Sports Technology M&A Update – April 2024

Franchise Deals Boost Demand for Data-Driven Businesses in the Sports Technology M&A Market

The use of data analytics in the Sports Technology (SportsTech) sector has increasingly influenced both the fan experience and executive decision making, creating a favorable backdrop for merger and acquisition (M&A) activity in 2024. Data analytics have traditionally been used in the SportsTech sector to optimize athlete performance through wearable diagnostic tracking devices. Recently, sector participants have incorporated data analytics into their products’ capabilities to attract a broader customer base that includes both sports fans and franchise executives. Due to the increasing value of sports franchises, M&A interest has trickled down to the SportsTech sector. Blockbuster franchise transactions headlined the deal market in 2023. This has included David Rubenstein’s announced acquisition of the Baltimore Orioles Major League Baseball (MLB) franchise (January 2024, $1.7 billion), and the Adelson Family of the Las Vegas Sands Corporation’s (NYSE:LVS) acquisition of the Dallas Mavericks Basketball franchise for $3.5 billion (November 2023). Former Mavericks owner Mark Cuban has expressed an interest in building a resort and casino around a new Dallas-based arena, citing the sale of the Mavericks franchise to the Adelson family as an effort to facilitate the process. As sports franchises increase investment in the fan experience, franchise executives have increasingly used access to fan data and statistical analysis to drive team management and sponsorship deal flow.

Frequent consolidation in the Sports Betting space in 2023 has continued into early 2024, as leading companies have increased their share of the market while paying premium valuations for technology-enabled gambling businesses. Of note, DraftKings (Nasdaq:DKNG) announced its intent to acquire mobile lottery ticket application developer Jackpocket (February 2024, $758.1 million); international sports betting company Flutter Entertainment (LSE:FLTR) acquired omnichannel betting company Max Bet (September 2023, $290.8 million, 1.9x EV/Revenue, 8.6x EV/EBITDA); and Fanatics acquired online casino operator PointsBet USA (May 2023, $225 million). As sports betting becomes more widely available, fans and betting enthusiasts are expected to increase their use of data-driven betting tools providing the most up-to-date information on betting lines and advanced player statistics. M&A transaction volume for data-driven technology businesses is likely to benefit from the consolidation wave in the Sports Franchise and Sports Betting spaces throughout 2024.

Innovation in sports data and analytics, including improved programming and implementation of artificial intelligence, should drive increased fan engagement and acquisition interest in the sector.

Peter BaileySenior Director, Capstone Partners

Sports Technology M&A Deal Volume Declined in 2023, but Deal Value was an All-Time High

M&A activity in the SportsTech sector was a double-edged sword in 2023 with deal volume falling, but total disclosed deal value reaching record highs. Deal volume in 2023 experienced a 20.6% decline year-over-year (YOY) to 127 transactions announced or completed. Sector transaction activity in 2023 mirrored the broader M&A market which experienced a 24.1% decline YOY across all enterprise value ranges. Strategic buyers accounted for the lion’s share of transaction activity in 2023 (68.5% of total transactions), of which private strategic buyers represented 40.9% of total transactions. Although the interest rate environment throughout 2023 was not conducive to private equity dealmaking, sponsors increased their share of total transaction activity from 26.9% in 2022 to 31.5% in 2023. The share of platform acquisitions in the SportsTech sector also increased, from 6.3% in 2022 to 9.4% in 2023. This is in contrast with a 24.9% YOY decline among platform deals in 2023 across the broader M&A market, according to Capstone Partners’ Q4 2023 Capital Markets Update. Through year-to-date (YTD) 2024, deal volume has been in line with the previous year with 17 transactions announced or completed, compared to 20 through YTD 2023. The majority of consolidation themes in the SportsTech sector during full-year 2023 have also been present through YTD 2024. Sports franchise deals have continued to thrive in YTD 2024, including RAJ Sports’ acquisition of Portland Thorns Football Club (January 2024, undisclosed). Sports betting has also continued to drive buyer appetite, such as PENN Entertainment’s (Nasdaq:PENN) acquisition of Wynn Resorts’ (Nasdaq:WYNN) mobile sports wagering licenses in February 2024 for an enterprise value of $25 million.

The other side of the double-edged M&A sword was the precipitous rise in premium valuations paid for SportsTech businesses in 2023, which amounted to $36.9 billion in total disclosed value and a 36.2% increase YOY. This was largely due to the high value of sports franchise and sports betting transactions which supported this figure throughout full-year 2023, and continues to bolster total disclosed deal value in YTD 2024. Of note, hedge fund Standard General announced its intent to acquire Bally’s (NYSE:BALY) in March for an enterprise value of $5.6 billion, equivalent to 2.3x EV/Revenue and 11.7x EV/EBITDA. Bally’s operates an online sportsbook, iCasino platform, and multiple resort locations throughout the U.S. Standard General offered to buy the remaining shares of the company for $15 a share, a 41% premium to Bally’s closing price on Friday, March 8, according to a press release.¹ The ability for the SportsTech sector to garner record-high disclosed enterprise value in a down year for dealmaking provides optimism for strong valuations through full-year 2024.

Betting Demand Fuels M&A for Data-Driven Businesses

Sports betting has quickly become an integral part of the U.S. sports fan experience, leading to increased demand among consumers for data-driven gambling tools. Since 2018, 38 U.S. states, including the District of Columbia, have legalized sports gambling, with total market revenues in excess of $7.5 billion in 2022, a 72.7% increase compared to the prior year, according to the American Gaming Association (AGA).² Leading players such as DraftKings and Flutter Entertainment’s subsidiary FanDuel have managed to capture 45.1% and 32% of the U.S. market, respectively, as of June 2023, according to Covers.com.³ The U.S. Sports Betting market still has room to grow as the three most populous states, California, Texas, and Florida, have yet to fully legalize sports gambling. The latest available data shows that the number of people betting on sports has grown in tandem with the Sports Betting segment’s expansion. Between 2018 and 2023, U.S. adults have placed a total of $220 billion on legal sports bets, according to the AGA.⁴ Additionally, one-in-five U.S. adults said they have personally bet money on sports within the past 12 months as of July 2022, according to Pew Research Center.⁵

Due to the heightened and growing interest in sports betting, businesses offering data-driven gaming tools have seen increased buyer attention. Of note, Bruin Capital-backed FairPlay Sports Media acquired Quarter4 in January 2024 for an undisclosed sum. Quarter4 develops an artificial intelligence (AI) platform leveraging data automation to predict sporting outcomes. FairPlay Sports Media is expected to integrate Quarter4’s predictive models into its subsidiaries such as Oddschecker and WhoScored.com. The plug-and-play characteristic of Quarter4’s platform highlights the attractiveness of businesses with seamless integration capabilities. FTN Fantasy’s acquisition of DFSForecast (September 2023, undisclosed) has served as a recent example emphasizing this trend. FTN, which delivers highly detailed and advanced data for betting and fantasy sports, targeted DFSForecast for its Daily Fantasy Sports Lineup Builders tool backed by advanced data analytics. Following the acquisition, FTN Data customers were instantly able to access DFSForecast’s tools. “The acquisition and incorporation of DFSForecast into our umbrella of tools offered to our customers is just another step in the journey of cementing FTN Network as the one-stop-shop for anyone when it comes to fantasy enthusiast or bettor,” said FTN CEO, Kevin Adams, in the press release.

Data Analytics Businesses Serving Franchise Executives Receive Private Equity Interest

High-profile sports franchise acquisitions in 2023 have created subsequent demand for SportsTech businesses that can maximize revenue through increased fan engagement and elevated commercial performance. The value of sports media has increased in tandem with franchise values, as the global value of sports media rights reached $56 billion in 2023, up from $54.7 billion in 2022, according to SportBusiness’ 2023 Global Media Report.⁶ This total is expected to increase to $60 billion in the second half of 2024 due to the Summer Olympic Games in Paris, according to the report. The rising global value of sports media rights has brought increased attention from private equity firms, which have become active acquirers in the Sports industry in recent years. Notably, private equity firms have varying levels of ownership stakes in 20 out of the 30 franchises in the National Basketball Association (NBA), according to PitchBook.⁷ David Rubenstein’s previously mentioned intent to acquire the Baltimore Orioles highlights this trend, as Rubenstein co-founded the private equity giant The Carlyle Group (Nasdaq:CG). Data analytics businesses in the SportsTech sector have benefitted from the influx of capital and acquisitions by private equity firms looking to maximize franchise revenues. Select transactions outlining this trend are highlighted below.

• Charterhouse Capital Partners Acquires Two Circles (January 2024, $315 Million) – Private equity firm Charterhouse Partners acquired Bruin Capital-backed Two Circles in January for an enterprise value of $315 million. As a data-driven marketing business, Two Circles works with sports brands to maximize fan-generated revenues and advertising sales. The sponsor-to-sponsor deal is expected to provide Bruin Capital an internal rate of return (IRR) of more than 60%, after the firm purchased an 80% stake in Two Circles in December 2019 for an enterprise value of $40 million, according to a press release.⁸ “In a rapidly changing media landscape, sport has the potential to become more popular and valuable than ever before. We believe Two Circles is emerging as the first digitally native global sports group and will lead the next era for the sports industry to help its clients navigate the changes ahead and fulfil their potential,” said Charterhouse Partner, Chris Warren, in the press release.
• Monroe Capital-Backed Playfly Sports Acquires The Aspire Group (May 2023, Undisclosed) – Playfly Sports, a portfolio company of Monroe Capital, acquired The Aspire Group in May 2023 for an undisclosed sum. Aspire provides consulting, research, and marketing expertise to sports franchises and college athletics departments. The company also focuses on maximizing revenue through ticket sales, bringing in more than $1.5 billion in revenue for its partners, according to a press release.⁹ Playfly is expected to enhance Aspire’s capabilities with AI-driven ticketing technology, supporting Playfly’s vision of building and delivering a “fandom-based proprietary platform,” according to the press release. “Playfly is rapidly expanding its ability to use data and technology to strengthen fan engagement and adding The Aspire Group’s incredible team and capabilities will further fuel our ability to get closer to fans at the height of their sports passion to drive key revenue targets for our partners,” said Playfly Sports Founder and CEO, Michael Schreiber, in the press release.

To discuss the rise of data analytics, provide an update on your business, or learn about Capstone's wide range of advisory services and Sports Technology M&A knowledge, please contact us.

Joe Collins, Analyst, was the lead Market Intelligence contributor to this article.

Endnotes

1. Investopedia, “Bally’s Stock Soars Nearly 30% on New Takeover Bid From Hedge Fund,” https://www.investopedia.com/ballys-stock-soars-on-new-takeover-bid-from-hedge-fund-8607523, accessed March 22, 2024.

2. American Gaming Association, “2022 Commercial Gaming Revenue Tops $60B, Breaking Annual Record for Second Consecutive Year,” https://www.americangaming.org/new/2022-commercial-gaming-revenue-tops-60b-breaking-annual-record-for-second-consecutive-year/, accessed March 12, 2024.

3. Covers, “DraftKings Taking Over Sports Betting Market Share,” https://www.covers.com/industry/draftkings-taking-over-sports-betting-market-share-june-27-2023, accessed March 12, 2024.

4. American Gaming Association, “Five Years Post-PASPA: Consumer Sports Betting Trends,” https://www.americangaming.org/resources/five-years-post-paspa-consumer-sports-betting-trends/, accessed March 12, 2024.

5. Pew Research Center, “As more states legalize the practice, 19% of U.S. adults say they have bet money on sports in the past year,” https://www.pewresearch.org/short-reads/2022/09/14/as-more-states-legalize-the-practice-19-of-u-s-adults-say-they-have-bet-money-on-sports-in-the-past-year/, accessed March 12, 2024.

6. SportBusiness, “Global value of sports media rights nears $56 billion, SportBusiness report reveals,” https://www.sportbusiness.com/2023/11/global-value-of-sports-media-rights-nears-56bn-sportbusiness-report-reveals/, accessed March 12, 2024.

7. PitchBook, “Major league investors: Private equity’s pro sports ties,” https://pitchbook.com/news/articles/private-equity-sports-investment-dashboard, accessed March 12, 2024.

8. Sportico, “Bruin Captial-Owned Marketer Two Circles Sold for $300 Million,” https://www.sportico.com/business/finance/2024/two-circles-bruin-capital-charterhouse-1234762200/, accessed March 12, 2024.

9. Playfly Sports, “Playfly Sports Acquires The Aspire Group to Expand Ticket and Hospitality Offerings to College and Professional Team Partners,” https://www.theaspiregroupinc.com/playfly-sports-acquires-the-aspire-group-to-expand-ticket-and-hospitality-offerings-to-college-and-professional-team-partners/, accessed March 12, 2024.