The Hockey News Money and Power 2024 hockey business annual features W. Graeme Roustan’s NHL team valuations in addition to the Top 100 People of Power & Influence in hockey, Q&As with important figures from the hockey world, and reports on each NHL team.
Having been involved in the Ottawa Senators’ 2023 sale process, I can draw from recent experience when writing my sixth annual piece on NHL team valuations. I can and will share with you my current opinions regarding the current valuation of an NHL franchise, even though I am unable to share with you any of the material that I was provided and looked over during the due diligence process.
Neither I nor anyone else involved in the process who has since compared notes with me mentioned the Sportico or Forbes valuation numbers as a benchmark at any point during the Ottawa Senators sale process. The financial models they use have no bearing whatsoever on the sale price, as I have made clear in nearly every one of my five previous articles on valuation in previous Money and Power issues.
The franchise was never purchased for a multiple of EBITDA or any other financial formula. Through a competitive sale process, the Ottawa Senators were only sold to the highest bidder. This determined the sale price.
The sale process, which I have participated in numerous times throughout my career with varying degrees of success, is a structured auction method intended to sell a business. To minimize public attention, they are usually carried out in private and away from the media. That was obviously not the case in this instance, though.
The estate of Eugene Melnyk handled this sale process. They hired renowned figure in the sports business sector, Salvatore “Sal” Galatioto, to lead the process. Galatioto is an amazing person to spend time with and a true legend. He’s been a great friend and fellow aviation enthusiast of mine during the Second World War.
The asking price for an NHL franchise is what the seller is willing to accept as payment from the prospective buyer. Regarding the Senators, Galatioto informed me of the bare minimum that the Melnyk estate required from my group and me; there was to be no haggling at all because there were other bidders who were prepared to meet and surpass that amount.
I was best informed by Gary Bettman himself during an interview for the Money and Power issue about the only potential use that I can think of that stems from a Forbes or Sportico valuation. A value placed against us in other businesses is significant for the recognition of who we are, he stated, not because someone is going to turn around and sell their franchise tomorrow. Even so, it is possible.
Putting these Forbes and Sportico valuations in perspective, one can see that they represent the value of the game on the ice and how it has increased annually when compared to franchise valuations in other major sports leagues. Within that framework, valuations can contribute to the narrative of the NHL’s yearly success, both on and off the ice.
During this issue, I asked Bettman a question and he said, “You would think that is the floor, but I even think that floor is $1 billion.” I said that since the Senators were sold for almost $1 billion, the new floor of the valuation of any NHL franchise is $1 billion.
He continued, “It really comes down to branding. In the end, perception is key. Of course, a club owner wants to know that their investment is increasing in value, but in my opinion, this also speaks to the significance of the league, the teams, and the game. Therefore, an increased valuation is really putting a stake in the ground regarding how strong we are as a league and a game—not that owners, most owners, or any owners are selling anytime soon.
In the end, there are currently only 32 NHL franchises, though as Bettman hinted at in the video interview, there may be more to come. Compared to the millions of franchises that are created every single day all over the world, these few franchises are transferred much more slowly. Sports teams are valuable assets, and their prices will always soar no matter how some media companies determine their valuations—with the exception of mine, of course, as I employ a very different methodology based on my personal, first-hand, and numerous sale-process experience dating back to 1989.
In the upcoming years, I anticipate the NHL will grow by adding two new teams, and I think the markets will be Atlanta and Houston. A record $2 billion in U.S. franchise fees is what prospective franchisees for those two new brands should be prepared to pay. “Whether it is $2 billion or $2.5 billion or $2.7 billion, I think that is the range I believe the owners would want to be in if we were going to consider expansion,” Bettman said in response to my question about whether my estimation of a $2 billion franchise fee was reasonable.
With the tremendous success of both the Vegas and Seattle franchise launches and sales, the NHL is in a better position than ever to grow to 34 teams. As a result of the product on the ice and the financial success off the ice, they can and will receive the full value for new franchises.
Before Bettman, supported by the owners, graciously declined, Bain Capital reportedly made an offer to purchase the entire league for $3.5 billion back in 2005. They later increased their offer to $4 billion. The combined value of the 32 clubs is $50 billion as of right now. When I asked Bettman to compare the current valuation to the time when Bain made the offer, he angrily retorted, “It would have been a helluva deal for them.”