A Major League Baseball logo at Angel Stadium in Anaheim, California, on May 22, 2022.
Ronald Martinez | Getty Images
Major League Baseball is increasingly drawing private equity investors as the league faces major shifts in player salaries and media rights.
Private equity has been gravitating toward professional sports, which sports-acquisitive firm Arctos Partners called “remarkably resilient assets” during times of economic uncertainty in a research note this week. MLB in particular is poised to attract new stakeholders with big changes on the horizon.
A potential MLB lockout is looming if the league puts forth a salary cap proposal during collective bargaining negotiations in late 2026. MLB is also navigating a dramatically changing media landscape. The result could be major changes to league finances — and renewed interest from investors.
“There hasn’t been a massive private equity gold rush to invest in MLB,” said Neil Barlow, private equity partner at Clifford Chance with a focus on sports and entertainment. “MLB needs to get its house in order for the league to become even more competitive for investment. Institutional investors aren’t going to commit and risk their capital when all it means is it’s helping to fund an arms race of talent.”
MLB does not have a salary cap for its players — unlike the National Football League, National Basketball Association and National Hockey League — which has led to some of the biggest contracts in sports and major pay disparities. Team owners and the league’s front office are contemplating a new economic structure, CNBC previously reported. Meanwhile, the league is also recalibrating its media rights strategy as regional sports networks continue to suffer, and ahead of the expiration of national deals in 2028.
These factors present risk, but also a lot of opportunity, said Michelle McKenna, a senior advisor in Evercore’s strategic advisory practice, who has a focus on technology, entertainment and sports. In particular, the luxury taxes associated with teams overspending on players present the biggest risk, McKenna and Barlow both said.
McKenna called it a moment of “strategic transformation” for MLB, particularly when it comes to the decline of local media revenues and the changing distribution model. Private equity capital could “help smooth this transition period and offer strategic assistance,” McKenna said.
“Baseball remains a great asset with great sports content. They will figure this out and those that invest early will benefit,” McKenna said.
MLB has been open to private equity since 2019, becoming the first league to open its gates to these investors.
Per MLB bylaws, private equity firms can own up to 15% of individual teams, which can sell up to 30% of their equity to such investors, according to Sportico.
The rest of the major U.S. leagues have followed suit, allowing private equity to take minority stakes. Most recently, the NFL began allowing these investments, setting off a frenzy among institutional investors, as the league has some of the highest viewership and most lucrative national media rights deals.
Private equity’s capital and influence often goes toward expenses surrounding teams, such as stadium and hospitality improvements and digital enhancements. This frees up more room for payroll spending, too.
“It is also interesting to watch as baseball works to introduce new rules, products and in-stadium experiences to connect with a younger audience,” said McKenna, noting private equity’s expertise in a lot of those areas. “PE investment in sports isn’t your grandfather’s PE. These are longer-term partners with well-honed strategic advice in addition to capital.”
According to PitchBook, 18 of MLB’s 30 teams have some connection to private equity, including 10 teams that have received direct investment from firms.
Last month, Sixth Street Partners bought a stake in the San Francisco Giants, the firm’s first investment in MLB. Arctos has built up a portfolio of five direct stakes in teams.
In a release, Sixth Street said its “significant investment” in the Giants would support the franchise “in its pursuit to be champions on and off the field.”
