VIDEO: Sports Technology M&A Update

Hello, I’m Pete Bailey and I cover the Sports Tech sector at Capstone Partners.

We provide M&A advisory and capital raising services to companies in this fast-growing and exciting sector.

Today, we are discussing some key segments and trends in sports franchises, fan engagement, and fitness tech & wearables.

“HOW HAVE VALUATIONS BEEN TRENDING?”

A key question that may come to mind is how have valuations been trending and where are they headed relative to recent market activity? Let’s start off with sports franchises, where valuations have reached all time highs.

Forbes highlighted that NFL team valuations grew 14% year-over-year to $3.5 billion last year.

And the Denver Broncos had a record-setting $4.65 billion sale to a group led by Walmart heir Rob Walton—which is the largest ever for a North American franchise and reportedly had a 9.3x revenue multiple.

As a result, NFL team valuations are expected to increase 12% and Front Office Sports highlighted that Chelsea FC set a global record with its $5.2 billion sale price, which includes promised investments in the team and its venue. And the trend isn’t limited to the NFL. NBA team values increased 4% last year to reach an average of $2.2 billion.

Major League Baseball teams rose 9% to $2.1 billion, and the average NHL team grew 32% to $865 million in value. Sports technology has played a major role in the recovery of sports organizations by reinvigorating viewership and expanding options for fan engagement. We think this symbiotic relationship is now poised to benefit companies across the Sports Tech sector in return.

“HOW WILL EXPANDED DIGITAL ENGAGEMENT AFFECT MARKET ACTIVITY?”

The evolution of fan engagement and technology innovation in stadiums continues to raise the bar with enhanced digital screens, sound, and the rollout of 5G networks.

Outside the stadium, Sports Tech companies continue to connect fans to Web 3.0, NFTs—which grew to $41 billion in 2021—digital collectibles, blockchain, and interactivity with virtual reality applications.

Sports betting continues its expansion geographically, is now legal in 29 states— generating $57 billion in 2021—and is expected to become an increasingly integrated part of the live game experience with real time in-play technology.

As digital fan engagement climbs and capabilities expand, these companies are poised to capture significant interest in the M&A market.

“DEMAND FOR WEARABLES CONTINUES TO GROW”

The Fitness Tech and Wearables sector has become increasingly sophisticated as technologies become more streamlined for the user and the volume of data collection continues to expand and become more valuable. The NFL will require all 32 teams to track players’ load management during the pre-season, and data will be anonymized and aggregated for use in player health and safety initiatives.

Many teams are leveraging sensor-enabled compression apparel to track physiological and muscle-exertion data via real time software based analytics.

Fitness Tech and Wearables companies, including Whoop, have taken notice and have identified sports betting as an area of growth as player tracking data becomes more sophisticated and part of the landscape.

Consumers, meanwhile, continue to embrace wearables for their own use, both in and out of the gym.

As fitness tech applications in the professional arena continue to become more integrated, along with increased health and wellness trends, consumer demand and acquirer interest for innovative wearable products are expected to remain strong.

“WHAT TO EXPECT FROM SECTOR M&A MOVING FORWARD”

While there has been recent volatility in the public markets, we do expect Sports Tech M&A activity to remain healthy this year after a record 297 transactions in 2021.

As acquirers and investors are attracted to innovative sports tech companies and their growth potential, large public companies have led to acquisition activity thus far in 2022 as they seek to leverage inorganic initiatives to expand their digital presence in growing segments and as digital capabilities expand.

We continue to see an active universe of strategics, private equity groups and venture capital firms actively investing in sports tech.

Thank you for your time today.

And if you are thinking about trends in the Sports Tech sector and how to position your company for a future capital raise or sale, we welcome you to reach out directly.

In the meantime, our full Sports Tech M&A report is available to download for a deeper dive and information we shared today, including some interesting insights on e-sports and streaming rights, and we invite you to subscribe to receive additional insights in the sector.