The childhood dream of owning a sports team has hit an additional roadblock on top of the outrageously steep cost: private equity firms.
On March 20, a majority stake in the reigning NBA Champion Boston Celtics was sold for $6.1 billion, the largest sale of an American sports franchise ever. The new ownership group is headed by William Chisholm — a lifelong Celtics fan who grew up in Boston — and the investment firm Sixth Street. While this sum seems exorbitant at over $2 billion more than any prior sale of an NBA franchise, Forbes estimated the value of the Celtics at $6 billion this past offseason, making this a seemingly fair price.
This sale demonstrates a growing shift in the NBA — and professional sports as a whole — in which private equity firms are becoming increasingly involved in ownership groups. As of July 2024, 20 out of 30 NBA franchises have connections to private equity firms (according to PitchBook), as well as 18 MLB teams, nine NHL teams and eight NFL teams. These numbers are likely to keep rising given that leagues recently relaxed ownership rules for institutional investors. U.S. sports teams’ valuations have been outperforming the S&P 500 in recent decades, and some firms receive significant discounts by obtaining minority shares without voting control, making these investments even more attractive.
Sports fans may see this recent trend as harmful, both to their beloved teams and to the leagues as a whole. Institutional investor owners are, by definition, only concerned with the financial bottom line. In the eyes of these firms, team success only matters to the degree it drives financial returns, meaning fans could have to carry more of a financial burden through increased ticket prices, concessions and streaming costs.
Additionally, although William Chisholm does happen to be a fervent fan of the Celtics, this is not likely to be true of all private equity owners. As can be seen throughout the sports world, owners who seemingly, or truly, do not care about their team’s success have a tremendous ability to alienate their fanbases, who may see any attempt to not spend aggressively as a sign of apathy.
Lastly, private equity firms tend to operate by raising rounds of capital, which eventually need to be returned, hopefully with gains, to their investors. This means these investors will need to sell their shares in the teams after a set period of time, leading to more ownership turnover than previously existed. Uncertainty like this can be dangerous for a franchise, and it can create ripple effects throughout a league.
But the story of private equity’s greater involvement in team ownership is one that carries many positive effects as well. The deep pools of capital these firms have access to allow them to build teams in ways that individuals might not have the resources to do. Also, the short lifespan of these investments means that owners have a vested interest in immediate team success and cannot afford to wait around in mediocrity for years. These owners are motivated to influence team success as soon as possible and typically have the financial backing to do all in their power to make it happen. An increased amount of investment in teams is good for the league as a whole, as it allows for more financial stability, as well as improvements to infrastructure and fan experience. All in all, it is not hard to picture a future in which private equity investment ends up positively reshaping the entire sports landscape.
At the end of the day, major league sports are a business, regardless of who owns the teams. Even the most skeptical fans may find that this influx of money and motivation for immediate success will better their beloved teams. Only time will tell whether private equity’s rising role in sports will benefit the game or reduce team ownership to simply a profit-driven operation, devoid of the passion that makes the fans so dedicated to their teams.
