One of One Opportunity - Silver Lake Takes Endeavor Private

Today's article walks through the Endeavor take-private deal, and I share some thoughts on why I think this is an one of one sports private equity deal that will shape the future of sports investing.

Silver Lake acquired Endeavor, the parent company of WWE and UFC, at a valuation of $25 billion in March 2024, the largest take-private deal in the media industry. Silver Lake will own 100% of the company after being its biggest investor since 2012. They now have one of the strongest sports asset rosters across the private equity world, including complete ownership in WWE, UFC, Diamond Baseball Holdings, IMG, and partial ownership in City Football Group, Madison Square Garden Sports, Australian Professional Leagues, and Professional Bull Riders, which make up around 15% of their entire 102 billion AUM.

Sports has been the hottest asset class recently, and only a few private equities, such as Arctos and RedBird, have tapped into this niche space. Silver Lake is not just one of the few that have welcomed sports to the private equity world; they’ve been ahead of the curve, having recognized the potential as early as 2012. That year, they deployed over $200M in Endeavor through the 2007 SLP III LP Fund, the same fund that invested in Alibaba, Dell, GoDaddy, and many other big names in the TMT space. Altogether, these investments have helped the fund harvest an impressive 18.8% IRR despite going through the financial crisis and holding onto most of the dry powder for 5 years. Silver Lake later followed up with an investment in IMG in 2014, a reinforcing message about their investment thesis in industry-leading firms specializing in global sports rights, talent representation, and sports media production. These media-centric sports investments have paid off as the sports industry underwent a period of global expansion, fierce bidding for broadcasting rights, and diversified distribution channels. As WWE closes a $5B/10-year media deal with Netflix in January 2024, 2.5X of what they signed just 3 years ago, Silver Lake could not wait to agree to a buy-out deal before the UFC renegotiates their next mega-contract, which is very likely to increase Endeavor's valuation once more. Therefore, Silver Lake agreed to pay a 55% premium at a TEV of $25B to take Endeavor private just after a few months of negotiation.

What's really unique about Silver Lake's strategy is that they are buying controlling stakes in leagues. This is important for several reasons. 

First, many private equity firms have invested in high-profile teams across all sports, such as the Yankees, Warriors, and Chelsea, but they are fundamentally passive stakes. All major leagues now forbid private equity to own a controlling stake in a team, fearing that these institutions will turn teams into pure investment assets and consider the financials over team performance, which will inevitably hurt the quality of the game. Therefore, these private equities rely on the team president and general manager to make and spend money, although, in my opinion, these institutions will affect the decision-making one way or the other.

Silver Lake, on the other hand, is in a position to be envied. They are going to appoint new management teams and aim for exponential value creation through active deal negotiation, cost cuts, and utilizing their existing portfolio company relationships to further drive success. They don't need to make many tough decisions - they are going to make changes if, and only if, that means more cash. For us, this unfortunately means that their sports content, especially UFC, is very likely to be extremely expensive and exclusive. PFL and AEW may pick up more market share overall, but as UFC takes on the premium market that F1 left behind, they will be more profitable than ever. 

Second, Silver Lake owns two leagues. They do not comply with anyone but themselves - they own the rulebook, the event calendar, the broadcast rights, the IP, and the entire revenue stack from ticket sales to sponsorships to media to merchandise. It's a structurally different investment model: one that enables active value creation through direct control and quick decision-making. The other major sports investments are all in teams. Besides the non-controlling stake aspect, their main revenue stream comes from a cut from the league's media deal, and they have zero control over what the league gets. 

Leagues are also slow in action. For example, conversations about new teams, international expansion, and many other emerging opportunities have been around for years, but the risk-averse nature of the traditional leagues stretches out the timeline for those inevitable moves, losing the team a lot of money. Meanwhile, UFC is set to host a blockbuster event in, you guessed it, $audi Arabia, who pays UFC an extra $20M for a single event this year and $40M for the second event next year.

Dana White (CEO of UFC), Vince McMahon (former CEO of WWE), Ari Emanuel (CEO of Endeavor), Mark Shapiro (President of Endeavor) at the inauguration of the first ever UFC event in Saudi Arabia

Silver Lake isn't just ahead of the curve—they've captured a true one-of-one opportunity. What began as a media investment has led to the rarest prize in private equity: complete ownership of not one, but two globally dominant, not teams, but leagues. Opportunities like this do not exist anymore—there simply isn't another WWE or UFC waiting around the corner for sale. Now, firmly in control, Silver Lake is uniquely positioned to carry out its vision. There are only two questions remaining: 1. How will private equity impact the quality of the game? 2. What could an exit look like in ten years? One thing is certain: This will set the path, and we are all here for the ride.