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The art of investing in professional sports

| Aug 17, 2017 | Buying & Selling Businesses |

As North Carolina continues to grow into a lucrative professional sports market, prospective investors are starting to inquire about opportunities in team ownership. A few years ago, former Microsoft CEO Steve Ballmer made headlines as he plunked down $2 billion to purchase the Los Angeles Clippers NBA franchise. Even though the sale was carried out under duress due to a scandal involving the former owner of the team, the exorbitant price tag prompted many analysts to question the value of the franchise.

Being an ardent lover of professional basketball, Ballmer has proven to be one of the most beloved team owners in the NBA. From a financial standpoint, however, he is probably losing money now. Nevertheless, there is no doubt that the team is increasing in value. Should the Clippers be crowned NBA Champions in the next few years, Ballmer could conceivably sell the team for a handsome profit to another billionaire or to a group of investors.

Ballmer has sole ownership of the Clippers, but this would not preclude him from offering some of the equity of the franchise to other investors as long as he sticks to NBA rules in this regard. In North Carolina, local basketball legend Michael Jordan could do the same. In fact, he started off as a partial owner of the Charlotte Hornets before increasing his stake in 2014 and becoming a millionaire in the process. The Hornets are valued at about $725 million, a figure that has climbed considerably in recent years.

Investing in a professional sports franchise can be a complex transaction that requires adequate representation by a law firm experienced in buying and selling businesses. Ballmer retained an entire legal team to help him with buying the Clippers because of the scandalous circumstances of the sale. Jordan was also well represented due to the significant increase of business assets he was adding to his portfolio. There is no question that Ballmer and Jordan have invested wisely, but it’s important to remember that they covered all legal bases before going to the closing table.

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