Sports tech M&A hit a record this year, study finds
The first six months of 2024 featured a record 225 mergers and acquisitions in the sports tech industry, according to a report released by investment bank Drake Star. The total disclosed value of the deals amounted to $27.3 billion, which is a half-year high, according to the bank.
The period outpaced the first half of 2023 which saw $16.1 billion on 165 deals and the second half of 2023, recoding 163 transactions worth $8.6 billion.
This year’s mergers and acquisitions include big shots like entertainment giant Disney and Indian conglomerate Reliance merging media platforms Star India and Viacom 18 in a $3.1 billion pact. It also saw private equity firm Silver Lake strike a $13 billion deal to take entertainment conglomerate Endeavor private. Liberty Media agreed to pay $4.6 billion for Dorna Sports, the MotoGP World Championship commercial rights holder. Apart from these, the first six months of 2024 also featured three other mergers and acquisitions worth at least $1 billion.
“Sports as an asset class is the red-hot sector as of now, [and it’s] one category where there is a maximum amount of activity happening,” said Mohit Pareek, co-author of the report. “Whether you talk about the digital media rights, whether you talk about all the FAANGs moving into it—Apple, Amazon—everyone is trying to get a piece of the sports puzzle.”
However, this was not always the case, and the narrative has shifted recently, with team values exploding over the last two decades. For example, Forbes’ recent ranking of the NFL’s most valuable teams finds that the average franchise value was $5.7 billion, up 11 percent from 2023 and 77 percent since 2020.
The few team stake sales are becoming harder to nab as the price continues to rise and as leagues maintain strict ownership requirements. Although several pro leagues have recently eased their rules around private equity and other institutional capital, team ownership is still a dream for many.
Investors’ entry into sports tech
Therefore, investors have found a way around this. Desperate to dive in the sports sector, investors have turned to adjacent businesses related to the industry, diving into areas like wearables and performance enhancement, accounting for 99 of the total 225 M&A deals in the report. Apart from this, 35 of the total deals were related to fan engagement and experience while 20 were media and broadcasting. Remaining categories include data analytics, ticketing, venue management
and artificial intelligence.
A good majority of the mergers and acquisitions in the report involve earlier-stage startups, with transactions ranging from $30 million to $500 million. This comes amid a decline in private financing, declining from $3.3 billion on 354 deals in the first half of 2023 to $1.9 billion across 342 deals in the first half of 2024.
The trend of consolidation has caused many small startups to sell to their bigger competitors instead of holding out on their own. ” Paul Martino, cofounder of venture fund Bullpen Capital cites an example for this. He states how a fantasy sports startup would struggle because well established companies like FanDuel and DraftKing have an overwhelming market share, and the customer acquisition costs have shot up 10 to 100 times what they used to be.
“If you’re a new young entrant, you have to go to market with some incumbent support, or else you’re never going to get any audience,” Martino says.
