Sports Franchise Valuation Services & More
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|
There are many variables to consider 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 and small market teams and league-wide revenue sharing is evolving to balance the wide chasm of financial differences between teams.
In its most basic form, 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 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the true value of major league professional franchises are since most professional franchises are privately owned and do not publish annual financial statements.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 usually are operating on data that is publically available like attendance and average pricing for tickets sold that is anecdotally available.
Traditionally, investment bankers, brokers, and sports consultants representing potential buyers 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, i.e. 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 complex, and a thorough understanding of the accounting and tax rules is required.
No other firm has performed more purchase price allocations in the last decade than SVC. We have performed over 40 of these types of valuations for teams across North America and the United Kingdom.
When considering other firms, ask if the people directly involved with the team have performed this type of work for a team in their league. Many firms have been around for decades, but the people with the knowledge and experience have left. Furthermore, teams need to inquire if this work will be outsourced to another valuation firm. SVC has direct knowledge of several entities that outsource their valuation work.
Given our experience in this field, SVC understands that management’s time is vital and thus prepare each analysis with this in mind. Our process is as follows:
- Start with a brief call to review the transaction in order to understand what was purchased, the price, and any tax concerns of the client
- Prepare a brief data request
- Summarize all key elements once data is received; prepare questions to better understand the information
- Create an agenda that 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 various meetings)
- Establish a date to visit with the client at their office
- Gather information from the meetings and combine with data to help prepare the valuation analysis
- Discuss draft results with the client
- Prepare a draft report, which outlines the assets valued, the methodology employed as well as the assumptions utilized
- Issue a final report after consulting with client and audit/tax advisors
- Maintain constant communication with the client and the auditing/tax firm throughout the process
- Work with management and advisers 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 them with data on transactions and a complete 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 that sold. Therefore, 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 in order 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 has distinguished itself in the marketplace as being an independent, go-to firm for sports valuations.