The sports tech industry is experiencing a wave of mergers and acquisitions, with several major deals totaling billions of dollars in the first half of 2024. The $3.1 billion merger between Disney and Indian conglomerate Reliance to combine Star India and Viacom 18, as well as private equity firm Silver Lake’s $13 billion deal to take Endeavor private and Liberty Media’s $4.6 billion acquisition of Dorna Sports, have been just a few of the significant transactions in the sector. According to a report by investment bank Drake Star, there were a total of 225 deals in the sports tech industry in the first half of 2024, with a total disclosed value of $27.3 billion—a half-year high.
The surge in mergers and acquisitions in the sports tech industry is driven by the increasing value of sports as an asset class. Team values have skyrocketed in recent years, leading to a shift in the narrative around investing in sports. With the average NFL franchise value reaching $5.7 billion, investors are looking for opportunities in adjacent businesses such as wearables, performance enhancement, fan engagement, media, broadcasting, and other areas. As leagues maintain strict ownership requirements, it is becoming more challenging for investors to acquire stakes in teams, leading them to explore opportunities in other areas of the sports sector.
The majority of mergers and acquisitions in the sports tech industry involve earlier-stage startups, with transactions typically ranging from $30 million to $500 million. This trend has coincided with a decline in private financing, with fundraising in the first half of 2024 down compared to previous periods. Startup companies are increasingly being forced to sell to larger competitors as consolidation sweeps across the sports world. This has posed challenges for new entrants trying to establish themselves in the market, as incumbent players like FanDuel and DraftKings dominate the space and drive up customer acquisition costs.
Despite the challenges facing smaller startups, investors are still optimistic about the growth potential in the sports tech industry. With a significant amount of capital raised in 2023 still undeployed, there is expected to be a steady flow of M&A deals in the sector for the rest of 2024. While the total transaction value may see a slight decline without blockbuster acquisitions like the Endeavor deal, the sports tech industry is expected to continue outpacing other industries in terms of M&A activity. Investors like Verlinvest are recognizing the shift towards experiences and lifestyle offerings in the sports sector, leading them to make investments in businesses like electric go-kart racing.
Overall, the sports tech industry is undergoing a period of rapid transformation and consolidation, driven by the increasing value of sports as an asset class. Investors are diversifying their portfolios and exploring opportunities in adjacent areas of the sports sector, such as wearables, fan engagement, and media. With a record number of M&A deals in the first half of 2024, the sports tech industry is poised for continued growth and innovation in the coming months.
