What Are the Dodgers Really Worth?
If the Dodgers are being sold for $2.15 billion… then that is what they must be worth. A few months earlier they were valued somewhere from $900 million to $1.3 billion and the owner’s wife used that valuation as the basis for her divorce settlement. She also believed that this was the “real” value.
So what happened?
A strategic buyer emerged… Not an investor looking for an above-average return on their investment… Not a pure ego player… Not someone that wanted to operate a baseball team. And, not someone who would want to own it for a few years to resell at a profit.
The buyer is someone that figured the value to them would be much greater than the value by any other measure because the value was not determined with anything within the Dodgers, but from the value to the buyer. Take Guggenheim Partners – this catapults them to the top of the high profile investment mangers’ for the superrich, and some people just below that level. They are the firm to go to right now. Jackie Robinson’s widow’s and Magic Johnson’s money could not have made a difference in the deal but they bring history, pizzazz, community involvement, star power and cachet to the deal while raising their own brand value. Several rich people acquired bragging rights and great seats to all the games. And then some smart media people got involved and figured the value of the Dodgers could start their own network like the Yankees did (or get a humongous payoff for the TV rights).
Guggenheim Partners has to be commended for how they put the package together. A huge value was created. This reminds me of the deal Rupert Murdock made when Fox was the clear high bidder for the NFL rights to Sunday Football in 1993. His winning bid was so much higher than the CBS bid that the conventional wisdom was that he was off his rocker. What happened is that his winning bid established Fox as a legitimate fourth network – worth billions to him. His “overpayment” created unimaginable wealth for him. He saw it from the value created for him, not what it was worth in the market to the array of traditional buyers.
Whether buying or selling a business… an astute assessment of the price in terms of real value creation, called strategic value, will provide the advantage. It should be always approached that way.
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