Spurring Partners: CVC’s potential investment in the NBA

By Curtley Bale​

The Story

Whilst the pandemic has led to a global economic slowdown, it seems to have ramped up private equity deal-making. Luxembourg-based CVC Capital Partners has entered into talks to buy a 15% stake in the NBA franchise, San Antonio Spurs. This is significant as the NBA did not previously allow institutional investors. However, the Covid-19 pandemic has led to sport franchises and businesses worldwide looking for an injection of capital, hence the league relaxing the by-laws. Sports, especially, have struggled due to the lack of fans and matchday revenue, thus needing to make up that loss elsewhere.

What It Means For Businesses And Law Firms

CVC’s potential 15% stake values the San Antonio Spurs between US$1.5 billion and US$2 billion. This makes the team one of the league’s most valuable, although not quite on the same level as the NBA’s most valuable franchise, the New York Knicks - worth an estimated US$5.42 billion (USA Today). The Spurs franchise has won 5 NBA Championships and has one of the game’s most renowned head coaches in Greg Popovich. As an investment opportunity, the team has been successful on the court but also has a strong brand. The team is owned by the Holt family, who will continue to hold a majority stake and be responsible for basketball-related business should the deal go through. CVC is likely to be responsible for off-court commercial matters, including branding, ticketing, and marketing.

The NBA has come to terms with the need to attract institutional investors to the game. Previously, the ownership model centred on teams being owned by families or wealthy individuals. However, the NBA has seen an opportunity to attract investors such as private equity firms, who continue to have dry powder on their books. These firms can inject large amounts of capital that seem to have gone uninvested during the pandemic. If the private equity investment is successful, it could signal a shift towards institutional investment and away from single-party ownership.

For CVC, the potential stake is one in a long line of sports-based investments. The Luxembourg-based firm recently invested in English Premiership Rugby, and is currently in talks to take a £300 million stake in the Six Nations Rugby competition. As recently as this week, CVC expanded its sports portfolio even further by investing US$300 million in the International Volleyball Federation, with a view of expanding the world’s game. The firm is also in talks to acquire the media rights to Serie A, in a US$2 billion joint venture with Advent International. This commitment to sports and media demonstrates CVC’s expertise in the industry and ability to utilise its approximate US$109 billion in assets.

CVC has tended to use the legal services of Freshfields when making its sporting investments, including this week’s stake in the volleyball governing body. With Freshfields’ growing US presence, CVC will likely continue to utilise its relationship with the firm when facilitating the deal with the Spurs.

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