One area of business that has shown consistent lucrative returns over the years is the investment in North American sports franchises. Research indicates that had you committed funds to this sector between 1991 and 2022, your returns would be a minimum seven-fold. This financial performance surpasses the S&P 500 over the same time frame, with sports franchise investment returning twice as much. This data was gathered and made available by Sportico; the intriguing statistics have made this an attractive venture for investors globally.
In the past year alone, the average value of an NFL franchise appreciated by 24 percent. An investment attractiveness that in recent years has captivated the interest of investors, especially in private equity. The rapid growth in the market value of these franchises is an opportunity investors are increasingly looking to capitalize on.
It is, however, essential to note that this investment area does not come without risks. As with traditional investment areas, sports franchise sector is not devoid of rules, regulations and ‘known unknowns’. Understanding how sports franchises work, including their unique rules, will greatly impact how successful an investor’s return can be.
The article originally shared on JD Supra by Sheppard Mullin Richter & Hampton LLP, delves deeper into this high-reward business venture, and what private equity needs to understand about the influence of professional sports leagues’ rules on franchise valuations.