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But last year, Ares was the heavyweight of sports investment, raising $3. 7 billion to invest in the sports, media and entertainment sectors. This fund included about $2. 2 billion in equity commitments and has an advisory board made up of figures such as the soccer legend and LAFC teammate. owner Mia Hamm, wonderful NBA and Atlanta Hawks co-owner Grant Hill, and Meadowlark Media co-founder and CEO John Skipper.
Mark Affolter, who along with Jim Miller and Kort Schnabel leads Ares’ sports strategy as partners and co-heads of U. S. Direct Lending, declined to comment on how much they have earmarked for the sports fund or the timing of their investment. However, he said that the rising valuations of the sports industry have necessitated more evolved capital structures for sports and sports-related assets, which has allowed Ares to make investments in structured and giant stocks.
“We liked the underlying dynamics, growth dynamics, lack of correlation from a broader economic standpoint; we believe the addressable market opportunity is of significance where we could actively not only raise a fund, but deploy a fund with a high degree of diversity,” said Affolter. “We also believed that there weren’t a lot of players that look like us trying to bring the ability to invest up and down the capital structures with a high degree of scale.”
In fact, scale is the key word. Ares closed 2022 with an investment in John Textor’s Eagle Football Holdings, which allowed the holding company to take a majority stake in Olympique Lyonnais in a deal that values the legendary French football club at more than $900 million. This Eagle’s fifth world football team, joining Premier League side Crystal Palace and Brazilian side Botafogo.
And in the face of an increasingly turbulent market, Ares has continued to be a front-runner in private equity’s rush into sports by backing some of the year’s biggest transactions. Most notably, the firm reportedly invested some $500 million in Chelsea FC in September. The team has been on a spending spree following its sale to a group led by Todd Boehly and Clearlake Capital, and it’s now said to be eyeing a major stadium investment and the potential acquisitions of other global soccer teams. Affolter declined to comment on Ares’ reported involvement with Chelsea.
A month earlier, Ares made a $75 million investment in Inter Miami stock after the team negotiated a landmark deal for superstar Lionel Messi. This investment, which brings Ares’ total commitment to the MLS club to $225 million, will also cover the structure of a new stadium.
And Ares is now reportedly part of Legends’ proposed $1. 85 billion personal investment to acquire ASM Global. Affolter declined to comment on the main points of the deal or Ares’ potential involvement, though he said the deal represents “a super mix of two top-tier franchises that will create a really dominant player in the space. “
For Affolter, mitigation has been a critical component of Ares’ approach.
“Our purpose is to have intelligent protection against problems,” Affolter said. “Even when we go through the middle of the capital structure, or even a small decrease in the capital structure, which we do occasionally. We are not looking to take control of equity positions. We’re very structured in terms of, for example, the types of percentage investments we make.
This type of structure, based on its history of direct lending, means that Ares has little interest in conducting a non-unusual inventory on professional equipment. Although Affolter said the company would maintain minority positions in stock (it was reported earlier this month that it was exploring a minority stake in the Texas Rangers), he has no plans to pursue a multi-team bundling strategy like that of Arctos Sports Partners.
“The decisive aspect is the type of reduction that can be obtained by acquiring a minority stake. What kind of governance rights can be obtained?” said Affolter of the potential challenges. “Probably the most important thing when it comes to our capital is the ability to recover our capital, or influence the ability to recover our capital in a moderate period of time. It tends to be trickier if you take a natural position of five or 10 percent, say, in a Major League Baseball franchise or an NBA team.
Ares’ recent flurry of activity, which also included participation in a $35 million investment circular for League One Volleyball, has been a focal point for industry insiders. And even one of the most pessimistic sports bankers stated that the firm’s highly designed technique for making additional investment in capital design proves moderate amid negative macroeconomic trends such as peak inflation and emerging interest rates.
Fitch Ratings last week indicated an unbiased outlook for sports in 2024, with Gerry Cardinale, managing partner at RedBird Capital, saying at a recent SBJ meeting that “all sports are overvalued right now. “Affolter also sees potentially demanding situations in the future, but remains independent. -confident in Ares’ ability to navigate troubled waters.
“The era that we’ve gone through, let’s say in the last five to 10 years, where it was kind of an emerging tide that lifted up all the ships and everything related to sports that have press rights achieving that virtuous momentum, I don’t think so. “It’s a sustainable dynamic for the future,” Affolter said. “Naturally, there will be winners and losers, and it’s up to us to refine our thesis in a way that invests in those sectors that will continue to grow as they move forward. “go through cycles of renewal [of media rights]. “
On this week’s Marchand and Ourand Sports Media Podcast Hosts Andrew Marchand and John Ourand preview the biggest sports media stories of 2024. The includes the return of Marchand’s “Brady Meter,” which gives the odds on whether Hall of Fame QB Tom Brady will call a game as Fox’s top NFL analyst. The two also discuss to options for Greg Olsen, the analyst Brady is replacing.
Other topics come with predictions related to the NBA’s media rights deal, which is expected to close in the first part of 2024; ESPN’s direct-to-consumer plans, which are expected to arrive sometime in 2025; Disney’s efforts to locate investors for ESPN next year; and the most likely end results of all the chaos that has surrounded regional sports networks lately. Other topics are coming: the methods of the broadcasting companies, the Paris Olympics, negotiations with the CFP media and Orioles announcer Kevin Brown.
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