Loyal fans are turning sports teams into a multibillion-dollar asset class, Deutsche Bank says

By Louis Goss

Sports teams could soon find themselves at the center of a flurry of M&A deals, according to analysts at Deutsche Bank, who predicted the world is set to see a flood of investment into everything from English rugby to Indian cricket driven by those seeking to cash in on a fast-growing asset class.

In a note, analysts at Deutsche Bank led by Luke Templeman, said professional sports teams are becoming increasingly attractive to investors as assets that retain value, regardless of the state of the wider economy, due to their fiercely committed fan bases.

The analysts explained that fans' loyalty to sports teams ensures they retain brand value and holds on their audiences, even during major controversies, in a way that makes them immune to many of the problems faced by companies operating in other sectors.

This situation has seen the value of sports teams surge in recent years, as billionaire investors have piled into the sector by snapping up stakes in top teams including Manchester United (MANU) and AC Milan for eye-watering sums in the billions.

Now, Deutsche Bank's analysts expect this investment will increasingly start to flow into smaller sports teams, as investors seek to capitalize on growth in the global sports sector that is being driven by developments in technology and high levels of interest from millennials and Generation Z.

"Younger generations are increasingly framing their identity around their favourite sports teams and are willing to pay for it," Deutsche Bank's analysts said.

They explained that the growth of the streaming market, paired with the major leverage that sports teams have to increase pay-for-view prices due to the loyalty of their fan bases, could help offset falling revenue from traditional TV broadcasts and expand sports teams' audiences.

Sports teams are also well-placed to capitalize on younger audiences who mostly engage with their brands via social media, by selling branded goods, capitalizing on their intellectual property, and harvesting fan data, Deutsche Bank's analysts said.

The analysts said they expect the bulk of M&A activity to continue to be in the U.S. but said they foresee increased levels of investment in European football as well as in women's sports.

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"In the end, humans are arguably hardwired to engage in sports competition," the analysts said. "And the more people become less physical in their own lifestyle, the more they may wish to watch those people in the world who are the best at what they do."

The analysts, however, warned that backlash from still fans poses a threat to investment plans, as they pointed to the major protests in the U.K. that saw top investors abandon plans to create a European superleague.

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-Louis Goss

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04-09-24 1445ET

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