Private Equity in Professional Sports: Perfecting the Endgame

Sports and entertainment, to most professional sports fans, feels redundant. Sports are entertainment. Football commands the attention of half of America’s population on any given Sunday, and marketing departments are hard at work attracting the other half. A favorite team, in any sport, that earns the “W” brings unrivaled bliss, impish satisfaction, and bragging rights. Sports are woven into the fabric of our culture; each game reminds us of our love for winning, hatred for losing, and our obsession with keeping score. Green fields, hardwood courts, and sheets of ice become battlegrounds of finesse, agility, pride and grit. We can’t get enough. Professional sports are America’s entertainment, and they’re here to stay.

Win-loss records, historically, have weighed heavy on bottom lines. Victories, winning seasons, and championships can be elusive. But to private equity, winning games doesn’t  matter. It doesn’t have to. Returns count–wins don’t– and history shows private equity could have the candy-making secret. In a nine year span, the enterprise value of the NHL’s Toronto Maple Leafs tripled, according to Forbes, accounting for $413M in value. So how does mediocre on-ice performance, a disenchanted fan base, and no chance of making fingerprints on the Stanley Cup lead to industry-leading returns?  It’s the business equivalent of terroir to wine grapes, merroir to oysters– the bounty is derived from the perfect, delicate balance of key factors and forces. It’s making astute moves, redefining surplus, and living for the bottom line and the trophy. It’s business sense unencumbered by love for a team.

“The role of PE in professional sports will continue to evolve. As professional sports has leveraged technology to engage fans and broken new ground in revenue generation, doors have opened for private equity,”  notes Alfred Zaccagnino, President and Founder of the Samarian Group of Companies, a private equity firm headquartered in New York City. “If current trends continue, ownership of professional sports teams will continue to be a promising sector for private equity in the next decade.”

The Evolution of Private Equity

Private equity has, historically, been a private world available to pension funds, trusts, university endowments and only the wealthiest.

But times they are a-changin’.

Considered the most coveted alternative asset, individuals want in, and private equity firms are shaking off the welcome mat. But there are rules set by the U.S. Government and are meant to be followed. As long as they are, it’s a new world available to qualified individuals who seek a more diversified portfolio.

Most private equity funds require a participant to be what is termed an accredited investor, qualified client, or qualified purchaser. To which category an investor falls is decided largely by net worth and income. It’s in black and white—details are spelled out on http://www.investor.gov.

Where the black and white blur into gray can be largely found in the investor’s financial goals; his or her comfort level; how liquid they need to be and how fast. And not everyone is comfortable with the risk-reward ratio.

Private equity firms typically work with individuals through their brokerage accounts often referred to as ‘feeder funds’ that require an initial investment of $250,000, far less than previously demanded. The firms charge asset management fees, an upside for handling far more investors at lesser amounts.

And individual investors have become empowered. Getting into the private equity market is no longer limited to partnering with the big PE firms who may offer fewer choices. Boutique firms have established a reputation for specializing in certain sectors and geographies. More options can make it easier for investors to manage risk.

Today PE funds are far less private. Individual investors now have insight into performance and strategy—also critical for institutions where oversight is required.

As the landscape of private equity continues to change, the options for those who don’t fall within the ‘One Percent’ will continue to expand. As individuals react to the volatility of public markets, interest in PE funds will continue to grow.

“The world of private equity is constantly evolving,” notes Alfred Zaccagnino, President of Samarian Group of Companies, a PE firm with a growing global presence. “Individual investors want to be educated about where they’re putting their money—they do the research and utilize new technologies. Due diligence—for all parties—is the most important step toward a successful partnership.”

Private Equity in Professional Sports: Perfecting the Endgame

By Allyson Ruscitella

Sports and entertainment, to most professional sports fans, feels redundant. Sports are entertainment. Football commands the attention of half of America’s population on any given Sunday, and marketing departments are hard at work attracting the other half. A favorite team, in any sport, that earns the “W” brings unrivaled bliss, impish satisfaction, and bragging rights. Sports are woven into the fabric of our culture; each game reminds us of our love for winning, hatred for losing, and our obsession with keeping score. Green fields, hardwood courts, and sheets of ice become battlegrounds of finesse, agility, pride and grit. We can’t get enough. Professional sports are America’s entertainment, and they’re here to stay.

Win-loss records, historically, have weighed heavy on bottom lines. Victories, winning seasons, and championships can be elusive. But to private equity, winning games doesn’t  matter. It doesn’t have to. Returns count–wins don’t– and history shows private equity could have the candy-making secret. In a nine year span, the enterprise value of the NHL’s Toronto Maple Leafs tripled, according to Forbes, accounting for $413M in value. So how does mediocre on-ice performance, a disenchanted fan base, and no chance of making fingerprints on the Stanley Cup lead to industry-leading returns?  It’s the business equivalent of terroir to wine grapes, merroir to oysters– the bounty is derived from the perfect, delicate balance of key factors and forces. It’s making astute moves, redefining surplus, and living for the bottom line and the trophy. It’s business sense unencumbered by love for a team.

“The role of PE in professional sports will continue to evolve. As professional sports has leveraged technology to engage fans and broken new ground in revenue generation, doors have opened for private equity,”  notes Alfred Zaccagnino, President and Founder of the Samarian Group of Companies, a private equity firm headquartered in New York City. “If current trends continue, ownership of professional sports teams will continue to be a promising sector for private equity in the next decade.”

Cantor Fitzgerald: A Lesson for Us All

If a company can have a soul, Cantor Fitzgerald surely does. Broken and lost under the weight of one of history’s darkest days, it has since been rebuilt and made better. The company’s memory remains strong and it’s mission redefined.

For all those that say ‘We will never forget’, the truth is that some do. Life gets in the way and tragedies continue to mount. But what Cantor Fitzgerald has done is create a legacy that reminds Americans that out of loss, hope must survive—a lesson for us all.

The Cantor Fitzgerald Relief Fund was created in honor of the 658 Cantor and 61 Euro Brokers employees who lost their lives on 9/11. The non-profit supports victims’ families and international charities that by extension help victims of other global tragedies.

Cantor Fitzgerald Charity Day has become an annual event—a day when all global revenues are dedicated to the Relief Fund. Since it’s inception in 2004, Cantor Fitzgerald and it’s affiliate BGC Partners have distributed more than $280 million.

The Relief Fund has leveraged their global reach to identify the greatest needs in the poorest areas. They’ve partnered with charities working hard to understand medicine’s most complex mysteries—Alzheimer’s, Autism, and Cancer, to name a few. The Relief Fund has discovered charities with incredible outreach—embedded in communities that need support.

Celebrities also pitch in—their help means bigger donations and more attention for the cause. Actors including Jake Gyllenhaal, Margot Robbie and Michael J. Fox team-up with sports icons including Alex Rodriguez, Johnny Damon and Mark Messier to work the phones, network relationships and make a difference.

“We will never forget. 9/11 forever changed the skyline ofNew York City, but was a time when our city and most peoplefrom around the world came together as one,” notes Alfred Zaccagnino, the President of Samarian Group, an international private equity firm based in New York City and supporter of Charity Day 2015. “It’s awesome how the Relief Fund has transformed a tragedy into hope for our city and other cities around the world. And being a part of Charity Day—well, there’s nothing I’d rather do.”

Business in the Caymans: The Financial Sector’s Golden Child

The business benefits of domiciling a company offshore are well-documented. Data suggests the advantages overwhelm the deficiencies for qualifying businesses. Cayman’s Special Economic Zone (SEZ) and most notably, Cayman Enterprise City (CEC) are no exception─one must search far and wide to one-up the impact of these initiatives.

Cayman Enterprise City, encompassed in the SEZ, is designed to attract and keep organizations from five distinct business sectors: marketing and media, outsourcing, biotechnology, commodities and derivatives, and internet and technology. This innovative design─founded in distinct silos of knowledge─forms the foundation for the unique international hub the CEC has become. Looking at the SEZ in its entirety, Cayman tops the list as the #1 jurisdiction for hedge funds and private equity across the globe, and is the tenth largest financial center, with 40 of the world’s 50 most prestigious banks having a presence.

With 59 percent of CEC companies originating in North America─and a cumulative economic impact of nearly $50M USD on Cayman’s local economy─Cayman is the clear winner. Incenting top businesses and business executives by offering tax neutrality (while making it relatively red-tape free to set up shop) has boosted their local economy and fortified their international brand.

To the victor go the spoils. In this case, the victor is the Cayman government and its people─and the spoils are green and countable. But in this game, second is not a bad place to be. Companies domiciled in the SEZ are exempt from corporate tax, sales tax, income tax, capital gains tax, and import duties. Companies with 100 percent foreign ownership can access all tax exemptions. Work visas for employees can be acquired within five business days. And if intellectual property is at the core of your company’s assets, you’ve hit pay dirt.

“There is good reason private equity has found a home in the Cayman Islands. They have crossed every ‘t’ and dotted every ‘i’, anticipating and removing each potential hurdle,” states Alfred Zaccagnino, President of Samarian Group of Companies. “Watching the Cayman Islands develop as an international business center has been remarkable.” The Samarian Group established a presence in the Cayman Islands in 2011 and, like most companies, plans to stay long-term.

In October 2015, Cayman will be added to the list alongside 90 other countries in implementing a Common Reporting Standard─an effort to streamline the automatic exchange of information (AEOI) with other countries related to taxation. Implementation will begin in 2017─and true to its recent history, the Cayman Islands will undoubtedly use this to further its brand as a leader in international business.

Why Do Firms Choose Divestiture?

Alfred Zaccagnino leverages over a decade of entrepreneurial experience to lead the Samarian Group, Ltd., a boutique financial services company providing advisory and consultation on a variety of corporate transactions. As president, Alfred Zaccagnino oversees the organization’s partnerships with corporations, foundations, endowments, and other financial entities, assisting such institutional clients with activities including asset divestiture.

Divestiture is a method of asset management that can assist a company in reducing or refocusing its portfolio. Achieved through the exchange, closure, or sale of assets, as well as via bankruptcy, divestiture occurs when a company either partially reduces or completely shuts down a specific business unit.

A firm’s management may choose to divest a portion of its assets or operations for a variety of reasons. Companies often carry out divestitures to free up financial resources for other business areas or to increase their profitability in general. They may also divest business units that fall outside of their core competency, or to get rid of redundant operations following a merger or acquisition. In some instances, divestiture can be the result of a court order. Court-ordered divestitures are generally aimed at increasing market competition and preventing the development of monopolies, as was the case in the breakup of the Bell System in 1982.

Upward Trend in Mergers and Acquisitions

As founding partner and president of the Samarian Group, Ltd., Alfred Zaccagnino leads the boutique investment firm in delivering a variety of financial services aimed at helping clients grow and preserve their wealth. Backed by partnerships with agents, broker dealers, and other financial organizations, Alfred Zaccagnino and his fellow executives offer corporate consultation on matters such as mergers and acquisitions.

As noted by leading financial professionals from Wall Street to Hong Kong, 2015 is likely to be the strongest year for mergers and acquisitions (M&A) since 2007. Although the number of M&A transactions in the first half of 2015 is similar to the amount observed during the first six months of 2014, the sizes of these deals continue to increase. As large firms seek to spur revenue and market share growth, the sector has seen a 42 percent increase in transactions exceeding $5 billion.

This ongoing consolidation has resulted in a faster-paced environment for mergers and acquisitions, as prospective buyers must act quickly to take advantage of limited M&A opportunities. According to experts such as Centerview Partners co-founder Blair Effron, this is especially true of the rapidly consolidating pharmaceutical and telecommunications sector. This upward M&A trend has also increased the likelihood of firms intervening in the transactions of rival corporations, attempting to make the most compelling offer in M&A efforts that are often the result of years of research and analysis.