Billionaires Are Paying Record Premiums for Sports Franchises. Here's Why

Mark Walter paid $10 billion for the Los Angeles Lakers last year — a record price for a sports franchise. Steve Ballmer has poured more than $4 billion into the Clippers and their new arena. Bill Chisholm, a private equity founder few outside finance had heard of, became a household name the moment he closed his $6.1 billion purchase of the Boston Celtics.

The rich have always wanted to own a team. Lately, they have been lining up to do it. Rob Walton, the Walmart heir, sits courtside at Denver Broncos games and holds a piece of the Arizona Diamondbacks. Arthur Blank went from cofounding Home Depot to owning the Atlanta Falcons and Atlanta United. Bernard Arnault, the head of LVMH, bought Paris FC and became the world's richest sports owner in the process.

So why are billionaires paying these sums? The answer, according to David Silverman, a partner in Cooley's mergers and acquisitions group who worked on the Celtics sale, starts with access.

"It is being part of a very elite and exclusive club of owners that control those franchises," Silverman told Fortune. "There are unique business opportunities that come from both being part of that club and being notable in that way."

The network is the asset

The appeal begins with who you get to know once you're in. "There are a lot of guys that have very successful private equity firms, but Bill Chisholm is now known not just for being the founder of Symphony, but the controlling owner of the Celtics," Silverman said. "And I'm sure that there are business opportunities that will come to him, sort of in the Garden, or from knowing about that in a way that would not have been relevant in another context."

The underlying economics help. Long-term national media rights deals have made team revenue far steadier. A team can stay profitable "regardless of the number of people that shows up" on a given night, Silverman said.

Consumers are also spending more on in-person experiences generally, and sports captures that spending better than most entertainment options. "You look at the entertainment dollar spend and the desire for in-real-life activities," Silverman said, "and sports checks those boxes."

The result: franchise values have compounded at a pace few other asset classes can match over the long run.

The tax code sweetens the deal

Even at record valuations, owners still enjoy a significant tax advantage. By amortizing key assets like media rights and treating other assets — contracts and the stadium — as depreciable, owners can lower their tax bill.

Scarcity then compounds everything. When a marquee franchise actually comes up for sale, competitive dynamics take over. "If they went and did a discounted cash flow analysis, they might not come to the number anywhere close. But they know it's a competitive dynamic: if you don't get it now, you may never get it at all." That is what pushes prices past what the underlying business alone would justify.

Silverman said that logic shaped the Celtics deal, then the largest in NBA history. Part of the purchase price was funded by letting some existing owners roll their equity forward into a staged exit, rather than requiring Chisholm to finance the entire deal in cash upfront.

Private equity finds a way in

The same mechanics are now playing out across all sports, Silverman said. Apollo Global Management is reportedly circling a roughly $3 billion investment tied to the Steinbrenner family's holding company, which controls the New York Yankees along with minority stakes in AC Milan, New York City FC, and Legends Hospitality. Major League Baseball's ownership caps limit how much control a private equity firm can take in a team directly, so Apollo's structure is expected to combine debt and equity in the parent company rather than a stake in the Yankees themselves.

That structure gives a legacy family like the Steinbrenners a path to generational liquidity without giving up control, while giving Apollo the exposure it wants. "Apollo has a long-term view about where their capital can be most useful in long-dated opportunities where there isn't necessarily a path to liquidity in the near term, but a real chance for capital appreciation in the long term," Silverman said.

The logic now extends to soccer. The World Cup gave private backers of U.S. soccer a visible return on years of investment. Silverman pointed to Arthur Blank's underwriting of U.S. Soccer's new Atlanta headquarters as a case where philanthropy and business logic are hard to separate. "He knows, as an investor in the Falcons and the MLS team in Atlanta, that there's an opportunity to grow U.S. soccer in a way that becomes more marketable, becomes more in the public image to draw more fans, to increase franchise value," Silverman said.

That is the same kind of thinking, he explained, that billionaire Ken Griffin likely applied when he worked to get Mauricio Pochettino to coach the U.S. men's national team. "It always has some degree of altruism. I do think that there's a large part of it for genuine interest and support in the project. That kind of philanthropy is interrelated with his business interests and long-term support of the sport, which is quite frankly amazing," Silverman said.

Griffin's push for Pochettino may have lifted the USMNT to a higher status than before. "The World Cup? Super exciting. Amazing to see the turnout at games—you know how culturally relevant it is," Silverman said. "Everyone's following the U.S. team, and I thought they did great. It was awesome to see them get to the round of 16."

Emotion drives the bidding

At the end of the day, sports can be emotional — and that may be the biggest driver for some buyers in the first place.

"If you love basketball and you want to be involved in this opportunity, that puts bidders in a position that they're not just bidding on a multiple," Silverman said.

With scarcity built into the market — only 30 NBA teams, 32 NFL teams — and private equity capital now structuring its way in through parent-company deals like Apollo's reported Yankees play, the pressure on franchise valuations looks set to persist regardless of what any cash flow model says.