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Chapter 369 A One-Step Industrial Layout

There was a gentle knock on the office door, and with Jane Fraser's "Come in," Ralph Peyton pushed the door open and entered, breaking the conversation between the two.

Ernst's first task upon arriving at Ernst Asset Management was to discuss strategic plans for the sports industry with the private equity division led by Ralph Payton.

The sports industry has been booming globally in recent years, with increasing commercialization of events, a growing fan economy, and increasingly prominent commercial value of various sports IPs, making it an important sector that cannot be ignored.

Ralph recognized the potential of this industry and naturally wouldn't miss this potentially huge opportunity.

Jane Fraser gestured for the coffee-serving assistant to leave temporarily, and then the three of them sat down on the sofa in the corner of the office.

Ernst picked up his coffee cup, took a small sip, and calmly glanced between Jane Fraser and Ralph.

When his gaze fell on Jane Fraser, Jane Fraser sighed slightly, a hint of helplessness on her face, and spoke first, "I do not deny the broad prospects and huge potential of the sports industry, nor have I ever explicitly opposed the private equity department entering this field."

"Judging from the current development data of the global sports industry, whether it is the price of event broadcasting rights, the investment of sponsors, or the market size of peripheral products, all show a year-on-year upward trend. This is indeed a track worth focusing on."

"However, I think we should adopt a more prudent approach and proceed step by step in terms of specific implementation strategies. In my opinion, the plan proposed by the private equity department seems to be taking too big a step, which may bring unnecessary risks to the company."

After listening to Jane Fraser's explanation, Ernst subtly turned his gaze to Ralph beside him, his eyes filled with a hint of inquiry.

Prior to this, he knew that Ralph had encountered some obstacles in advancing his sports industry strategy, otherwise he wouldn't have approached him.

It was initially thought that Jane Frazier was fundamentally opposed to the private equity arm entering the sports industry, but now it seems that the disagreement between the two was not about whether to enter the industry, but about the scale of investment and the pace of progress.

Ernst thought to himself: This old man is not honest. Given his style, he must have already formulated a detailed and precise implementation plan. Otherwise, Jane Fraser would not have said that.

However, during the last visit to Madison Square Garden, he made no mention of the scale of the investment or the detailed plan.

Ralph also caught the fleeting look of inquiry and scrutiny in Ernst's eyes, knowing that his previous concealment had been discovered. An awkward smile appeared on his face, and his eyes darted away, not daring to meet Ernst's gaze directly. He subconsciously shifted his gaze to the coffee cup on the coffee table.

A brief silence fell over the office, broken only by the soft hum of the air conditioning system.

A moment later, Ernst put down his coffee cup, the bottom of which made a crisp, soft sound as it touched the marble coffee table, breaking the silence.

His voice was calm and powerful, without the slightest emotion. "Ralph, please give us a detailed explanation of your sports industry strategy."

Ernst did not rush to conclusions about the differences between the two, but chose to first obtain complete information.

Ralph breathed a slight sigh of relief when Ernst did not directly pursue his responsibility for concealing the plan.

He composed himself and quickly took out a thick stack of documents from his black briefcase.

These materials were organized in an extremely orderly manner, with each page categorized and labeled with color tags, clearly demonstrating the effort Ralph put into developing the plan.

He gently placed the documents on the coffee table, pushed them in front of Ernst and Jane Fraser, and then began to introduce them methodically: "After in-depth research and analysis by our private equity team, combined with the current development status and future trends of the global sports industry, we have selected five top sports events that are most valuable for investment and can quickly and effectively enhance brand influence."

"These are the NFL, MLB, NBA, NHL, and the top five European football leagues."

"However, after further evaluation, we believe that the Premier League, Serie A and La Liga have advantages in terms of commercial operation maturity, global attention, future growth prospects and team commercial value among the top five European leagues. Ligue 1 and Dresden are relatively lagging behind in these aspects. Therefore, we have a relatively low willingness to invest in these two leagues and are not very optimistic about them."

No wonder Jane Fraser said he was taking too big a step. With the four major American sports leagues plus European football leagues, he was trying to achieve everything at once.

The problem is that the four major sports leagues in the United States each have a huge market size and a complex operating system. Each league requires a huge investment of money and a lot of energy. Add to that the English Premier League, Italian Serie A and Spanish La Liga in Europe, and these leagues cover the world's top sports event resources. Such a large-scale layout is a huge test of financial strength, risk control ability and cross-regional operation ability.

However, after listening to Ralph's initial introduction, Ernst did not immediately express his opinion, but simply nodded slightly, signaling Ralph to continue.

He reached out and picked up a document from the coffee table. This document detailed key information such as the basic situation of each event, market size, and investment prospects.

Ernst carefully perused the documents while continuing to listen attentively to Ralph's narration.

"Let's start with MLB. Among the many teams in MLB, after multiple rounds of screening and evaluation, we have finally narrowed it down to the San Francisco Giants and the Boston Red Sox. We are currently conducting in-depth due diligence on these two teams and will choose one of them for acquisition later."

"Why not consider the New York Yankees?" Ernst asked, looking up just as Ralph finished speaking.

Although Ernst himself doesn't usually follow baseball games closely, he knows that the New York Yankees hold a pivotal position in MLB and even in global baseball. They are the most successful team in MLB history, with far more championships than any other team, and they have an enormous number of fans.

Ralph didn't answer immediately, but instead looked quite shocked.

Jane Fraser, sitting to the side, couldn't help but frown, her gaze towards Ernst carrying a hint of helplessness and incomprehension, similar to that of someone caring for a mentally challenged child.

She spoke first, explaining, "Who doesn't know that the Steinbrenner family sees the New York Yankees as a symbol of family honor and an important stepping stone into the upper echelons of American society, changing the outside world's stereotype of them as rural Ohioans?"

Seeing Ernst frown slightly, Jane Fraser wondered to herself if this boss didn't collect any information about the upper echelons.

"The Steinbrenner family originally came from Ohio, where they owned some businesses, but they didn't have a very high status in the American upper class. They acquired the New York Yankees in the hope of leveraging the team's huge influence to improve their family's social standing and expand their business to the East Coast."

"Furthermore, judging from the New York Yankees' performance this season, the team is in excellent form and has a good chance of achieving the best winning record in MLB history. Under such favorable circumstances, the reputation of Steinbrenner has also risen accordingly, and the family's status has been further consolidated."

"Under these circumstances, how could he possibly be willing to sell the New York Yankees? This team is no longer just an asset to the Steinbrenner family. Unless you can offer them a price that would allow them to enter high society with the money they have, it's hard to sway them."

Ralph didn't continue following her lead. To avoid putting Ernst in an overly awkward position, he picked up the thread, saying, "Aside from family factors and the team's current good form, from an investment cost-effectiveness perspective, acquiring the New York Yankees isn't a wise move."

"We already have the New York Knicks in the New York metropolitan area, which has helped us spread our influence there. If we were to acquire the New York Yankees, while it would further expand our value in the New York market, it would also create overlap in brand influence, leading to a waste of resources."

"From an investment perspective, the return on investment for acquiring the New York Yankees is too low, which does not align with our principle of pursuing efficient capital operations."

Then, Ralph changed the subject, saying, "The reason we ultimately focused on the San Francisco Giants and the Boston Red Sox is because we saw their value in terms of return on investment."

"Both teams have a rich history and are traditional powerhouses in MLB. Both teams have achieved brilliant results in their long history, and their number of championships is second only to the New York Yankees. They enjoy a very high level of recognition and loyalty among fans."

"This profound historical heritage and strong fan base provide a solid guarantee for the team's commercial operations and brand value enhancement."

"The second, and more crucial point, is the acquisition price and the ease of the acquisition." Ralph took the documents from Ernst, turned to a page, and handed them back to him.

"The Boston Red Sox is currently owned by JRY Trust, and the actual owner of the team is Jane Avik. She doesn't have much emotional investment in the sports industry itself; she holds and manages the Boston Red Sox more as a high-quality financial product."

"This means that as long as we can offer a fair market value that meets her expectations for return on investment, she has no reason to refuse to sell the team."

"Similarly, the situation is the same for the San Francisco Giants."

"Currently, the San Francisco Giants are owned by an investment group. For the investment group, the core goal is to realize capital appreciation and exit. Their purpose in holding the team's shares is to sell them at the right time and at the right price to obtain substantial investment returns."

Ernst listened attentively to Ralph's introduction and, combined with the information he had, gained a preliminary understanding of the basic situation of the San Francisco Giants and the Boston Red Sox.

While the Boston Red Sox has certain advantages in terms of brand influence, team performance stability, and mature business operations, making it a relatively cost-effective investment, its acquisition price is also relatively expensive.

According to assessments conducted by private equity firms, the estimated transaction value for acquiring the Boston Red Sox is around $6.1 million.

The acquisition price of the San Francisco Giants is relatively low, with the transaction amount estimated at only between $1.5 million and $1.7 million, but it is not cost-effective.

"For teams that are roughly the same size, the price difference is so huge, and the cheaper ones are actually not good value for money." Ernst found it quite interesting.

"Over the past two decades, the team's assets have grown from less than $1.6 million to an estimated $6.1 million, nearly quadrupling, which is a very significant increase."

"The situation with the San Francisco Giants is different. The team last changed hands four years ago, when it cost $1.15 million to acquire it. If we want to acquire the San Francisco Giants, we must offer a relatively high premium to meet the investment group's profit expectations; otherwise, they will not easily sell their equity."

.

Ernst turned his gaze back to Ralph and asked in a calm tone, "Which team do you personally prefer to acquire?"

Upon hearing Ernst's question, Ralph answered almost without hesitation: "Personally, I prefer to acquire the San Francisco Giants. In my proposal, the Boston Red Sox is more of an alternative."

Before Ernst could even raise a question, Ralph quickly explained, "Compared to other MLB teams, the San Francisco Giants have consistently had top-tier attendance in the league. According to our data, their average attendance is second only to the New York Yankees. Even in their worst season, their average attendance still exceeds 2.5."

Ernst understood that the market determines everything.

San Francisco is adjacent to Silicon Valley and has no shortage of wealthy people, but the San Francisco metropolitan area doesn't have many decent sports teams. Baseball is the symbol of the San Francisco metropolitan area, with two traditional powerhouses, the San Francisco Giants and the Oakland Athletics, which is the only sport that the San Francisco metropolitan area can be proud of.

The data also fully demonstrates that the San Francisco Giants have an extremely deep fan base and high market recognition in the local area, and the fans are very loyal to the team.

A stable and large fan base is an important guarantee for a team to achieve stable revenue, whether it is ticket sales, merchandise development, or sponsorship partnerships.

"Another issue is the stadium; the San Francisco Giants don't have their own stadium."

This is also why the San Francisco Giants are so much cheaper than the Boston Red Sox – they don't have heavy assets.

"You want to acquire the land." Ernst instantly understood Ralph's intentions.

The other party nodded, not denying at all that "the rise of Silicon Valley will inevitably drive up the economic level of the entire Bay Area, and real estate prices will definitely benefit in the future."

"If we make a request to the San Francisco City Council to build our home stadium, they will definitely make it happen with the most favorable terms."

There's one more thing Ralph didn't mention: Ernst's influence in California.

This land will not only be approved, but it will also be approved at a low price, and in large quantities.

Therefore, while building the stadium, one could also develop sports real estate and make a fortune, depending on the circumstances.

Another reason is the same as the reason for not acquiring the New York Yankees: overlapping influence.

Because in the NFL, the opponent's first choice was actually the New England Patriots.

It wasn't an acquisition, but rather through taking a stake in the upstream group that owns the team.

"The Kraft Group?"

Ralph thought Ernst probably hadn't heard of the company, adding, "It was founded a little over a month ago by Robert Craft, the owner of International Forest, North America's largest privately held paper company. He wants to enter the sports entertainment and real estate development sectors, but he's short of a lot of funds."

Don't assume that being the largest in North America means being very rich; it's very possible that this largest company can't even operate outside the territory of a single state.

Robert Craft is a case in point. He owns the largest privately held paper company in North America and the New England Patriots, yet his net worth is less than $300 million.

"If our Ernst Asset Management Company were to approach them at this point and propose investing in the Kraft Group, they would not be able to refuse."

He certainly wouldn't refuse; Ernst's prestigious reputation would save him a lot of GG fees.

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