A few weeks after the National Football League invited private equity firms to purchase passive stakes in its teams, a very different sport across the pond said it's planning something similar.
While largely unknown in the U.S., cricket is the second-most popular sport in the world behind soccer, boasting at least 2.5 billion fans, according to the World Atlas. That dwarfs the popularity of such U.S. sports as basketball (800 million fans) and baseball (500 million).
Now private equity firms may compete into the medieval sport, which is thought to have originated in Britain and is played throughout South Asia, the Caribbean, South Africa and the Antipodes. Cricket will also return to the Olympics in 2028 in Los Angeles, after a 128-year hiatus.
The England and Wales Cricket Board, the national governing body of the sport in those countries, has initiated a process to attract private equity firms to invest in the eight teams that participate in The Hundred, a tournament comprising men's and women's English and Welsh cricket clubs that commenced in 2021.
Global interest among investors
The board said on Sept. 5 that the process has “sparked global interest from a variety of investors” and that “incoming investors will act as strategic partners for its future success.”
In the next few months, the board will work with local cricket clubs to “assess the suitability of prospective partners, their values and their ambitions for the team of interest.” The board expects to announce specific investments in 2025.
“This marks the most significant private investment opportunity in the history of cricket in our country and there’s never been a better moment for partners to engage with our sport,” said Vikram Banerjee, the board’s director of business operations, in the release. “Cricket’s global appeal continues to soar and in England and Wales — we’ve seen engagement with the sport hit record-levels.”
A spokesperson for the board told P&I that a minimum 49% in each team is available for purchase by the invited firms, with a minimum hold period of four years.
Sources said that the majority of each 49% stake in a team would likely go to one bidder, but that they could also allow a consortium of investors.
That 49% is the stake currently held in each team by the board, while the remaining 51% stake is held by each club’s host county. “It is up to (each host county) whether they wish to offer some of this for sale in addition so that investors could obtain a majority stake,” the spokesperson noted.
The board spokesperson also indicated that cricket is growing rapidly around the globe. That growth, combined with the sport's return to the 2028 Olympics, raises confidence that "there will be continued interest in the sport from (private equity) and other investors.”
Ben Davison, director, transactions at PwC, said cricket made headlines following the official launch of The Hundred sales process. "The opportunity to invest in one of eight different franchises has attracted significant interest from investors, including private equity and existing investors in cricket around the globe," he said.
According to U.K. media, CVC Capital Partners is in negotiations to make an acquisition in one of The Hundred franchises. CVC could not be reached for comment.
Like the NFL?
Shana Orczyk Sissel, founder and chief executive officer of Banríon Capital Management, an alternative asset technology platform which advises clients on alternatives, said U.S.-based private equity firms seeking to buy cricket teams in Britain or as far away as India might not even care about cricket, but would be attracted to these opportunities if they believed that they could deliver attractive excess returns for clients.
“I think the more esoteric sporting leagues — like cricket which has moderate following in the U.S. — might be more appealing to American investors because they may be more likely to generate more handsome returns,” she said. “And they provide some healthy diversification to a private equity portfolio.”
Buying a stake in the NFL is different, she pointed out.
In the U.S., owning a piece of, say, the Dallas Cowboys or Kansas City Chiefs is more of a “trophy investment” for American PE limited partners, and there are limited ways to add value to such an investment.
PE in India
In India — another cricket-mad nation — some private equity firms have already invested in local cricket clubs. In June 2021, New York-based RedBird Capital Partners purchased a 15% stake in the Rajasthan Royals of the Indian Premier League, India’s top cricket league with 10 teams. Terms of that transaction were not disclosed.
Gerry Cardinale, founder and managing partner of RedBird, told P&I the firm still holds that initial stake, but declined to comment on its current valuation.
“Rumored valuations for other expansion (cricket) franchises with less history than the Royals are in the range of US$1 billion,” Cardinale said. RedBird has more than $10 billion in AUM.
Cardinale said RedBird could “help drive value for the Royals” as it has with some of its other sports properties, including Italian soccer club AC Milan.
The business fundamentals of the IPL are very strong, said Cardinale, boasting a “large, growing base of passionate fans, a disciplined league structure that drives profitability at each club, rapid adoption of data analytics strategies, and multiple growth opportunities both domestically and abroad.”
In fact, Cardinale observed, the IPL “feels like the NFL did 20 years ago.”
In 2021, the Luxembourg-based private equity firm CVC Capital Partners purchased the Gujarat Titans cricket club outright for about $827 million, making it the first private equity firm to buy an IPL team. CVC has €193 billion ($214.5 billion) of assets under management
Santosh N, managing director of D and P Advisory, a valuation services provider and boutique transaction advisory firm based in Bangalore, India, noted that there was also talk last year that Tiger Global Management was seeking to purchase a stake in the Royals, but that transaction did not go through.
However, the IPL's attraction to private equity investors is that it offers a “unique pairing of emerging-market growth with a strong, well-managed league construct,” Cardinale said. "This mix of high growth and sustained profitability is hard to find,” he added.
Scott Markman, founder and president of Monogram Group, a Chicago-based global branding agency specializing in private equity portfolio companies, said IPL teams are a potentially attractive buy due to their long-term trajectory of value growth, the pool of potential buyers down the road, operational efficiency opportunities, and licensing rights, among other reasons.
“These variables make it hard to project the upside on a purely financial basis, but ultimately they’ll all contribute to future valuations and the potential upside of Indian cricket clubs,” he said.
“Now that the door for PE firms or PE firm owners to invest in global sports brands/franchises has been opened, many firms are chasing these opportunities and here the law of scarcity applies — there’s just a limited amount of them that would make sense to explore. And, professional Indian cricket teams fall within those boundaries, due to the history, passion, market size, global popularity of the sport,” Markman said.
Valuations
According to a June valuation study by Houlihan Lokey, a New York-based investment bank, the 10 teams in theIndian Premier League had a combined valuation of about $16.4 billion, having surged from $8.5 billion in only two years.
“IPL is the only property in the world that has the ability to reach over a billion-plus populace, with its popularity not just limited to the Indian subcontinent,” the Houlihan report noted.
In the Houlihan study, Manoj Badale, the majority owner of the Royals, said IPL “has always been highly investible.”
“Having been inspired by U.S. sports leagues, and particularly the model of the NFL, the IPL was always going to attract institutional investors,” Badale said. “A closed league (no relegation) offers long-term security, a ‘hard’ salary cap ensures a level playing field and competitive parity, and an equitable commercial model in which central income is split equally amongst franchises secures contractual revenue for franchises.”
In cricket leagues, “relegation” refers to the practice of moving poorer performing teams to a lower division for the following season. However, as IPL is a “closed league,” such relegation cannot occur.
But Santosh N is somewhat cautious. “There’s a fundamental difference between a good asset and an investable asset,” he said. “A good asset might generate strong cash flows and appear profitable, but it may not always be an attractive investment if its current valuation already factors in much of the future growth potential.”
Santosh N noted that the IPL and its teams represent a “fantastic cash-generating business.”
However, he cautioned, “when you consider the valuations being paid, particularly the prices for the new franchises like Lucknow Super Giants and Gujarat Titans, much of the future growth and profitability has already been priced in.” According to Houlihan, the Super Giants have a brand value of $91 million, while the Titans have a brand value of $124 million.
Santosh N also observed that IPL teams are currently highly profitable, thanks to revenue streams from media rights, sponsorships, and fan engagement. “But the challenge is that these high profitability levels are already discounted into the current valuations,” he added. “The prices paid for recent teams suggest that investors are expecting strong future growth, but given the already high valuations, much of this growth is baked in, leaving less upside for new investors.”
Aside for the two new teams (Gujarat Titans and Lucknow Super Giants), most other IPL teams have started to generate substantial profits after the renewed media rights deal last year, with EBITDAs exceeding 20% for many franchisees, said Harsh Talikoti a senior vice president in Houlihan Lokey’s Corporate Valuation Advisory Services practice. The Titans and Super Giants will likely see profitability in the longer term, he added.
While historically the IPL has seen a consistent rise in valuations, mainly driven by the robust growth in media rights fees, which have been a significant revenue-driver, Santosh N noted however that this year, “the league saw a decline in valuations because the previous figures had already factored in expectations of continued high growth in media rights per match,” he said.
“(But) with consolidation in the Indian media industry, there is a real possibility that these expectations for future media rights growth may not materialize as strongly as anticipated.”
According to media reports in India, the enterprise value of IPL dropped by 11.7% to $9.9 billion this year.
Broadcast rights
In 2023, investment bank Houlihan noted, the broadcast rights to Indian Premier League matches were sold for just over $3 billion, while the internet streaming rights alone brought in almost $3.1 billion.
From a private equity perspective, IPL teams are attractive due to their strong revenue model, driven by lucrative media rights, sponsorship deals, and growing fan engagement, Santosh N said.
Still, Santosh N cautioned that the Indian market can pose some obstacles for western PE investors due to such issues as regulatory hurdles, complex tax laws, and compliance issues. “Additionally, cultural and operational differences, along with competition from domestic investors, make it challenging to navigate deals,” he said. “However, India's growth potential and economic opportunities continue to attract foreign investment despite these barriers.”
Sophie Baker contributed to this story.
