Part III. Exit Scenarios and Liquidity Considerations

An exit strategy is a key element in assessing any investment, and sports franchise ownership should be no exception. In the first two articles in this series, we looked at the key revenue drivers and then took a deep dive on the financial considerations of those drivers.

In this final article in the series, we examine an investment’s liquidity.

While sports franchises have traditionally been viewed as long-term investments, investors should still consider how and when they might eventually exit their position. Liquidity in this space is inherently limited, although that has begun to change and varies by league. These assets are generally illiquid by nature, with extended hold periods and a narrow pool of potential buyers. Most transactions occur privately and opportunistically, influenced by timing, league dynamics, and broader market conditions.

Identifying the likely buyer universe is an important part of the diligence process. High-net-worth individuals, family offices, institutional investors, and private equity-backed roll-up platforms all have entered the space in recent years. In some cases, strategic buyers have been less focused on cash flow and more interested in branding opportunities, real estate development, or international media exposure. These varied motivations can shape both pricing and deal structure at exit. Certain foreign investors are more attracted to leagues and franchises that are relevant in their markets. As an example, baseball media rights are less relevant in many international markets than soccer, basketball, and American football.

Secondary transactions may provide a path to partial or full liquidity, but are governed by league rules and approvals. Most leagues maintain significant control over who can acquire an equity interest, often imposing right-of-first-refusal provisions or requiring consent from the league or other owners. Opportunistic investors may find value in acquiring stakes from minority owners seeking liquidity, because they often come at a relative discount — something to consider should you be such an owner.

Distressed minority owners — whether facing estate planning pressures, partnership disputes, or personal financial needs — sometimes sell at meaningful discounts to intrinsic value. These secondary transactions can provide entry points at a discount to primary transaction valuations, particularly when the seller lacks negotiating leverage, lacks voting rights, or when league transfer rules create narrow limitations on who may meet investor qualifications. Minority owners may have to disclose encumbrances, existing shareholder agreements, and potential litigation that might affect the investment.

While the sports franchise space presents meaningful long-term upside, investors should enter with a clear understanding of the exit environment. Careful diligence on league transfer rules, prospective buyer demand, and the practical limitations on liquidity is essential to crafting a realistic investment thesis.

League Transfer Rules

Well-organized leagues have differing requirements for franchise equity transfers. Beyond basic accreditation requirements, leagues will often require purchasers to be Qualified Purchasers (QP’s) and ensure that purchasers do not have any Rule 506 “bad actor” disqualifications. While many families/investors are investing through trusts and other estate planning tools, leagues often require that trustees, all beneficiaries, and any special trustees are also QP’s. As such, any transfer requires thorough league approval, investment in legal to address any league concerns, and, on occasion, substantial time to complete the transfer.

Team Transfer Restrictions

In addition to league limitations on transfers, it is not uncommon for franchises to include right of first refusal rights and other buy-back rights with regard to the sale of any equity. Any team restrictions on the sale of equity also add friction to an already laborious process, as the ROFR and buy-back rights often include extended notification periods (such as 60 – 120 days’ notice) for first the franchise and then for the major investors to assess whether they intend to exercise or waive such rights. For minority investors, in addition to internal transfer restrictions, additional information may be needed from the team for estate planning transactions to provide to any third-party buyers (such as basic financials) or for valuation purposes. These additional information requests can often extend the timeline further.

Player Rights

While a long-standing concept in soccer leagues worldwide, U.S. investors are becoming more aware of how franchise ownership of player transfer rights impacts franchise valuation. Particularly with the MLS, franchises are standing up academies (and, in fact, are required to have youth development programs) to develop “homegrown players.” In addition, some franchises have seen positive liquidity from the sale of transfer rights tied to players who have not been homegrown talent. As the MLS continues to ascend in quality, the expectation is that franchise valuations will benefit from the development of talent that can be sold globally. Heretofore, player transfer rights remain a potential area of growth, but certainly they have not reached full maturity.

Benefits

After thorough diligence and preparing for an investment in a sports franchise, often the last query of importance is: What are the benefits of the investment? Do investors have first right to purchase tickets and parking passes? Do investors benefit from discounts at the team store? Do investors have the right to attend critical league events or acquire suites for such events? The benefits offered by teams to investors differ quite substantially franchise-to-franchise, but they should not be overlooked. For many minority investors, part of the genesis of the investment is the joy that comes along with being part of a team. As such, many investors also hope and expect that they will actually be treated like owners.

Conclusion

For investors who are passionate sports fans, it is now easier than ever to invest in their favorite teams. While this does not necessarily guarantee a sound investment, those who follow the framework outlined in this three-part series will be equipped with a solid understanding of how to evaluate risks and opportunities.

Taft partner Rob McDonald co-authored this article with Zahki Davis, former Taft associate and now Vice President of Legal, Harbinger Sports Partners, with assistance from Taft attorneys Kiley Bizzle-Brown, Blake Hale, and Chase Morris.