CVC Capital Partners Purchase of Gujarat Titans

Meet the first Private Equity owners of an IPL franchise

Private Equity ownership in sport’s teams around the world is common, but IPL teams are owned by mostly family businesses for the long haul. However, owning an IPL team can be lucrative. Let’s see what led CVC Capital Partners, Luxembourg based private equity and investment advisory firm with approximately €186 Billion AUM, to acquire Ahmedabad based Gujarat Titans (GT).

CVC History

CVC, which deals with venture capital, credit asset management and private equity, was founded over 40 years ago, its British roots laid by banking firm Citicorp, which wanted to found an investment firm. CVC Capital Partners is Europe's biggest private equity (PE) firm. CVC has assets worth over £100bn according to the company website — seeking to make inroads from the IPL’s rise, since the event's inception in 2008, its large audience and multi-billion pound media rights deals.

​​“CVC has a great track record of identifying opportunities and creating value in many of the sectors more traditionally targeted by private equity," a source told Yahoo Finance. "The team are super smart and are now developing a strong reputation across the sporting arena." CVC has now been involved in the sporting sphere for nearly 25 years. In 1998, it bought MotoGP brand Dorna for around £45m, selling eight years later for a profit of around £486m. They also invested in Formula 1, selling their majority ownership stake to Liberty Media in 2017 and making a huge return on its initial investment of £1.6bn. In 2018, Spanish soccer’s La Liga sold around 10% of the game’s rights to CVC in a £1.7bn deal and TV revenue share over 50 years. The deal hasn’t come without controversy, with four clubs — including Barcelona and Real Madrid — opting out. CVC has since acquired stakes in rugby's Six Nations, the buyout group owning a 14% stake at an investment cost of up to £365m, and major shares in both the Gallagher Premiership and United Rugby Championship. CVC’s total investment in professional rugby today stands at more than £700m. Meanwhile, it has also ventured into "minority sports", the private equity giant having invested a reported £240m last year in driving global growth in volleyball.

The Purchase

In 2021, GT was among the franchises put up for auction, attracting bids from various companies. Ultimately, CVC Capital Partners secured the rights with an eye watering bid of Rs 5,625 crores (US$ 700 million). Acting on behalf of the CVC group were its stalwart co-founders Steve Koltes, Donald Mackenzie, and Rolly van Rappard.

As a PE firm with an average 10 to 15 years before an exit, CVC will be looking to turn GT into a profit making machine before selling it off. In fact, "We will become profitable in the next media rights cycle. Even the original ten franchisees took four-five years before they turned profitable," said Arvinder Singh, COO, Gujarat Titans.

Singh said the Gujarat Titans' sponsorship revenue is expected to increase 24% from last year to touch Rs 90 crore this season from the 27 sponsors and partners. "In 2023, we had a 38% increase in sponsorship revenue. This year, we are looking at a 24% increase. We are well into the Rs 90 crore range," he added.

The team has two new sponsors, Dream11 and Lubi Pumps. Dream11 has replaced Ather Energy as the title sponsor, while Lubi Pumps has replaced Timex. "Most of our existing sponsors continue their deals this year at an enhanced value," Singh said. Gujarat Titans has 8 million fans across various platforms and two million direct fans who have shared credentials with the franchisee. "We are engaging our core fans through the Gujarat Titans app with user-generated content and live-streaming," he added. Gujarat Titans looks at merchandising as an engagement tool rather than a revenue stream, Singh said. "Merchandising is a difficult revenue stream to build in India due to counterfeiting," he said.

Reasons behind the purchase

Many IPL observers had been surprised when CVC became Ahmedabad franchise owners. However, as one sports industry expert told Mihir Vasavda, an assistant editor at the Indian Express, CVC’s investment wasn’t seen as a “'random punt”. “Their entry can be seen from two points of view: the first is that they seem to be conscious of India's growing sports — especially cricket — industry as well as the digital economy,” Vasavda told Yahoo Finance. “IPL has been at the centre of both — it's driving India's cricket consumption and backed increasingly by digital start-ups in terms of sponsorship deals. Not to forget the growing middle class, which is willing to spend on IPL while more than 100,000 people turned up to watch Gujarat play the final at their home ground. “Given that CVC have a reputation for pursuing profits, these factors become important.”

“For CVC, this seems like a perfect platform to get a foothold in US cricket as well,” adds Vasavda. “The US has a Minor League right now, they are launching a Major League next year, and hosting the T20 World Championship as we speak and there's a genuine push to get cricket included in the 2028 LA Olympics." Millions has already been poured into US cricket, with PE firms along with tech-billionaires, such as Microsoft CEO Satya Nadella and Adobe CEO Shantanu Narayen. As a cricket aficionado, Nadella co-owns the Seattle Orcas. He led a total investment of $120 million in two tranches—$44 million in seed investment and an additional $76 million —in the league. The funds will finance the construction of cricket-specific stadia and training centers.

In the next one, we’ll look into the economics of owning an IPL team, and just about how lucrative it can be!