August 1, 2014
Former Microsoft CEO Steve Ballmer’s $2 billion bid for the Clippers looks to be a gross over-valuation, at least according to the bid book of sale put together by Bank of America. Reporters from ESPN.com got hold of the valuation numbers through documents introduced in the trial determining whether Shelly Sterling has the right to sell the team without Donald.
The bid book showed Ballmer’s $2 billion offer for the Clippers is 12.1 times the expected 2014 revenues of the team. Purportedly, Bank of America also showed the average of teams sold over a five-year period was 3.4 times total revenue, and that no team has been purchased for more than five times its total revenues.
In the case of the Clippers, revenue alone might present an under-valuation if the team’s alleged years of mismanagement were to be taken into account. The Clippers also have a pending national TV deal that could be a slam dunk to raising the franchise’s popularity and profits.
Of course, Ballmer’s serious bid is probably about a lot more than him just wanting to make another profitable business deal. Among the billionaire set who have most of what money can buy, we expect there’s immeasurable enjoyment and prestige to owning one of 30 teams that besides their exclusivity, hardly ever go up for sale. For this alone, any team on the NBA is a statistical anomaly in the world of business dealings. Like any near-priceless objet d’art up for auction, the emotional value of ownership can be equal to, if not greater than, the investment value.
Outside of these outliers, most buyers looking to acquire a business, whether as a singular investment or a complement to an existing company, are more likely to focus on the financial returns they can expect to get for their purchase price. B2B valuation and legal advisory professionals, including those at Talley and Company, can provide comprehensive data and due diligence in these situations to enable decision-makers to make the most profitable investment choices.
Before entering into any buy/sell agreement, Talley & Company can help you determine both optimal deal pricing and structure to achieve your goals from an ROI and tax perspective, accounting for factors that include revenues, future opportunities and contracts, industry trends, and market share. Of course, if you just plan to make a must-have power bid like Ballmer, at least you’ll know what you’re getting into and how far from the baseline to overshoot.