Premier League.
It's just going to put these, you know, small semi
(32:19):
professional clubs out of business.
So what do you need to do? You either need to, as the
overall company, Chelsea FC thatowns the whole thing, you either
need to massively commit to a multi year project of investment
within the the women's team, or you need to siphon it off as a
(32:43):
separate subsidiary that has theability to attract outside
investors and start to get that,you know, upside the, the, the
rest of the sporting world is here.
So you explain to me a little bit more than about the the
private equity relationship here, the involvement, what is
it that they're looking at? I mean as some of the numbers
(33:04):
here are making sense, but if you could unpack that.
Yeah, this is super interesting.So back in April, remember,
Chelsea FC is owned by Clear Lake and Todd Bowley.
Private equity guys, they know their stuff, right?
And if anyone knows football, Chelsea went on a massive buying
spree over the last couple of years.
(33:24):
If anyone knows football as well, you'll know that if you
suffer multiple years of significant losses, you are
subject to regulations and sanctions.
So I'm a Nottingham Forest fan, we spent too much money in the
first two years, incurred too much of a loss and we got a
points deduction. So Chelsea who have spent so, so
(33:47):
much money, reported a £90.1 million loss last year and they
have actually reported a 128 million pre tax profit this
year. Why have they reported a 128
million pre tax profit? Because they sold Chelsea
Women's Football Club to themselves.
(34:12):
So they basically sold Chelsea Women's Football Club to a
subsidiary. So it's, it's recognized by
Chelsea FC as a gain from a disposal of an asset, turning
them from a loss making company to a profitable company, which
means that they don't get done by the sanctions, they don't get
done by the regulations. They still own this subsidiary,
(34:34):
maybe indirectly, maybe there's more control outside of the
organization. And by the way, just to compound
this, I told you that they made a loss of 90.190 point 1,000,000
the year before. That loss would have been
167,000,000. But they got rid of two of the
(34:54):
hotels that are on the Stamford Bridge site.
They didn't get rid of it. They didn't get rid of the the
hotels to an outside party. They got rid of it to a sister
company that that still is part of the same entity.
So think about this just to get our heads a little bit straight.
You've got the Topco, which is owned by Todd Bowley and
(35:16):
Clearlake, you know, Chelsea management company.
Then underneath you have ChelseaFootball Club, men's football
club, subject to sanctions and regulations that previously
owned all of the assets, the hotels, the women's football
club, etcetera. So what they've done over the
last few years to avoid a pointsdeduction is say new subsidiary
sitting underneath management code, new subsidiary women's
(35:40):
club, new subsidiary hotels. And they've and they've, they've
gone, they've gone away with. One, how is that even possible?
I mean, how is that not, I mean,it's so like obvious what's
happening here? Like, is there not some sort of
governing body that works on behalf of the the English
Football League that can like, step in here and just say, look,
(36:03):
this is not this isn't right? Yeah, I mean you, I think.
And you know this as well as I do, the the smartest people are
on the on the sharp edge of making money, right?
So they will do things, they will exploit loopholes that were
previously open. And those loopholes in the next
(36:24):
few years might get closed. But Chelsea would have done what
they've done, right? So they're not doing anything
illegal. They're not doing anything that
is outside of the letter of football regulations and the
football law, certainly outside the spirit.
And I'll just end this little piece by a little quip from a
from an unidentified Chelsea fanwho says next year we're going
(36:46):
to be selling ourselves the lawnmowers for £90,000,000.
Create a new subsidiary Lawn Mower Limited £90,000,000.
Done. Easy.
Oh, you've got to love it. You've got to love the ingenuity
of making money. All right, well, look, just
(37:06):
conscious of time. So maybe we could just have a
quick tuck on these last two stories involving lacrosse and
rugby. Yeah, this is super interesting.
And, and the reason why I put these two stories in and and
I'll deal with them together even though they're very
different stories, is to explaina little bit about the direction
(37:26):
of travel and the valuation trends in sport in general.
So ESPN buying stake in lacrosseleague, ESPN, obviously ESPN
plus a streaming platform, ESPN owned by Walt Disney.
You know, ESPN getting involved in the product as well as in the
(37:46):
distribution and the media rights of that product makes
sense and is important in the context of understanding just
how just how necessary and intrinsic the likes of ESPN and
the media rights are to the clubs themselves.
And obviously that probably wouldn't fly in a small in a
(38:07):
much bigger league. You're not likely to get Sky
Sports or Sky buying a 40% stakeof Wolverhampton Wanderers.
It's probably not going to happen.
But in the smaller leagues whereESPN can can increase the value
of the lacrosse league by putting it front and center in
(38:28):
some of its streaming assets, there is this classic synergies
that you can that you can get there.
So that's number one. This kind of commingling of the
distribution and the ownership of the product #2 this relates
to the headline English rugby ripe for international
investment after overcoming crisis.
(38:49):
This is and we've discussed earlier on, this is the
Americanization of sport. And when I say the
Americanization of sport, what Imean is the franchising of
sport. Now, as a British purist, I love
relegation and promotion, right?I love, you know, historically
(39:11):
family owned teams that are liketied to their communities and
all of this stuff. But that means that a, you trade
at a discount to franchise to franchisees and B, you you end
up getting into financial trouble.
So in the Premier League, in in the Rugby Premier League, three
(39:35):
of the 13 companies in the Premier League went bust a
couple of years ago because theyjust didn't have the investment
firepower. They were locally owned
etcetera. What is going to happen what
what we think is going to happenis that Premiership Rugby is
going to be franchised. So these teams, Wasps,
Harlequins, Saracens, etcetera are going to become franchises.
(39:58):
No promotion, no relegation, Open to in, no to external
investment. In the same way as the 100
cricket has been franchised and just raised £550 million by
selling its franchises after a couple of years of of running of
running the product. The other interesting franchise,
(40:19):
obviously you've got the Indian Premier League in cricket.
The other interesting franchise which I would encourage everyone
to check out is Sale GP. This is the Intercontinental
Sailing franchise which has I believe 12 teams from different
countries. My favorite teams firstly are
(40:39):
the British team, which is ownedby Ben Ainsley, the legend of
the Olympics. But the second is the Bonds
Flying Ruse. Must have heard of these.
And Bonds Flying Ruse owned by Hugh Jackman and Ryan Ryan
Reynolds. And I believe the that Bonds is
AI don't know is it an underwearcompany or something like that?
(41:01):
You've not got a pair of bonds. I don't have a pair of bonds.
I'm far too pale and northern for that.
So yeah, franchises, it's super interesting and it makes sense,
right? No promotion, no relegation, you
know, you certainty of media rights, predictability of cash
flows. It's not sport from my
(41:23):
perspective, but it's it's definitely business.
So. So maybe it's a close then if I
were a student going into interview applications, these
sorts of things, trying to demonstrate my interest and
knowledge about something like DCFS and more, more corporate
finance terms. Am I right in saying then the a
(41:44):
good place to go is find something you love?
Could be Chelsea Women's Football Club, it could be the
LA Lakers. There's always something,
whether it's a sports team, a brand, a product, and then you
can almost lean into that enthusiasm for your for that
thing and then have all those technical components around it.
Is that something you've seen orthat you'd advise?
(42:06):
Yeah, I think like especially I would say probably from my
experience, like just having interviews, talking about deals
and valuations, going with what you like is the way to go.
Because if you're talking about like a company, an industry
you're really passionate about, honestly, just like you're
passion sparks out a little bit more.
Like they can actually feel likeyou did your research because
(42:29):
you were generally interested and not just like you search a
random, I don't know, insurance company you absolutely don't
care about. Because maybe it's like just not
your field, but you thought like, yeah, this could be
interesting for my interviewer and not for me.
And you're just like reading a form of script or kind of like
just know it by heart. So yeah, my advice probably
(42:50):
would be, yeah, find something which is relevant in the news
right now because you need to talk about something which is
happening right now, not just like five years ago deal, but
those are something you can relate to so that you can also
add in like your personal flavour.
Cool. All right, well, we will finish
the episode there. We will say a huge thank you to
(43:10):
Stephen and a big welcome to Sylvia and we'll see everyone
next week. Thank you both.
Thanks, Ant. Thank you very much.
Thanks Ant.
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