Forbes - A sports sale unlike any other

Kevin Dowd and Becca Szkutak

Staff Writers

Professional sports teams have emerged as a true asset class in recent years, with investors pumping billions of dollars into the space on the belief that an extended track record of surging valuations will continue in the years to come.

Now, one of the most valuable soccer clubs in the world is on the block. But we’ve never seen a deal quite like this one.

Roman Abramovich’s days at Chelsea may be numbered. UEFA via Getty Images

Russian billionaire Roman Abramovich is putting Chelsea FC up for sale, with plans to donate the net proceeds from his prized possession to a new charity to benefit victims of Russia’s war in Ukraine. As my colleague Anna Kaplan notes, the move comes “amid political pressure for the British government to sanction Russian billionaires.” A sale would certainly seem like an effort by Abramovich to preempt such sanctions. Sky News reported that Abramovich is seeking at least £3 billion ($4 billion) for the club, and that he has already rejected one £2.5 billion bid. The Raine Group is said to be running the sale process.

It's rare that a team of Chelsea’s pedigree hits the market. The club is worth $3.2 billion, according to the latest Forbes calculations, ranking seventh among all soccer clubs and tied for 25th among all pro sports teams in the world. None of those other top 25 teams has changed hands since 2012, when the Los Angeles Dodgers sold for $2 billion. Today, they’re worth $3.57 billion.

Those numbers reflect part of the reason why these kinds of deals are so rare. Franchise valuations are rising rapidly, and investors are always loath to part with a gold mine—particularly one that also comes with all the other perks of sports ownership. Chelsea’s valuation has risen 93% in the past five years, per Forbes, and it’s up about 1,275% since Abramovich purchased the club for £140 million in 2003.

Another major team could be on the move soon, though: A sale process for the Denver Broncos—tied with Chelsea for 25th on the Forbes list with a $3.2 billion valuation of their own—is currently underway, with reports indicating the eventual price could top $4 billion.

Abramovich has a net worth of $12.3 billion, according to Forbes, placing him among the world’s 150 wealthiest people. He capitalized on the post-Soviet chaos in the Russian economy to build a fortune in the oil and aluminum industries, joining a generation of businessmen who rose to prominence in that era thanks in part to their close collaboration with the Kremlin.

His acquisition of Chelsea nearly two decades ago helped usher in a new era. Like the rest of professional sports, European soccer used to be a largely local affair. But when Abramovich arrived and promptly began spending hundreds of millions in pursuit of trophies and acclaim, he sparked a number of imitators. Dubai’s royal family swooped in and transformed Manchester City into a global power. The Qatari government built a roster of staggering talent at Paris Saint-Germain. Last year, the Public Investment Fund of Saudi Arabia backed a takeover of Newcastle United. These days, the politics of soccer are a lot more complicated.

Abramovich has set a mid-March deadline for initial bids, per Sky. It’s possible that an accelerated timeline and the controversy surrounding Abramovich may drive down the price. But there also might be so much demand that the circumstances of Chelsea’s sale don’t matter. The Guardian reports that billionaires Hansjorg Wyss and Todd Boehly are feeling “increasingly confident” about a potential joint bid.

If Abramovich does part ways with Chelsea, he’ll be leaving on a high note. The Blues won the UEFA Champions League last year, and three weeks ago, they brought home the Club World Cup for the first time. After the win, Chelsea manager Thomas Tuchel recounted his post-match conversation with Abramovich: “I said, ‘It is for you—your input and passion made it possible.’ The trophy is for him.” —K.D.

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Operator-led M13 raises $400 million

In today’s venture market, entrepreneurs want investors who have founded or worked at startups themselves and can offer best practices and cautionary tales from their experiences over investors who have only crunched numbers on Wall Street.

That has prompted some traditional venture firms to build operator teams. It led M13 to build its entire team around the former hands-on professionals, opting not to bring on anyone with previous venture experience until their most recent hire. When siblings Courtney and Carter Reum—the latter of whom is married to Paris Hilton, I have now learned—launched the Santa Monica-based firm in 2016, they had just sold their independent liquor startup, VEEV Spirits, and could already see that operator experience was at a premium.

“Whereas most people are trying to retrofit traditional venture models and build operator platforms on the edges, this is the core of our model,” Carter Reum tells Forbes. “We wanted a firm led by operators, built by operators. We wanted to build a different VC firm."

The firm just announced $400 million for its latest fund. Get all the details here. —B.S.

KKR’s Italian adventures

Italy’s biggest telecom company is tangled up in red ink.

KKR offered to buy Telecom Italia last November for €10.8 billion ($11.9 billion) and spin off its landline unit as a separate business, sparking something of a reckoning at TIM. Reports emerged this week that the company was pushing KKR to abandon its bid and that it would instead present its own new strategic plan.

The skies aren’t looking so blue these days at Telecom Italia. AFP via Getty Images

But when TIM revealed that plan, it looked an awful lot like what KKR had already proposed, and the company also reported a record €8.7 billion loss for 2021. Add it all up, and TIM’s shares plunged 14% in Milan on Thursday, taking the company’s market cap to less than €6.3 billion, its lowest point in over a year. Suddenly, KKR’s offer might not look so bad.

The Italian government is reportedly pushing TIM to collaborate with rival fiber-optic broadband company Open Fiber on efforts to make much-needed updates to Italy’s national fiber network. No matter what happens, KKR will have some role to play: The firm already owns 37.5% of TIM’s secondary network, which connects homes to street cabinets, and KKR could still “strengthen its grip” on the company’s landline network under TIM’s new proposal. —K.D.

Homebrew takes a homegrown approach

As venture firms rush to raise larger funds, each quicker than the last, San Francisco-based Homebrew has decided on a different approach with its latest fund. Instead of a traditional closed-end, limited partner-backed fund, as the firm has done for its first three, its fourth fund will be a $400 million evergreen vehicle that consists of capital exclusively—at least for now—from firm founders Hunter Walk and Satya Patel, they announced in a blog post.

Patel and Walk said they had realized they no longer wanted to have to think constantly about the firm’s 10-year fund lifecycle while helping startups build for different stages of their future. “You’re simultaneously helping startups solve the challenges of that day, that week, that quarter, while also being asked to make decisions about your own investment strategy that will play out over a fund’s lifecycle of 10+ years,” they wrote. They think the evergreen fund will allow them more time and energy to focus on working with founders and companies.

Venture conglomerate Sequoia also ditched the standard 10-year fund structure in October when it announced an evergreen approach. Unlike Homebrew’s, though, it will still take outside capital; it made the switch largely to let it hold its public investments longer.

Who’s next? —B.S.

They Said It

“It’s a reminder that if you do business in countries without a rule of law, you could lose everything.”

—Bill Browder, a hedge fund manager who has a long history as a critic of Vladimir Putin, speaking to Institutional Investor about the financial impact of sanctions on Russia

Just The Facts

— A Taiwanese startup that uses augmented reality to let customers try on makeup without actually trying on makeup is going public at a $1 billion valuation. The company, called Perfect Corp., revealed a SPAC deal that includes a $50 million PIPE investment from backers including Chanel and Snap. Our colleague Zinnia Lee has more on the move.

— Serena Ventures, founded by tennis star Serena Williams, raised $111 million for its debut fund, following nine years of angel investing that had resulted in a portfolio of 60 investments and 13 unicorn companies. The firm invests in underrepresented founders.

— Accel-KKR closed its fourth flagship growth fund with $1.35 billion in commitments, nearly twice the size of a $685 million predecessor from 2019. The new vehicle includes $100 million from the firm’s employees. In addition to its growth fund, Accel-KKR also lined up a growth deal, taking a stake in Masabi, which develops ticketing and fare technology for public transit.

— GTCR agreed to acquire Experity, a Chicago-based developer of software for the urgent care industry, from Warburg Pincus. No price was announced for the secondary buyout, but previous reports had indicated the two sides were discussing a deal worth between $1.2 and $1.3 billion. Warburg Pincus has owned Experity since 2016.

— Epic Games, the studio behind the wildly popular online video game Fortnite, has acquired online music publishing platform Bandcamp. Many investors are pegging this deal as a way to bring more music to the metaverse. Bandcamp had previously raised $4.7 million from True Ventures and multiple angel investors.

— It required lopping $1.4 billion off the price tag, but 51job once again has an acquisition agreement lined up. The Chinese operator of an HR and recruiting platform agreed to sell itself to a group including DCP Capital Partners, Ocean Link Partners and 51job CEO Rick Yan for $4.3 billion, down from $5.7 billion when the take-private buyout was first announced last June. The deal was delayed and then downsized amid recent regulatory changes in China.

— Swiss private equity giant Partners Group will pay €1 billion ($1.1 billion) to buy software company Forterro from Battery Ventures, which has backed the company for a decade. Based in London, Forterro makes resource-planning tools for small and mid-sized manufacturing companies, with more than 10,000 clients across Europe.

— A little more than a month after calling off a planned SPAC merger, Chicago’s Kin Insurance raised $82 million in Series D funding led by QED Investors, with plans for the round eventually to total $100 million. Kin had said in July that it planned to merge with a blank-check company at a roughly $1 billion valuation. The company cited current market additions when it canceled the deal.

— XRHealth raised $10 million on Monday for its virtual-reality therapies including cognitive behavioral therapy, stress management and others. The latest round included backing from AARP, Bridges Israel and HTC Vive.

Charted

The Canadian startup ecosystem saw record funding and exit volume last year. More than C$14.2 billion ($11.2 billion) was invested into Canadian companies, according to data released this week from the Canadian Venture Capital and Private Equity Association (CVCA)—more than double the C$6.2 billion record set in 2019. And exit volume also set a new record, with 73 exits in 2021 compared with 38 in 2020.

There are now 18 unicorn companies in Canada, including blockchain startup Dapper Labs (valued at $7.6 billion), cybersecurity company 1Password (valued at $6.8 billion) and travel platform Hopper (valued at $5 billion).

What We're Reading

Pulling oil and gas out of the ground made Harold Hamm a billionaire. Now, the 76-year-old is embracing a surprising second act. (Forbes)

The non-alcoholic spirits industry is growing, and so is its drama. (Wired)

The effects of the war in Ukraine are reaching private equity, where a potential European pharmacy mega-deal has been thrown off course. (Financial Times)

Another day, another $1 billion debut crypto fund coming out of stealth. Electric Capital is the latest to emerge, and it has plans to invest in equity rounds and tokens. (Forbes)

While it recently raised $75 million at a $400 million valuation, the WNBA is not your typical startup. In fact, it’s the sort of place where chartering a plane was nearly cause for excommunication. (Sports Illustrated)

Biotech entrepreneurs trying to raise funds are tired of biotech venture firms asking for majority stakes and management changes. So they’re turning to tech investors instead. (Insider)

Talking to your boss can be nerve-wracking. Does it make things better or worse if they’re a hologram? (Bloomberg)

Video conference startup Fuze wasn’t doing so hot in 2021, but CEO Brian Day kept assuring employees it was nearing profitability—until it was sold at a fraction of its last valuation, rendering their stock options worthless. (The Information)

What To Watch For

When will the U.S. IPO market heat back up? A shaky stock market has caused listings to just about evaporate over the past few weeks. A mere eight companies went public during February, and only one of them raised more than $100 million in its debut, according to data from Renaissance Capital—a sharp departure from last year, which set new annual records for IPO volume. Zero listings have gone off this week. The IPO window is always a bit of an amorphous idea. But right now, it is firmly closed.

Kevin Dowd

Staff Writer

I am a staff writer at Forbes. I previously wrote for PitchBook, where I created The Weekend Pitch, a weekly newsletter about the private markets. Before that, I covered high school sports in the Pacific Northwest, and I graduated from the University of Washington with a degree in journalism and creative writing. I live in Seattle, where I read a lot of books and play a lot of golf.

Follow me on Twitter.

Becca Szkutak

Staff Writer

I'm a New York-based reporter covering venture capital, startups and investors. I was previously a reporter at the Venture Capital Journal and Private Debt Investor. I graduated from Emerson College in 2017 with a degree in journalism.

Follow me on Twitter at @rebecca_szkutak or send me an email at rszkutak@forbes.com.

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