Sports Value Consulting, LLC provides a range of services including the valuation for purchase price accounting to meet both tax and financial reporting guidelines and the valuation of a professional sports franchise for:
|Asset Valuation – post acquisition valuation of assets for tax and financial reporting purposes|
Business Enterprise Valuation:
|Estate/Gift tax planning|
|Expert witness testimony – Michael Rapkoch has an ASA designation|
|Internal management planning|
|Naming rights representation or valuation|
|Buy-side operational and financial due diligence|
There are many variables when attempting to fix a hypothetical value to a professional sports franchise. Most people in the business of sports agree that traditional financial metrics cannot be used when attempting to predict what anyone is willing to pay for the acquisition of one of these unique assets. Valuing a franchise is particularly difficult, since there is a large disparity between big market and small market teams and the league-wide revenue sharing is evolving to balance the wide chasm of financial differences between teams.
In its most basic form, the definition of the value of a team can be best described as what an individual is willing to pay. Many of the teams are cash flow and EBITDA negative, so universally trying to apply multiples of these data points is usually an effort in futility. In recent years, professionals in the industry have retrospectively looked at recent sales transactions, measured the sale as a multiple of a team’s revenues, and tried to apply this standard as a measure of the hypothetical future value of future transactions. While this method has been used by some sports industry experts to justify a franchise asking price, buyers have solely relied on this metric as a benchmark empirical data in assessing a proposed transaction price.
Additionally, there is no industry publication reliably instructive as to what the true value of major league professional franchises are since most professional franchises are privately owned and do not publish annual financial statements. Publications that currently attempt to value professional sports franchises are usually operating on data that is publically available, such as attendance and average pricing for tickets sold or other information, that is anecdotally available.
Investment bankers, brokers, and sports consultants representing potential buyers have traditionally used a wide array of data points when trying to determine a recommended acquisition price for professional sports franchises. None of the information is used in a singular fashion, and a great deal of thought is put into how all of the information and measurable inputs to be acquired interact with each other both quantitatively and qualitatively.
All of the aforementioned data is reviewed and looked at in full context with historical audited financial statements and current team forecasts for future operations as these experts try to estimate the future earnings potential for the franchise.
Only after completing a thorough review of all the data should anyone attempt to forecast the value of a franchise.
An Asset Valuation, aka Purchase Price Allocation, is a recommendation as to the Fair Value of the assets acquired in a team. The purpose of this valuation is to meet both tax and financial reporting requirements. This type of analysis is fairly complex and a thorough understanding of the accounting and tax rules is required.
Sports Value Consulting, LLC has performed over 40 of these types of valuations for teams in the NFL, MLB, NBA, NHL, MiLB, AFL, and EPL.
Given our experience in this field, we understand management’s time is vital and thus prepare each analysis with this in mind. Our process is as follows:
- We first start with a brief call to review the transaction to understand what was purchased, the price, and any tax concerns of the client.
- Next we prepare a brief, perhaps two pages long, data request.
- Upon receiving the data, all key elements are summarized and questions are prepared to better understand the information.
- Our firm then prepares an Agenda, which outlines who we need to speak to, how long it will take, and the questions we will ask them. This allows the team’s management to be better prepared for our meetings. We typically only need to meet once.
- Once a date is set, we visit with the client at their offices.
- The information gathered from the data and meetings is utilized to prepare the valuation analyses.
- The draft results are discussed with the client.
- A draft report is then prepared, which outlines the assets valued, the methodology employed as well as the assumptions utilized.
- Upon comments from the client and its audit/tax advisors, a final report is issued.
- During the entire process, we have constant communication with both the client and its auditing/tax firm.
- Unlike other firms, Sports Value Consulting, LLC will work with management and its advisors to create an opening balance sheet for both tax and financial reporting purposes.
SVC is the only valuation firm solely dedicated to the business of sports. Therefore, we have a significant amount of knowledge pertaining to transactions and how teams operate in different markets.
Information is key. In professional sports, the true transaction price, not what is reported in the press, is what is used to start the comparative analysis of the application of market multiples. Few firms have this data, and can only complete the analysis if the league provides data on transactions and compete financial overview of those teams. In other words, those firms who have not been part of a transaction have no knowledge of (i) the true price paid, (ii) capital structure of the deal, (iii) purchase price adjustments, (iv) motive for the acquisition or (v) the financial and operational overview of the team which sold. Thus, the only way for them to complete the analysis is to ask for private information on clubs from the leagues.
SVC will work alongside your legal, audit and tax advisors to meet your needs and goals. SVC compliments investment banking firms by providing independent valuations or guidance on teams. SVC does not act as a broker of teams, and therefore has distinguished itself in the marketplace as being independent.