Ari Emanuel’s Endeavor went private in a $13 billion deal with private equity firm Silver Lake, the largest transaction in a record half-year for sports tech M&A.
Jeff Bottari/Zuffa LLC
In February, Disney and Indian conglomerate Reliance agreed to merge media platforms Star India and Viacom 18 in a $3.1 billion pact. Barely a month later, private equity firm Silver Lake struck a $13 billion deal to take entertainment conglomerate Endeavor private while Liberty Media agreed to pay $4.6 billion for Dorna Sports, the commercial rights holder of the MotoGP World Championship.
Those deals provided a jolt, but they weren’t the only transactions shaking up the sports tech industry. The first six months of 2024 featured three other mergers and acquisitions worth at least $1 billion, and a record 225 in the sector overall, according to a report released by investment bank Drake Star on Thursday. The total disclosed value amounted to $27.3 billion—also a half-year high, according to the bank. The period far outpaced both the first half of 2023 ($16.1 billion on 165 deals) and the second half ($8.6 billion on 163 transactions).
“Sports as an asset class is the red-hot sector as of now, [and it’s] one category where there is a maximum amount of activity happening,” says Mohit Pareek, a principal at Drake Star and co-author of the report. “Whether you talk about the digital media rights, whether you talk about all the FAANGs moving into it—Apple, Amazon—everyone is trying to get a piece of the sports puzzle.”
That wasn’t always the case. “There was an old adage in capital: ‘No one’s ever made a penny on sports,’” Paul Martino, cofounder of venture fund Bullpen Capital, recalls from his early days as an angel investor. But that narrative has shifted as team values have exploded over the last two decades. In Forbes’ recent ranking of the NFL’s most valuable teams, for instance, the average franchise value was $5.7 billion, up 11% from 2023 and 77% since 2020.
Still, as the price tags rise, and as leagues maintain strict ownership requirements, it’s getting harder and harder to nab one of the few team stakes that come up for sale. And while several pro leagues have recently eased their rules around private equity and other institutional capital, that path to team ownership is also available to only a select few with massive resources.
Instead, investors desperate to dive into the sports sector appear to be turning to adjacent businesses, in areas such as wearables and performance enhancement (99 of the 225 M&A deals in Drake Star’s new report), fan engagement and experience (35), and media and broadcasting (20). Other categories of interest include data analytics, ticketing, venue management and—just as in every corner of the tech investing landscape—artificial intelligence.
The vast majority of the mergers and acquisitions in Drake Star’s report involve earlier-stage startups, with transactions ranging from $30 million to $500 million. That dovetails with a decline in private financing, with fundraising in the first half of 2024 down to $1.9 billion across 342 deals, according to Drake Star, from $3.3 billion on 354 deals in the first half of 2023 and $2.4 billion on 360 deals in the second half.
The upshot: As consolidation sweeps across the sports world, small startups are being forced to sell to their bigger competitors, rather than try to grow on their own. Martino, who invested in FanDuel in 2010, cites the example of a fantasy sports startup he is advising. The concept may be exciting, and the founder may be well connected, but the reality is that FanDuel and DraftKings now have overwhelming market share, and customer acquisition costs are now 10 to 100 times what they used to be. “If you’re a new young entrant, you have to go to market with some incumbent support, or else you’re never going to get any audience,” Martino says.
With that backdrop—and with roughly $7.5 billion that was raised in 2023 still largely undeployed—Drake Star’s Pareek forecasts a similar number of sports tech M&A deals for the rest of 2024, or slightly more, even if the total transaction value is likely to come down in the absence of an Endeavor-size acquisition. The sector may also continue to outpace other industries, even though many are performing well, too.
“The whole rest of the market’s still asleep at the switch,” Martino says. “I feel like while the rest of the world is a little crazy, our category is behaving the way it should be when there’s perceived growth and incumbents have lots of money on their balance sheet and high stock valuations.”
Verlinvest, a global holding company that generally makes deals between $50 million and $250 million, seems to be among the converts. While the firm traditionally comes from the food and beverage world, with stakes in brands such as Vitamin Water and Oatley, it recently made an undisclosed investment in K1 Speed, an electric go-kart racing business.
“What we’ve observed is a shift away from [consumer packaged goods] towards experiences for disposable income,” says Clément Pointillart, Verlinvest’s managing director. “We see people that want to build great experiences with their friends, their families, their colleagues, their community, and also—in an ever-digitalizing world—reasons to be together, between four walls or outdoors. And as consumer investors, of course, we want to go where the consumers are going for the long run.
“And so we believe that there is a very, very interesting opportunity here in the sports and overall lifestyle world.”