Bain Capital Makes a Bid for All 30 NHL Teams—
Serious Offer or an Example of Guerrilla Marketing?
Student Query: “Is this a stunt or do you think it was a serious offer? Is Bain Capital just flexing its muscles? In my opinion, there's no way in h--l the NHL can be bought for that cheap, especially since it takes a 30 team pro vote,” Nick Gravel, http://www.neopreneur.ca.
My Answer: “I think this was a form of Guerrilla Marketing for Bain Capital. They are a reputable Wall Street firm but they must have known that this would not go anywhere. From time to time, these kinds of offers circulate—there was a similar one for the CFL about ten years ago.
They never go anywhere because there is a concern (rightly, I believe) about competitiveness. I mean if one firm owned all 30 NHL teams as Bain suggested and operated each NHL team as a company owned franchise, then it would be mighty tempting to pre-select the Stanley Cup winner every year for heightened dramatic or commercial effect much as, say, the WWE does with wrestling matches. They pre-determine the winner for maximum drama and ratings. It would be relatively easy to do if, for example, one team decided to trade all its top stars to another just before the playoffs and then somehow got them all back at the start of the next season...
Also, buying the teams without the buildings would be incredibly stupid and those men and women at Bain Capital are REALLY smart people so I am pretty sure this was just a stunt. They got mainstream media coverage—huge television, radio, newspaper and Internet exposure and buzz. It was all free ('earned media', comprehendo?)
There is also something quite different and special about an Owner’s relationship with his or her home town and his or her players as well as the players’ relationship with their city. Usually, the Owner of a major leaguer sports franchise has close ties to the community and this develops a special bond. I have always felt that Owners hold their franchises in trust for their cities—they don’t really ‘own’ them and should never move them. I think if these teams were owned by a distant corporate conglomerate run by, say, Wall Street bankers, the bond between fan and team would suffer and, ultimately, the sport would diminish—both as a commercial enterprise and as a sport. It would become a fad, a spectacle and eventually disappear or become irrelevant or both. It would be a big mistake to replace these relationships with a corporate octopus.
The key to running any franchise is simple—sell your season tickets and everything else (sponsorship, signage, suite sales, merchandise, television ratings) follows. Did you ever see those National League Football ads that ran on TV that showed great slow motion action of touchdowns being scored? Then after the run or pass, the player celebrates in the end zone but then he looks up and the stands are empty. It’s quiet. The NFL could, in fact, play in front of empty houses because they get enough TV revenues to pay all their bills and still make a profit. But the game would suffer terribly—which company would want to rent a corporate suite and then to go sit in an empty stadium? No one. It’s embarrassing. So selling tickets to the public is hugely important to these franchises and is really the bedrock that creates value for all stakeholders. And to sell tickets, people have to be fans, which is short for fanatics. And people become fanatics because they feel they have a personal relationship with the team, with the players and, yes, with the Owner too. So anything that diminishes that is a league killer.
The National Football League, for a long time, would not allow corporations to own teams—it had to be an individual and they were further prevented from owning any other sports franchise. A NFL Owner is an important person in his or her community and his or her impact on the city far outweighs the actual size of the business. If the NHL is looking for a business model that works in every way, they could do worse than look to the NFL. What do they have that the NHL doesn’t—well, things like meaningful revenue sharing, competitive balance, rules that are updated as often as necessary to keep the sport fresh, a salary system that works, decent labour relations, a great television product, huge media revenues, great management and a ton of R.E.S.P.E.C.T.
Anyway, the NHL played ball by giving Bain 30 minutes to present their idea at the last BOG meeting in NYC because I would think it serves Gary Bettman's purposes. By showing the NHL Member Clubs that their franchises still have value, he would buck up their morale and keep ownership on side in their bruising, on-going and, so far, futile dispute with the PA. So it suited the Commissioner and it helped denote Bain Capital as an innovative source of ideas and... capital which helps them sell more of their deals and make huge commissions which is what they do. Wall Street 'bankers' make Donald Trump look modest and humble.
Have you ever heard the expression: 'If you can't be humble,
you can never be great'? That is an eastern philosophy, I think, and, for me, I
think it is right. But I am pretty sure that the only nation on earth that does
not subscribe to that ideal is the
Cheers, Bruce”
Dr. Bruce M. Firestone,
Owners
show little interest in NHL bid
(From: http://tsn.ca/nhl/news_story.asp?id=116886)
Canadian Press
A firm well known to Wall Street as one of America's most reputable companies pitched NHL owners a proposal to buy the entire league for more than $3 billion US at a league board of governors' meeting Tuesday in New York. But top officials with several clubs characterized the presentation as merely an interesting information session that barely lasted half an hour and won't be given much thought in the future.
''It was an information piece for people to hear what an independent group thought,'' said New Jersey Devils CEO and GM Lou Lamoriello, who also sits on the NHL's board of governors.
''I have had no conversations since we left (the New York meetings) with our ownership about it, nor do I think we will have,'' Lamoriello said, adding that except for several media calls received Thursday about the reports, ''I haven't thought about it.
''You listen, but that doesn't mean you want to sell,'' he said of the presentation. ''Is it something I feel should be considered? Certainly not in my mind.''
The NHL confirmed Thursday reports that the presentation was made by Bain Capital Partners LLC of Boston, backed by Game Plan LLC, a company that helps broker sales of sports franchises. But a source said there are no plans for NHL governors to vote on the proposal and there was no indication the presentation represented a firm offer anyhow.
The proposal, which an official with another
''It's taking the National Hockey League and its 30 teams and operating it
as any large corporation does with each team essentially being a division of
one company,'' Game Plan chairman Robert Caporale
said on WBZ radio in
But while describing team owners as ''very attentive'' to the proposal Tuesday, even Caporale - whose firm is in the business of drumming up interest in teams up for sale - questioned the level of support it would receive among owners.
The proposal is going nowhere according to Boston Bruins owner Jeremy Jacobs.
''I don't think it's realistic, and I don't think there's much interest, and I know there's no interest on the part of the Bruins,'' Jacobs said. ''And I think it takes 30 (team owners) to do it.''
According to one sports business expert, the NHL should be more concerned
about the fact a top
''What we're seeing now is that the NHL is, in Wall Street parlance, in play,'' said Marc Ganis, owner of Chicago-based Sportscorp, which advises professional sports teams.
Before the work stoppage, the total value of the 30 NHL franchises was an estimated $4.9 billion, according to Forbes Magazine. The Detroit Red Wings topped the list at $266 million, with the Edmonton Oilers last at $86 million. The value of the arenas are part of the assessment.
''It's primarily a reflection of the labour problem. But it's also a
reflection of the flagging interest in the sport on television'' in the
The proposal also offers further warning to players that the old NHL and its soaring salaries are gone and that the longer they're locked out, the worse off they may be.
''I think this demonstrates that it may be a very different NHL, and the players might have preferred the days when they might have negotiated with deep-pocketed owners as competitors in a league that was willing to share revenues with them,'' Ganis said.
The idea of a single-entity league is not new. Women's basketball WNBA is centrally owned, as is Major League Soccer, where players are under contract to the league instead of a particular club. The XFL, a brief football rival to the NFL in 2001, was also run as one business under the corporation owned by wrestling guru Vince McMahon.
The NHL even proposed the concept as one of six early offers to the NHL Players' Association in bargaining talks last summer. The union did not take it seriously, mostly because it would conceivably give the NHL even more power than with a traditional salary cap. The league would be able to step in and nullify any deal between a free agent and a club, drastically reducing a player's bargaining power.
Such labour cost certainty would appeal to league owners who cancelled the 2004-05 season over the issue. But imagine trying to determine how to split $3 billion or more among 30 franchises of widely varying values, among them rich teams like the Toronto Maple Leafs who would stand to lose plenty of money under a collective sale.
''One doesn't really know what the value of anything is in sport until you actually complete the sale,'' said Richard Peddie, president and CEO of Maple Leaf Sports and Entertainment.
''But anything that we have seen would support a much greater price'' than the $100 million or so MLSE would collect if funds from a sale were equally divided, he said.
Peddie said it was prudent of NHL commissioner Gary Bettman and chief legal officer Bill Daly to keep owners informed about the fact a proposal, whether it was palatable or not, had been floated.
''As with any management group, when someone floats a $3-billion idea in front of you, Gary and Bill have a fiduciary responsibility to bring it to the board, and that's what they did,'' said Peddie, who attended the board of governors' meeting alongside other Toronto Maple Leafs officials.
''I can't speak for the other 29 teams. But it's of no interest to us.''
Lamoriello said it's not uncommon in any business for purchase offers to be made, and often such approaches are rejected as not being serious enough to warrant discussion.
Bain Capital's presentation wouldn't have been heard ''if it wasn't a firm with their qualifications and their portfolio,'' he said. Bain is one of the world's leading private investment firms with more than $17 billion US in assets under management.
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