Sports Tech Finance Perks Up as Drake Star Projects Better 2024
Financing activity in sports and sport technology businesses perked up in the third quarter, tallying more than $10 billion in mergers and acquisitions, capital markets fundraising and venture capital placements, according to a new analysis by investment bank Drake Star.
“2023 has, as everyone knows, been a challenging year for the broader markets, but sports tech has been, surprisingly, a high-growth, high-activity market,” said Drake Star banker Mohit Pareek, one of the authors of the firm’s third quarter Sports Tech Market report. “We’re talking about $30 billion of transactions in sports tech the first nine months of the year.”
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That rate far exceeds what used to be the annual average $10 billion to $12 billion sports tech financing market, Pareek added (and the amount excludes the Activision acquisition by Microsoft, which formally closed at the start of 2023.)
Sports mergers and acquisitions were headlined by Endeavor’s purchase of WWE, but also included billions of dollars of other notable deals, including Francois Pinault’s purchase of the control of CAA from TPG in a deal valuing the talent representation business at $7 billion. Also highlighting the period was the Qatar Investment Authority acquiring 5% of Monumental Sports & Entertainment at a $4.05 billion valuation, injecting $200 million into the parent of the NBA’s Wizards and NHL’s Capitals, among other businesses.
All told, the sports tech M&A market saw 90 transactions in the third quarter, valued at $6.3 billion. That’s more than double the same period last year, according to Drake Star, which is a technology-focused investment bank with offices in five countries.
“Sports as an entertainment vertical has actually expanded a lot more than it did during COVID,” said Pareek, in a video call. “Sports is back as one of the primary activities people want to do, and there is a lot more momentum with money coming in and people having a much broader market to pursue,” thanks to the expansion of in-stadium technology, mobile sports betting apps and advances in live sports streaming data and personalization.
In particular, the M&A and public markets side of the sport tech business has benefited from the broad stock market being buoyed by the large successful IPO of Arm Holdings in September. While not a sport business (Arm designs computer chips for mobile phones and EVs), market watchers have been saying technology needed a strong IPO to break the industry’s logjam of deals. With fresh momentum in the IPO market, it should goose late-stage private equity investment and venture capital investment in more developmental businesses. That also lays the groundwork for what should be one of sports’ more sizeable IPOs in 2024: the debut of Amer Sports, the owner of Wilson and Salomon brands that is seeking to raise up to $3 billion at a $10 billion valuation.
On the venture capital side, the difficult 2023 for VC deals seems to be lifting, with the number of sports tech VC fundings hitting 211—the first time the deal count was over 200 in five quarters. While the amount of the deals—$1.4 billion—was below the second quarter and only slightly higher than a year ago, there was an uptick in mid- to late-stage financings, an area that had been particularly slow in recent quarters, according to the investment bank. Notable deals include a $225 million raise at $600 million valuation for Egym, a smart workout tech maker, which saw Affinity Partners, Mayfair Equity and Bayern Kapital invest. Professional Fighters League raised $100 million from SRJ Sports, a Saudi investment vehicle, while Figur8 raised $25 million in a Series A1 round from First Spark Ventures, DigiTx and Phoenix Venture Partners. Figur8 develops technology around musculoskeletal health and biomotion.
“Overall, if you look at Q1 and Q2, there were fewer later stage financings primarily because of the valuation expectation differences between what people were willing to pay for, mid- to late-stage companies versus what the founders were looking for,” said Pareek. The opening of the IPO market and expectations for healthy public markets next year have businesses refocused on acquiring the funding they need for the next 12 to 18 months before an anticipated liquidity event, like an IPO or acquisition, he added.
Overall, Drake Star foresees a strong 2024 with significant flow of investment into sports tech companies, given a number of sports-focused VC and PE funds have raised billions of dollars over the past year and are seeking places to invest. In particular, AI, fan engagement, ticketing and venue management continue to be the hot segments, according to the report.
“2024 is going to be a much more vibrant one for the whole tech market, and sports tech will benefit from that too,” Pareek said.
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