Following recent rule changes across three of the major North American professional sports leagues, rising valuations and overall strength of the asset class, private equity firms are jumping at the opportunity to hold ownership stakes in everyone’s favorite sports team. While there are only a limited pool of teams and barriers to entry are high, dealmakers are seeing true value within the assets, as reported in the latest issue of Mergers & Acquisitions. Here is a look at what we are seeing in the market.

The National Basketball Association, Major League Baseball, Major League Soccer, and the National Hockey League have all relaxed restrictions that allow private equity firms to acquire minority stakes in teams. In the NBA, the Board of Governors has agreed that private equity could own as much as 20 percent of a single franchise and up to five franchises in the league. The other leagues follow similar qualifications.

“What began as mom-and-pop businesses worth a couple hundred million 20 years ago and were easily funded within the local community via wealthy businesspeople in town coming together to purchase or run an asset, has now become a multi-billion dollar global organization,” says Drew Laurino, a managing director with Dyal HomeCourt Partners. “In the NBA, 20 years ago there would not have been any private equity or private capital in the business.”

A host of private equity firms have entered the market with a full-focus strategy centered around investing in minority stakes of professional sports teams.

Arctos Sports Partners, a private equity firm focused on the industry, holds minority stakes in teams like the Sacramento Kings, Golden State Warriors, and Tampa Bay Lightning among others. Deal HomeCourt Partners, a subsidiary of Blue Owl Capital, has acquired stakes in the Phoenix Suns and Atlanta Hawks. Additionally, Ares has raised a $3.7 billion Ares Sports, Media and Entertainment Finance fund focused solely on investing in the asset class.

Do you think that the valuations of professional sports teams will continue to go up year by year? Let me know at [email protected].

Cole Lipsky