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Non-public Fairness’s Newest Goal: Dwell Sports activities

Some may assume the glamor and competitors of proudly owning a sports activities staff has attracted traders like Silver Lake, CVC Capital Companions, and Clearlake Capital Group.

As an alternative, it’s the worth of reside sports activities content material, and the rights to it, that has helped generate curiosity within the sector.

thisweek,

Ares

Administration (ticker: ARES) introduced its first devoted fund targeted on investing in sports activities groups, leagues, and franchises, in addition to media and leisure firms.

Ares spent 18 months advertising and marketing for the pool, which raised $3.7 billion, together with $2.2 billion of fairness commitments and $1.5 billion of anticipated leverage and associated transaction automobiles, based on a Sept. 15 assertion.

“We felt there wasn’t anybody on the market doing what we’re searching for to do,” mentioned Mark Affolter, an Ares accomplice and co-head of US direct lending. “We’ll be investing up and down the stability sheet.”

Ares have a number of completely different companies. It is likely one of the largest personal lenders to US and European middle-market firms. It additionally has a private-equity enterprise that takes controlling stakes and invests in distressed conditions, in addition to actual property and infrastructure divisions. In 2021, Ares launched a wealth administration enterprise that targets high-net-worth retail traders and monetary advisors.

Shares of the corporate, down 8% this 12 months, traded Friday at $74.64, off 2%.

With its sports activities, media and leisure, or SME, fund, managed out of its direct lending enterprise, Ares will search to put money into European and US soccer golf equipment, Affolter mentioned. It’s going to additionally goal Main League Baseball, the Nationwide Hockey League, rugby, and different sports activities.

In media and leisure, Ares will give attention to music catalog rights and songwriters; firms that present lighting, grips, and props to studios throughout North America; in addition to companies that personal media-related property, he mentioned.

“Our view is that there’s unimaginable development throughout these sectors. It is actually pushed by valuations ascribed to authentic content material,” Affolter mentioned.

The agency will present debt—senior, junior and mezzanine loans—to groups and firms, Affolter mentioned. Ares may also search to take minority stakes, making most popular and customary fairness co-investments, he mentioned. (With most popular fairness, traders are senior to the frequent fairness, however junior to the debt.)

To date, the fund has achieved 19 offers, together with investments in soccer golf equipment Atlético de Madrid and Inter Miami CF, the San Diego Padres, and McLaren Racing. About one-fourth of the pool has been invested, the assertion mentioned.

Non-public-equity companies have been investing in sports activities groups for years. Executives pointed to the worth of reside sports activities content material because the draw. The sale of broadcasting and media rights is now the largest income for many sports activities organizations, based on the World Mental Property Group.

The NFL in 2021 signed media rights agreements with

CBS
,

NBC, Fox, ESPN, and

amazon

that have been collectively value about $110 billion over 11 years, the

New York Occasions

reported. Media rights for the sports activities groups are one instance of how the golf equipment generate recurring income streams, together with sponsorship income, that appeal to traders, Affolter mentioned.

Streaming has additionally elevated the worth of premium content material, with reside sports activities among the many most wanted property. In June,

Manzana

clinched a 10-year deal to stream each reside Main League Soccer match.

“Now we have witnessed important demand for brand new and authentic content material amongst followers, streaming platforms and networks and this has pushed sports activities associated companies to require versatile and scalable capital to assist gas this secular development,” Affolter mentioned in an announcement.

To date this 12 months, PE companies have made 221 sports activities investments, valued at $31 billion, as of Sept. 9, based on information from PitchBook. This compares with 440 offers, totaling $58.4 billion, in 2021, which is taken into account a record-breaking 12 months for mergers.

Current offers embrace CVC Capital Companions $2.4 billion funding in LaLiga, an expert soccer league in Spain, final 12 months. This 12 months, Clearlake Capital and Los Angeles Dodgers part-owner Todd Boehly led a consortium to purchase Chelsea FC for two.3 billion kilos ($2.6 billion). Silver Lake in 2022 additionally elevated its stake in Manchester Metropolis FC, changing into its second-largest shareholder, Bloomberg reported.

Ares, nonetheless, is likely one of the few with a devoted sports activities fund.

Dyal Capital, a unit of

Blue Owl Capital

(OWL), has a devoted pool that makes minority investments in sports activities groups. Offers embrace the Phoenix Suns, Sacramento Kings, and the Atlanta Hawks.

There’s additionally Arctos Sports activities Companions, which makes passive, minority investments in skilled sports activities franchises. Arctos, which raised $2.1 billion with its first fund, has invested within the Golden State Warriors, Tampa Bay Lightning, the Chicago Cubs, and Actual Salt Lake.

Write to Luisa Beltran at [email protected]

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