General M&A Market Trends

The world mergers and acquisitions (“M&A”) market has been significantly slower than typical this yr, significantly as in comparison with the deal stream seen in each 2021 and preliminary quarters of 2022. With financial uncertainty as a consequence of elements equivalent to rising rates of interest, excessive inflation, and geopolitical battle, there was a calm down in M&A exercise throughout many industries. The global deal volume within the first quarter of 2023 was $559 billion, the third-lowest within the final 10 years. Deals valued over $10 billion have additionally drastically decreased, contributing solely $102 billion in deal worth in comparison with $272 billion final yr. Low deal stream continued within the second quarter of 2023, falling 36% year-on-year.

However, there are constructive indicators that the M&A market will pattern upwards, attributable to elements equivalent to surprisingly resilient financial power in some sectors and alternatives for market consolidation. Mid-market offers are anticipated to paved the way as these are sometimes much less affected by market uncertainty. Despite the slowdown within the M&A market, there have additionally been some sectors which have continued to indicate important exercise, with one business, particularly, performing very strongly: the sports activities business.

The Sports Industry

Amidst the overall M&A market slowdown, the sports activities business has continued to see important deal quantity. From the start of 2023, it has been exhausting to overlook headlines about prime sports activities groups promoting for giant valuations. 2023 has already proven an inordinate quantity of exercise within the sports activities world, with sport group valuations the very best they’ve ever been within the NFL, NBA, MLB, NHL and extra. Some current noteworthy transactions embrace:

• A consortium led by the Michael Andlauer Group purchasing 90% of the Ottawa Senators for a reported $950 million.
• Harris Group purchasing the Washington Commanders for a report $6.05 billion.
• The ongoing multi-billion greenback sales talks of Manchester United, with reported third-round bids sitting within the area of £5 billion.
• The merger between LIV Golf and the PGA Tour.
• Mat Ishbia purchasing 57% of the Phoenix Suns and Phoenix Mercury, valuing the 2 groups at $4 billion.

While these valuations stand out amidst the present financial panorama, M&A exercise within the sports activities business is comprehensible as this business has persistently proven resilience.  While many different industries have pulled again throughout the financial downturn, the sports activities business continues to tug in report numbers for viewership each at house and in individual. With such excessive viewership and help, enterprise house owners and celebrities alike have been seeking to bounce in.

Hurdles to Closing

While numerous offers have made the headlines, a few of these have hit appreciable roadblocks towards closing. Like most industries, M&A transactions inside the sports activities business contain quite a few authorized issues earlier than a deal closes, starting from issues involving tax and actual property, all the best way to antitrust and First Nations issues.

Examples of a few of this yr’s sports activities M&A offers which have been accompanied by pre- and post-closing authorized hurdles embrace:

• The Washington Commanders sale being delayed as the results of questions relating to the financing construction of the acquisition, with the excessive quantity of unsecured debt to finance the down fee being reported as a serious stumbling block. The sale was subsequently approved because of a particular session between Harris Group and the NFL Finance Committee.
• The PGA-LIV merger dealing with antitrust competitors regulation considerations, pending board approval, and extra. With each events to the merger beforehand accusing one another of anticompetitive habits, there are actually considerations that the merger could create a complete monopoly inside the skilled golf business, thus elevating competitors regulation penalties. It is predicted that LIV could try a ‘failing company’ protection if met with authorized resistance, though commentators counsel that protection is unlikely to be successful because of the giant investments into the group by the Saudi Public Investment Fund.
• The Manchester United being presumably delayed as a consequence of sale construction and valuation issues. Following 5 months and three rounds of bidding, the sale course of stays ongoing.
• Ottawa Senators new possession group endeavor negotiations with the National Capital Commission and different stakeholders in reference to a possible new enviornment.

How McCarthy Tétrault Can Help

Sports M&A offers – like all M&A – contain the necessity to contemplate an entire vary of authorized, enterprise and statekholder issues. McCarthy Tétrault has in depth expertise in M&A, together with sporting issues, equivalent to beforehand advising Maple Leaf Sports & Entertainment with respect to receiving  regulatory approvals for the return of the Toronto Raptors to Canada after COVID-19,representing BCE in its C$1.07 billion acquisition of curiosity in Maple Leaf Sports and Entertainment with Rogers, and appearing for Bell Media/TSN on its landmark deal to combine FanDual’s main sportsbook utility into TSN’s sports activities media properties. We are uniquely positioned to profitable navigate novel and complicated transactions for our purchasers.

Acting on a few of Canada’s main transactions, our M&A Group focuses on advising purchasers on the most important and most modern home and worldwide offers. With places of work throughout Canada’s main industrial centres, New York and London, our agency has substantial presence and capabilities to assist home and worldwide companies full M&A transactions throughout Canada.

Our group at McCarthy Tétrault all the time stays dedicated to serving to our purchasers navigate the challenges they face in a M&A transaction. Please contact Matthew Kelleher, or some other member of the M&A Practice Group at McCarthy Tétrault, with any questions or for help.