Right now, the Dallas Mavericks and Miami Heat are blessing basketball fans with one of the most exciting Finals in recent memory. Every game has had its fair share of heroics and highlights, plus enough drama to entertain fans wire-to-wire. While Dirk, Jet and the Mavs continue to do battle with the LeBron, Wade, and the Heat for the right to hoist the 2011 Larry O’Brien trophy, 76ers news has, somewhat surprisingly, been bubbling to the forefront over the past week.
Andre Iguodala trade rumors have fluttered in, as was expected after the conclusion of the season. But, in a rather unexpected turn of events, the sale of the team by Ed Snider and Comcast-Spectacor, has stolen headlines as a deal seems imminent.
So, who’s buying? A small investor group led by Joshua Harris, a graduate of Penn’s Wharton School of Business, placed the leading bid. He is joined by fellow Wharton grad David Blitzer and former basketball player agent and NBA exec Jason Levien.
Harris, 46, founded Apollo Global Management, a firm that specializes in leveraged buyouts and purchases of distressed securities (thank you, Wikipedia). He is estimated by Forbes to be worth a cool $1.5 billion. In the spirit of oversimplification, they buy struggling companies or properties and rework their corporate structure and business practices until they are profitable again, and then flip the business for profit.
Word among financial circles is that the impending changes in the next CBA will make it more owner-friendly. The possibility of a hard cap and even the potential work stoppage makes it a good time to buy low. Considering that Comcast-Spectacor stated there was more than one bid for the team on the table (which apparently has been on the market for months), it seems to solidify the idea.
With the team valued at an estimated $330 million (17th among the league’s franchises), it would appear that the ownership group isn’t taking a huge financial risk in joining the ranks of NBA owners (The Deal Pipeline reported that the owners will be paying the team out of pocket, not by private equity firms). And with the Sixers operating at a slight loss ($1.2 million in the red) last year, Harris’ group could get in for lower than the estimated value. All this is bolstered by the potential for future success the team showed this season, and a continued upswing in the standings could substantially increase the value of the franchise.
So team Harris threw up the most money and appears to be taking control of the franchise within the week. Is this good or bad news for Sixers fans? Right now, it’s hard to tell. With little information out there about Harris personally, it’s unclear what his goals in owning a team will be.
Let’s look at the extreme ends of the NBA owner spectrum. On one hand, he could be like LA Clippers owner Donald Sterling. Sterling is famous for stripping operating costs to the bare minimum so much so that although the Clippers remain perennial losers, the team operates at pocket-lining profits. This scenario would be a disaster, to say the least. On the other hand, the young Harris could be a Mark Cuban, I’m-so-rich-I-don’t-give-a-youknowwhat type of competitor who will supply the team with substantial financial backing and extra amenities in hopes of earning a ring to show off among his billionaire boys club. Realistically, he’ll probably fall somewhere in between. If the goal is to increase the value and sell the franchise for a profit, so be it. The best way to increase the value of a sports franchise is: A) winning, and B) building a large, loyal fan base – neither of which allows much room for frugal spending or shady dealings.
The non-financier of the group, Jason Levien, is not foreign to NBA circles. As an agent, he certainly appears to have had some skills at the negotiating table (netted Luol Deng, Kevin Martin, and Udonis Haslem a combined $168 million worth of deals in a two-year span). After working as a player rep, he got a taste of the front office with the Sacramento Kings. While he appeared to be on the fast-track to the GM job with the Kings, he left the team abruptly after a (rumored) disagreement over drafting Ricky Rubio.
His ambitions as an executive could be worrisome for team President Rod Thorn, GM Ed Stefansky, and their fellow incumbents (after all, corporate restructuring is Apollo Management Groups’ m.o.). Of course, this is all speculation, but I’d be surprised if Levien didn’t end up toward the head of the front office when the dust of the sale settles.
As for Comcast, they will still own and operate the Wells Fargo Center (or whatever it’s called next season) and hold the 76ers’ TV rights. The financial details of those deals have not been mentioned thus far, but all reports seem complacent in the fact that this won’t be a hold up in the deal. The Sixers will operate within the Wells Fargo Center as tenants. Also, there is some talk that Harris will be expected to seek an increase one $13 million-a-year TV figure currently in place.
Nobody is expecting Snider to shed any tears over the departure; he clearly has his heart in hockey and the Flyers. While he was a solid owner, his apparent indifference toward the Sixers’ success makes a front office shake-up a welcome notion.
After struggling through the stagnant post-Iverson era the past few years, the team certainly appears to be diving headfirst into change this summer. Hey, as long as they keep Doug Collins at the helm, make a reasonable play to re-sign Thad Young, and don’t dare try and relocate the team, I’ll be satisfied. Until we see them in action, it’s impossible to judge the impact of the sale.