When the Vancouver Canadians were sold at the start of this month, they became the 17th team in Silver Lake’s minor league baseball conglomerate, Diamond Baseball Holdings.
It seems almost an anachronism that Silver Lake, a $92 billion asset manager that boasts stakes in top-tier sports properties like UFC, New Zealand’s legendary All-Blacks rugby team and Premier League titan Manchester City, would collect a gaggle of minor league baseball teams. After all, bush league baseball offers little by way of media rights that drives values in the major leagues. Yet demand for minor league baseball teams continues to increase, driving up team values.
“We have been involved in several dozen minor league baseball transactions in the last five to 10 years, and I can tell you, valuations have continued to rise,” Sports Advisory Group president Tommy George said in a phone call.
There’s no comprehensive data source for what minor league baseball teams sell for, but based on the $47 million Diamond Baseball paid for three teams affiliated with the Atlanta Braves just over a year ago, the selling owners of the Canadians, the High-A affiliate of the Toronto Blue Jays, probably more than doubled the $7 million they paid 15 years ago. Diamond Baseball Holdings declined requests to discuss their business.
In fact, it’s possible that minor league clubs affiliated with a Major League Baseball franchise will soon be worth much more. “These teams are now moving up in value, and could be, you know, in the 10 to 20, 30 to 40 or even $50 million or higher rates, in terms of their valuation,” George said, speaking generally about market conditions. (While his firm has worked with Diamond Baseball Holdings, he declined to discuss specifics of their transactions).
Valuations will vary based on level the team sits in minor league ball as well as revenue and profitability, he added. Generally speaking, AAA affiliated teams will be worth the most, followed by lower affiliated teams, independent league teams, especially in regions too remote to be realistic MLB affiliates, with niche leagues like college player wood bat leagues—most famously, the Cape Cod League—seeing the least team valuation at $1 million or below, according to various experts.
While there are no media contracts to drive values higher, minor league baseball shows some of the same characteristics as other leagues drawing institutional investor attention, like rugby and some European soccer leagues—mainly perceived inefficiencies in operations.
“You’re seeing an explosion of interest in minor leagues and part of the appeal is that a lot of minor league teams have been run the same way they were run in the ‘80s and ‘90s,” Alan Miller said in a phone call.
Miller is co-owner, along with former NFLer Jon Ryan of Collide Sport. The company owns nine minor league clubs mainly in the Pacific Northwest, including affiliated teams, independent teams and collegiate wood bat clubs. “I think what a lot of us see is that if you take some these franchises that have been doing things the same way and create an opportunity to modernize them with best practices, you can improve these teams and make them considerably better,” Miller said.
In practice that means combining functions across team to find cost savings by being able to place larger supply orders, eliminate redundant front office labor and, most important, apply new ways to get fans through the turnstile.
“People don’t consume minor league baseball, traditionally, by turning on the TV and watching games,” Miller said. “The challenge is you have a multifaceted revenue model. It’s a combination of selling tickets, obviously, having partnerships, good food and beverage, creating other events. It’s scrappy; you’ve got to find different ways to build revenue.”
Also helping minor league team models has been a strong uptick in the sale of minor league merchandise that came, at least anecdotally according to various owners, during the pandemic. The fresh demand for merchandise from minor league fans and the lack of small-order flexibility for team owners from mainstream vendors led Miller last year to form Official League, a premium cap maker that caters to small orders for minor league baseball and other leagues.
Still, unlike top-level leagues such as the NFL and the Premier League, where gate receipts’ importance pales in comparison to TV deals, minor league baseball teams are most reliant on getting people in the stands.
“It’s always going to be driven first and foremost with the eye of the gate. That is what keeps these places going,” Norm Laviolette said on a phone call. Laviolette is a limited partner of the Brocton Rox, a college player wood bat team in Massachusetts. “So you got to get them in the door in a landscape where people can choose other forms of family entertainment.”
Laviolette, a comedian and comedy club owner, uses his entertainment background to brainstorm ways to engage fans in hopes they’ll return to future games. Most people, he says, don’t care what the final score is, and a sizable minority probably don’t really care that much about the game itself.
Since buying into the team prior to the 2022 season, Laviolette’s club has benefitted from spectacles including arranging for all the players to wear cowboy hats for an inning, and Dog of the Day, when fans get a free hot dog if a specific member of the opposing team—usually the visitor’s best player who agrees to be targeted—strikes out. “You go from a mundane game on a Sunday to everybody going wild,” he said.
The success of the Savannah Bananas has made more owners see the potential to drive value by pumping up the entertainment value over the traditional pitch of seeing potential superstars in action.
“When you compare the cost of acquisition to the profitability of making these things work, that’s where I believe private equity and other investors are really looking at minor league teams,” Laviolette said. “The cost to flip from red to black in the grand scheme of things isn’t that much—if you can make it work.”