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Does the UFC's Sale Have a Sports Business Parallel?

Fightland Blog

By Phil Terrigno

Photo by Chris Goodney/Bloomberg via Getty Images

During the summer of 2015, a Chinese conglomerate purchased the Ironman triathlon series from Providence Equity Partners LLC for roughly $650 million.

The Ironman races, which grew under Providence and saw further expansion after the deal, developed from a strong brand into an owner and operator of competitive races around the world.

That deal is the most recent parallel in the sports business landscape to the sale of the UFC, which was finalized for a reported $4 billion Monday after being hotly discussed in recent months.  

ESPN reported that the deal is the most expensive transaction for an organization in sports history.

“Leagues typically formed around teams,” Robert Boland, Executive-in-Residence of Ohio University’s Department of Sports Administration, said. “It’s only in the very modern context where an entire kind of administrative unit or governing unit in sports has been deemed to be a piece of property that could be transacted.”

The UFC, which functions as part sports league for mixed martial arts and part promotions and events company for its own fights, notified its fighters of the sale via email Monday.  

The email, which did not disclose a dollar amount, explained that talent giant WMG-IMG bought the UFC along with Silver Lake Partners, KKR, MSD Capital, L.P. and MSD Partners, L.P. as strategic investors.”

“Ironman is certainly the best known circuit of triathlons,” Boland said. “But it’s not the only. It has the best intellectual property. The UFC has the best intellectual property (among fight organizers). It has very reputable distribution, it has some stars.”

The significant difference between the UFC’s sale and the Ironman deal is the amount of money involved.

By comparison, the Los Angeles Clippers—one of 30 NBA franchises—sold for $2 billion in 2014 to ex-Microsoft CEO Steve Ballmer.

“I can’t think of anything this big changing hands like that (in sports),” Director of Marist College’s Center for Sports Communication Keith Strudler said. “It’s almost like you’d see in the corporate world where an investment group comes over and buys out the entire organization. If nothing else, it certainly reinforces the idea that these things are truly businesses.”

A similar deal nearly took place in early 2005 when Bain Capital and a sports consultancy group made a pitch to buy the struggling league.

At that time, the NHL was in the midst of a season-long lockout before a $3.5 billion offer was made to purchase all 30 teams.

“By buying out all 30 teams and combining them into a modified single entity, they argued, they could streamline operations, boost TV revenue, and negotiate down player salaries from a position of absolute strength,” a 2012 Bloomberg article detailing the attempted purchase said.

Photo by Mike Stobe/Zuffa LLC

On a smaller scale in 1999, former NBA star Isiah Thomas purchased the Continental Basketball Association for $10 million.

In early 2016, Activision Blizzard acquired the assets of Major League Gaming, an E-Sports organizer, for roughly $46 million.

“It’s hard to sell a league like that when you have a bunch of different team owners,” Strudler said. “It’s rare that you see the entire organization own everything, athletes on down.”

In an interview with The Los Angeles Times last week, UFC President Dana White and owner Lorenzo Fertitta spoke about the rumored sale.

“What’s happening—this is standard,” Fertitta told the L.A. Times. “Any company, this size and magnitude, you don’t talk about things you’re working on in strategical terms. So, there’s nothing to report.”

During that July 5 interview, White relayed an anecdote from a recent trip to Bangor, Maine, to the L.A. Times, saying “‘[P]eople are yelling at me, ‘Congratulations.’ I’m looking at my family, saying, ‘Most of the free world thinks me and the Fertittas don’t own the UFC anymore.’ It’s unbelievable. We own the UFC. We did not sell the UFC. We own it.”

Among the groups rumored in recent months to be involved in a potential sale was China’s Dalian Wanda group—which also purchased the Ironman series—signaling a possible desire to expand the sport’s presence in China.

“You can’t go 24 hours without seeing a Chinese company investing in some sports property,” Joe Favorito, a professor in Columbia University’s graduate sports management program, said. “Everyday something happens. Whether it’s a soccer team in Italy, or an E-Sports company. You’re going to continue to see it and you’re probably going to see it at some point in the United States depending on how the tax laws work out.”

A constant through the media reports chronicling the then-potential sale was that White would remain the face of the UFC and involved in daily operations.

White told the Dan Patrick Show in May that “the day we decide to sell, I probably don’t want to do this anymore,” but Monday’s email to UFC fighters said that White will continue in his role and will retain a minority ownership interest.

“If you google the UFC, the first name that comes up is Dana White,” Favorito said. “He’s been the face of the organization since the Fertittas came in, probably a little bit before. I think they’ve done a great job of building the storylines of some of the athletes over time. Randy Couture comes and goes. Even to some extent Ronda Rousey will come and go. George St. Pierre comes and goes. The one consistent face of the UFC over the years has been Dana White.”

The UFC was purchased by Frank and Lorenzo Fertitta, operating as Zuffa LLC, for $2 million in 2001. The UFC’s email to its fighters said that upon the closing of the deal, Lorenzo Fertitta will be stepping down as chairman and CEO. But, it also said that Frank and Lorenzo will retain a minority ownership interest.

“We haven’t had the catastrophic moment for UFC,” Strudler said. “Where someone dies on national TV and everyone’s watching. We haven’t had the deep investigation of why this person gets promoted. From the ownership perspective, it’s a great time to cash out. They’ve built something from nothing. There is potentially more downside than upside.” 

@philterrigno

 

Check out this related story:

The UFC with Chinese Characteristics

 

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