Finance Uncategorized

Atlanta Hawks sale may prove to be a bargain for new owners

The team’s poor performance on the court is the primary reason for its modest fan base and overall poor financial performance.

(Jason Getz-USA TODAY Sports)
(Jason Getz-USA TODAY Sports)

Following controversial statements made by its owner, the NBA’s Atlanta Hawks are now for sale. Ultimately, the franchise may prove to be a bargain for the new owners.

The Hawks’ poor performance on the court is the primary reason for the team’s modest fan base and, by extension, its overall poor financial performance. The team hasn’t made it to the conference finals since 1970, and has yet to reach the NBA finals. Although the Hawks have made the playoffs, often with a record hovering around .500, they are routinely bounced in the first round.

Yet the cost to attend a Hawks game is the eighth-most expensive in the league. They are not a good value for consumers, and in today’s economy value matters. They have no superstars. Sports, like it or not, are part of the entertainment business, and to be successful a team needs wins and/or superstars. The Hawks haven’t had a superstar since Dominique Wilkins 20 years ago.

The Hawks’ local cable deal is abysmal, which means less money to potentially invest in quality players. The Hawks’ digital site is pedestrian, which means younger fans will be less likely to be interested in the team.

Overall, the team doesn’t seem to have a strategy to win a championship.  Fans want a team that they believe is striving for championships. The above accounts for the Hawks being below average in value growth and revenue growth of all NBA teams since 2004, when the current ownership group assumed control.

The good news is that the above issues are correctible. But it will require a comprehensive new strategy by ownership. Further good news is that relative demographics work in the team’s favor. Atlanta is the 10th-largest market in the NBA. Despite this, the Hawks are ranked as the 27th-most valuable franchise. The Atlanta-area population continues to grow, which means more potential fans. Moreover, the team has no competition in its designated market area. These are big pluses for a city that values basketball highly.

Forbes valued the Hawks at $425 million in January 2014. The recent sale of the Clippers at $2 billion should nudge the price higher than that estimate, and a general uptick in the price of sport franchises should drive the price of the Hawks up as well. Further increasing the value of the team is the opportunity for a much better local cable deal, and a doubling of revenues is expected for the national broadcast rights from ESPN/ABC/TNT, which gets spread among all the teams.

The Hawks should sell for in excess of the $550 million the Milwaukee Bucks sold for in May 2014 , but well below the Clippers sale price/Forbes multiplier, which would be a highly unlikely price of $1.48 billion. Purchased correctly, and with the right strategy, experienced advisors and management, there is plenty of room to create value with the Hawks.

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Brian Mulligan is currently the CEO of Brooknol Advisors, a Media, Entertainment and Sports Advisory Company. Mr. Mulligan has held CEO, Chairman, COO or CFO position of virtually every media/entertainment vertical for majors over a 30 year career, from Co-Chairman of Universal Pictures, CEO of Universal Television, Chairman of FOX Broadcasting and Cable, EVP/CFO of a Fortune 50 Company, SVP of MCA INC, EVP of Strategic Planning and Corporate Development Universal, Senior Executive Advisor Boston Consulting, Vice Chairman of Media/Telecom of a Money Center Bank, and worked extensively in/with private equity. Instrumental in over $175 billion of media and entertainment transactions.

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