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00:00William Blair is making a play in one of Wall Street's hottest sectors. The investment bank
00:04has acquired Inner Circle Sports, a firm known for advising on some of the biggest deals in
00:09professional sports, including Liverpool Football Club and the Philly 76ers. Joining us now is
00:14William Blair's global head of investment banking, Matt Zimmer, and the founder of Inner Circle
00:19Sports, Rob Tillis. Congratulations to you both. Thank you so much for joining. Rob, I want to
00:25start with you because you founded Inner Circle back in 2002, back before this was this institutional
00:31behemoth that it has become. So you've grown it so much to this point. Why not stay at it alone?
00:36Why join forces with Matt and the rest of the team at William Blair? As you said, the industry has
00:41really grown up. It's really expanded. So there's a great opportunity with the tailwinds we have behind
00:46us to leverage what we're doing across all our favorite five major segments of our business.
00:52business. And we found a partner with Matt and William Blair that aligned with our vision and
00:57our mission and what we want to try to accomplish to really grow our business over the next five to
01:0110 years. What sports are becoming the ones that people are really trying to get involved in? So
01:05there was a time when it was, you know, English soccer clubs, for example. I imagine now you might
01:09be looking at potentially, you know, college basketball leagues or something. Well, the privatization of
01:15college sports I think is coming. Women's sports is a really hot topic right now. So lots of investors
01:22coming into soccer, volleyball, women's basketball. So there's lots of opportunities. Of course, the
01:32five professional sports leagues here are still continuing to grow. So the whole business has just,
01:37you know, really grown up and really exploded. One last comment I make is when I first started at
01:42JP Morgan in 1990, the global sports industry was a $50 billion industry, and today it's $450 billion.
01:49Just that growth. And again and again, the proof of concept has been proved that this thing isn't just
01:54a trophy asset. Matt, let me bring you in on this and why this deal makes sense for William Blair.
02:00You
02:00know, why lean in and have this pure play type bet on sports and not just, for example, try to
02:05organically
02:05grow your consumer group, for example? Sure. So we've been looking at the sports, I would say media
02:11and entertainment industry for about a year. And we've gotten to know a whole bunch of different
02:15folks in the space. And if we met both Rob and Steve, Rob just mentioned his background a little
02:20bit. They both have been in the industry for 25 years. And to build that organically would take a lot
02:26of money and probably would not do it as well as they do it. So we decided to partner and
02:31acquire
02:32them. You know, if we think about why we did it, Rob mentioned a little bit of it, the big
02:36splashy sports
02:37deals are really fun to be a part of. They just did the Bulls transaction and the Padres deals both
02:42within the last month, which are great. But what we've seen is that the value of these teams has
02:48ballooned so much that you have minority players in there with LP stakes who are wanting to sell a
02:54portion of their stake. And so the velocity of those deals is increasing dramatically. If you think about pro
02:59sports is one element, but also collegiate sports, as you mentioned, you know, NILs are
03:04forcing athletic departments to think about ways of capital formation to monetize their athletic
03:09departments, essentially. And then even into youth sports, parents are spending a lot of money on
03:12their kids right now. So the tailwinds are gigantic across all of that. And we think we've got an
03:17excellent team that's been in the market and in that ecosystem for a long time.
03:21Matt, when it comes to the pro sports teams, is there any cap on valuations? Is there any point at
03:26which we'll hit a ceiling? I'll probably defer to Rob on that. I would say it probably depends on
03:31what team, what league, but certainly we're seeing prices continue to move up and to the right. Rob,
03:39I don't know if you want to jump in and weigh in, but I think that's probably true.
03:41Yeah, I mean, the growth is still happening. When we did the New England Patriots deal for 140 million
03:46or represented Wayne Weaver and buying the Jacksonville Jaguars for 170 million, everybody thought
03:53they were crazy, like categorically across the board. So there's just been tremendous growth.
03:58And the question is, what's the growth from? It's really been two major aspects. One is real estate,
04:03so stadiums and arenas and the surrounding developments. The second is the media rights
04:09growth that's propelled the value of teams. At the same time, we've had a tremendous amount of
04:14wealth that's been created in the last 20 years in the United States. So when you match all that up,
04:19it's been a strong growth driver, but we now have international expansion, NBA Europe. We have
04:24lots of other growth drivers that are still coming. So I wouldn't say we're in the early days,
04:29but we still have plenty of growth coming. So some of the growth has been idiosyncratic. I'm going to
04:34be honest, I'm just thinking of Wrexham here and you advised on the deal to Ryan Reynolds and Rob
04:39McElhaney, which has been incredible to see them grow and Wrexham come up to the championship league,
04:44which I mean, it's just this historic growth. I wonder when you think of an asset like that,
04:48that has names tied to it. I mean, surely those two guys are never going to be able to sell
04:52that
04:52thing, right? Like how do you get unwind an asset when so much of it is tied to the star
04:56power of
04:57the owner owners? Well, they've done a really good job at growing their sponsorship base. So
05:01their revenue, you know, I haven't seen it lately, but is a multiple of what it was from when they
05:06bought it. So as long as they stay competitive, they're going to be able to sell it to the next
05:13person who can then propel that team to the next level.
05:16No, no FX documentary or maybe they still get one. I don't know.
05:19Yeah. But when you think about it, when teams win, they make money, right? So as long as they
05:22get them to the place where they're winning, then they can perhaps, you know, re-evaluate another
05:27team and maybe, you know, rehabilitate them and move on. And maybe some other celebrities come in
05:31as well. What about foreign ownership in various countries? I'm not just talking about, you know,
05:36England, because obviously there was a lot of controversy there, but here in the United States and
05:41elsewhere, is it a thing that we'll see, you know, more global ownership or will that continue to be
05:46something that's a little bit, you know, booed? No, we've seen that across the board. We were
05:51actually on the forefront of bringing the American owners into the EPL back in 2008 with the Liverpool
05:58football transaction that we did. That's kind of opened the door for more. And then in terms of
06:05foreign ownership in the US, I think that will continue to be a trend. We had the Qatari Investment
06:09Authority invest in the Washington sports franchises. I think you're going to see that
06:16as well as ultra high net worth people from around the world are continuing to look at US sports.
06:22So I think that's a theme. Fans are fine with foreign owners as long as their team is performing.
06:26That seems to be the common theme. Matt, when it comes to some of these investments,
06:31again, sort of combining some that you already had at William Blair and what Inner Circle has,
06:35I wonder for you where the biggest opportunity seems. Is there, are there any other aspects that
06:41you think that you want to lean into at this moment? Yeah, definitely. One of the biggest
06:46elements that we looked at and we assessed alongside Rob is, you know, as you know, Danny, our private
06:50equity client base is very big. And as I saw it come across the screen just now, private equity is
06:57finding ways to deploy capital into athletics. They may not be buying a big stake in a team,
07:02Blue Owl, Sixth Street. Some of these firms have, but a lot of the traditional private equity firms
07:07are trying to find ways to play around the athletic space. So think about software going into sports,
07:12services, products, picks and shovels, those types of elements. As we talk to our client base,
07:17we're able to access them, talk to them and bring Rob and Steve's expertise alongside us to really offer
07:22what we hope are differentiated ideas of ways to play the category. Just on that, because one area,
07:28Rob, that private equity has been involved in and so has Inner Circle is youth sports. And you
07:34advise on PlayOn's acquisition of MaxPreps. Lawmakers right now have introduced a bill trying
07:39to stop that institutional private equity ownership of youth sports. The argument goes
07:44that it makes it more expensive. It becomes a luxury. It's something that not everybody can afford.
07:49What would you say to the critics of the sector's involvement in youth sports?
07:53I would say the youth sports business has been around for a long time. IMG Academy has been a
07:58place where people have been sending their kids for a very long time. The professionalization of
08:03youth sports is getting a lot of heat right now. But ultimately, I think it's going to make for better
08:10leagues, better competition, being more organized. And we'll see what happens with this bill going
08:16forward.
08:16We can ask both of you, why is golf different? And what should the world of golf learn from the
08:21debacle that is, was live golf?
08:25I'll go first. So I think, you know, it's very hard to start leagues. You need a lot of capital.
08:31And they obviously came in with a big splash. But you need to maintain the talent. And it has to
08:37have
08:37a business model that really, really works going forward. So it's actually the inverse most of the
08:42time when leagues start. Some of the smaller women's leagues we're working with, they were raising
08:46smaller amounts of capital to kind of grow, you know, in a systematic way. That was obviously like
08:52a big splash. And they made large commitments. So we'll see if they can restructure and reorganize
08:57it.
08:58Matt, any thoughts?
08:59No, I agree. I think some of the transactions that they're working on right now around league
09:03formation, it feels like the way to access capital today may be a little bit different than live
09:08golf as an example. And it feels like it's going in the right direction.
09:11As you mentioned at the start, you've been involved in a lot of soccer, football deals,
09:16Liverpool FC being one of them, Wrexham, as we were talking about. Do red cards not matter
09:19anymore? What do you think?
09:21No, red cards matter. But I think, you know, there's so much interest around the World Cup
09:27right now. We've been involved in soccer for many, many, many years, including I think
09:32we've done more transactions than anyone in Major League Soccer. Red cards matter. Rules
09:37matter. But there's some question of the severity of that foul and whether that really qualified
09:43for a suspension. So FIFA has made their ruling. I think a lot of fans in the U.S. are
09:50happy
09:51about it. I think it's great for soccer just in terms of this game is going to be the most
09:55watched soccer game probably ever in the history of the United States. So it's exciting.
10:00Great. I mean, but is it great for soccer? I mean, rules exist for a reason, right? Red cards
10:05exist for a reason. The suspension exists for a reason. Yeah, I mean, he's a super talented
10:10player. So not having him would have hurt the U.S. But, you know, it's going to be a
10:17super competitive game.
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