‘PE’ in Team Sports
Investors turn bullish on the team sports business ­— and that’s changing the game.
Boosted by the healthy rebound in game play post-pandemic, emerging digital technologies and bigger pay-to-play opportunities, investor sentiment appears to be picking up in the team sports space — and it shows no signs of slowing down.

The trend is evident in the November sale of Marucci Sports to Fox Factory Holding, best known for their Fox Racing Shox brand of off-road cycling suspension components, at a healthy EBITDA multiple of approximately 10.5x; the recently-completed initial public offering (IPO) of Wilson-parent Amer Sports; and rumored IPOs being explored by Varsity Brands, the parent of BSN Sports and Varsity Spirit; cap maker New Era Cap; and licensed sports powerhouse Fanatics.

And hitting closest to home in the team dealer business, private-equity (PE) deals have likewise picked up, as evidenced by the Augusta Sportswear/Founder Sport Group acquisition by PE firm Platinum Equity earlier this year.

Even more recently is the sale of one of the few remaining full-line sporting goods retailers in America, Hibbett/City Gear, to JD Sports Fashion. In announcing the late April acqusition — scheduled to close in the second half of 2024 — Anthony Crudele, chairman of the board of Hibbett, said, “The transaction with JD Sports will create immediate, certain and substantial value for Hibbett stockholders while ensuring that our brands are well-positioned to continue to serve the customers and communities that have always been the central focus of Hibbett’s business.”

Added aid Régis Schultz, CEO of JD Sports: “We’re thrilled to acquire Hibbett/City Gear, combining two of the most respected athletic retail brands in the United States, as we continue to strategically expand our global multi-brand platform.”

Those statements certainly sum up the allure of sports-related brands and retailers and it basically comes down to the fact that team sports and their suppliers are seen as a solid investment in uncertain economic times.

The increasing investor interest in old-school dealers and suppliers comes as a recovery in play from the pandemic offers another example of the resiliency of team sports. It also comes as a gusher of money has been heading toward technology-enabled start-ups that are making sports overall easier to join and train for, safer to play, more enjoyable to watch and easier to profit from.

Growing Investor Interest

Keith Bank, CEO and founder of KB Partners, an early-stage venture firm based in Highland Park, IL, tells us that seven or eight years ago his firm was one of the few focused on investments “at this intersection of sports and tech,” but he now sees about 30 boutiques taking a similar approach.

“The space has exploded,” says Bank. “The categories have exploded between NFTs and NIL, connected fitness and all the blockchain-stuff related to ticketing. All the AI that’s been brought into a lot of software applications. All the wearable technology for measuring player load and injury risks, and looking at speed, velocity and power; and all the things to make broadcasts more interesting to the fans.

“And then probably most importantly, the advent of sports betting here in the U.S. and the explosion in esports,” he adds. “Those are just a few of the areas, but the space has gotten red hot.”

Among the newer investor groups is Branded Velocity Group (BVGS), a New York-based PE firm that counts New York Giant’s legend Eli Manning as a partner. The firm launched a sports-focused vertical in late 2022 with a plan to “target companies in sports-adjacent categories — in both legacy categories and emerging sub-verticals — with the goal of accelerating brand growth, providing financial flexibility and driving economic impact for all stakeholders.” Professional sports teams and leagues are also being considered as investments.

BVG’s first sports-related acquisition was Score Sports, a 49-year-old team uniform supplier based in Wilmington, CA. BVG Partner’s Drew Sheinman said at the time of the acquisition, “We are at a moment in time where influencers across sports, business, entertainment and culture are collaborating and pushing boundaries in groundbreaking ways.”

In a white paper last year, Baird, the investment firm, outlined how societal, economic and technological shifts are creating investment opportunities in the team equipment space through increased participation, sales and pricing power. Matt Elberts, director in Baird’s global consumer investment banking group, tells us: “The secular tailwinds have never been more powerful or better understood.”

The NIL Impact on Investments

Among the newer and most powerful factors driving growth cited in the report is the arrival of NIL (name, image and likeness) deals, which allow amateur athletes to “cash in on their shining moments,” especially those adept at social media, with the financial incentives serving as a catalyst for early and continued sports participation. The report highlights how social-media interaction continues to “humanize” elite athletes and drive connections with fans.

“NIL is going to be huge,” says Elberts. “The same way parents tried to get their kids on scholarship or into elite schools via sports, we will see the same effect from NIL.”

Relatedly, the lofty valuations of professional sports teams, boosted by soaring media rights deals, are expected to trickle down across team sports levels as younger players aspire to the riches of professional players. Baird writes in the study: “As diverse economic opportunities, player compensation and social media stardom grow and gain visibility, participation and interest in team sports will expand at every level.”

The spread of legalized sports betting is another new factor more likely to “pay dividends for all sports stakeholders, including players,” according to Baird’s study.

Also helping drive sports participation and viewership is the breakout year in 2023 for women’s sports, marked by record game attendance and viewership as well as the formation of major media deals. Continued investments in youth clubs, specialized leagues, advanced coaching facilities and increasingly sophisticated onboarding systems were also cited as boosters for team play.

Among tech, tools measuring the impact athletes absorb while playing promise to address threats from high-impact sports. Data generated by sensors are elevating training and coaching techniques and possibly creating “gameday excitement” for fans and advertising opportunities for brands.

Finally, the social benefits of team sports are seen becoming an even bigger driver of participation with growing concerns around youth anxiety, depression, obesity and screen time. “Youth sports is the foundation of our culture and have become a parental obsession,” points out Elberts.

The Allure Of Team Sports

From an investor standpoint, Baird expects that similar to Fox Factory’s purchase of Marucci, other firms in the action sports space will increasingly look to team sports businesses as a way to diversify holdings. Boosting valuations in the team sports space is a “growing new investor base,” including several angel investors as well as well-heeled athletes looking to capitalize on sports-related investments.

As an example, Nobull, the training footwear brand, secured an investment from the NFL in December 2023 and then saw Mike Repole, best known for building Vitaminwater and Bodyarmor into beverage giants, acquire a majority stake in the company in July 2023. In January, Tom Brady became the second-largest shareholder after merging his wellness brand, TB12, with Nobull.

Many current and former pro athletes have joined forces with traditional PE firms to invest in existing and new youth sports opportunities, joining blue-chip institutional investors that have formed funds to support investments in sports and related media and entertainment areas. Baird wrote in its study: “Athletes, celebrities, influencers (“personalities”) and private equity have recognized the opportunity and are jockeying to invest in the category and we expect to see this current momentum continue.”

Among recent PE deals, Platinum Equity, which revived and sold Schutt Sports after acquiring the football equipment maker out of bankruptcy proceedings in 2010, this past January acquired both Augusta Sportswear Brands and Founder Sport Group as it saw an opportunity to consolidate the fragmented uniform space. “The core market for youth sports apparel and accessories has grown steadily over the past decade, but the ecosystem is highly fragmented and, in many ways, inefficient,” Platinum Equity co-president Louis Samson said in a statement announcing the deal.

In late November, Minneapolis-based Norwest Equity Partners (NEP) acquired United Sports Brands (USB), the parent of Shock Doctor, McDavid, Cutters, Nathan, Pearly Izumi and Glukos.

Tony Armand, an NEP partner and former CEO of USB/Shock Doctor and CEO of Bravo Sports, tells us that NEP already had a history of investing in the sports space, including acquiring Shock Doctor in 2008 and selling it to Bregal Partners in 2014. “As we evaluate investment opportunities, we look for profitable, industry-leading companies like USB where we believe our experience can help accelerate their continued growth,” Armand explains.

Armand says NEP particularly saw an opportunity to support USB’s growth overseas, but overall expects continued investment in innovation to drive growth across USB’s portfolio. “There is always significant interest in great brands,” he adds. “The sporting goods and team sports markets tend to be resilient across almost any macro-economic landscape, which has likely led to more interest over the past few years.”

On the team dealer side, Trivest, a Miami-based PE player, recapitalized and merged Athletic Supply and Barcelona Sports in 2018 and then acquired six other dealers to form Game One in 2022 and join BSN Sports as a consolidator in the dealer space.

“Being an athlete taught many of us the value of hard work, competition and being a great teammate,” said Russ Wilson, a Trivest partner, at the time of the deal. “Our drive, our resources and our relationships give Game One the competitive edge.”

In last year’s purchase of majority control of Longstreth Sporting Goods, which now specializes in field hockey, Cincinnati-based Roebling Capital Partners provided a “liquidity” solution for the owners who initially purchased the business from founder Barbara Longstreth in 2008.

Wes Goebel, Roebling’s managing director, says the co-owners, John Schaefer and David Dahle, continue to run the business but were nearing retirement age and looking for some return on their investment as the business transitions to new management. “We help folks transition out of the day-to-day management,” he says.” At the same time, they achieve some liquidity for their personal financial situation.”

Longstreth represents Roebling’s first investment in the sports space, but Goebel says the investment “resonated” with the firm’s investor group that largely consists of current or retired small business owners.

Goebel adds that Roebling appreciates the “underlying stability” of sports with parents highly likely to continue to support their kids’ sports needs even in challenging times. Women’s sports are also seen as a growth opportunity and Roebling liked investing in an asset that empowers women.

“Each of us has a daughter, so it’s more fun to be invested in something like this directly than to be in ball bearings or something,” he points out.

Finally, Goebel sees potential in field hockey, with pockets of strength in the U.S. in the Northeast, Mid-Atlantic and Midwest. He’s also hopeful that the U.S. Women’s National Field Hockey Team’s recent qualification for the Summer Olympics provides a boost to the sport.

Goebel says Roebling generally doesn’t have a specific exit plan set for any of its investments, adding that “we really aim to add enough value over five to seven years, which is a typical holding period for investment firms like ours.”

Not Everyone Is In The Game

Despite the big money being thrown around, some fast-growing brands continue to resist the allure of PE investment.

Among some trending brands in team sports, football brand Battle Sports remains self-funded with no plans to seek an outside investor. CEO Chris Circo tells us, “People have expressed interest in us, but we’re just not interested.”

Circo says Battle, which is part of the holding company C3 Brands Corp, continues to seize market share with its apparel range expanding from 50 doors at Dick’s Sporting Goods to 300 this year.  “We’re in a good position and we believe in our brand and the story,” Circo says.

ECD Lacrosse, another firm seeing rapid growth, is also not actively seeking any investment.
“It feels like investor sentiment in team sports is picking up; we are constantly getting contacted by PE firms or individual investors looking to get into the space,” Michael Kenneally, VP & co-founder, tells us. “Sports are exciting, they are also key to the development of kids. They teach discipline, toughens, and hard work.

“It is a fun category to work in and I am sure that is why investors are interested in team sport,” he adds. “It is great when you can mix passion and business, which team sports brings to the investing world.”

For owners, a PE firm may offer the highest selling price in a sale. For businesses, however, a sale can be a rocky experience. The PE firm is often betting it can make the acquired business more valuable by overhauling operations and/or combining it with other businesses. Replacing leadership, cost cutting, eliminating redundancies and seeking economies of scale are often in the cards.

On the positive side, a PE firm offers a wealth of experience in operating businesses and is incentivized to keep key personal and sometimes former owners engaged and motivated for the hopeful prosperous future exit.

Nathan Pund, managing director in Houlihan Lokey’s Consumer, Food & Retail Group, tells us the overall M&A market is “steadily improving,” particularly for outperformers in the consumer space.

However, he notes that Amer Sports’ IPO came in below targets, highlighting investor concerns over near-term geopolitical events. Pund also believes some investors remain leery of team sports participation challenges.

“Team sports has shown resilience, but one needs to have caution as the COVID boom exposed enthusiasts to many new and exciting outdoor pursuits that now compete with team sports for attention and their discretionary dollars,” says Pund.

The NIL platforms and other technological-advances expected to drive participation are still emerging and additional funding heading around sports-related businesses is positive for growth. Still, some may see downsides as sports overall faces a bigger investor spotlight.

“Some people would argue that sport has lost its purity and it’s all about the money,” points out KB Partners’ Bank. “Others would argue, ‘Hey, people work hard for what they do. They’re entitled to earn as much as they can earn.’

“And its entertainment in addition to being sports,” he continues. “It’s a supply and demand society. If people are still willing to pay for tickets and pay for subscriptions, they’re going to keep commanding the salaries and the pay that they get.”

And that is music to the ears of the PE and investment community in 2024.