Record-Breaking Sports Technology Investment Surpasses $90 Billion In 2022

Sports technology has moved leaps and bounds over the past few years. And, in 2022, pertinent market deals topped $90 billion, with a new report from investment bank Drake Star, the Global Sports Tech Report, noting this came a result of an increase in mergers.

According to Drake Star principal Mohit Pareek, deal value saw an increase from $11.3 billion in 2021 to $78 billion last year.

“With a thousand-plus deals last year, it was a bumper crop of M&A activity that produced over $78 billion in deal value,” Pareek, one of the annual report’s authors, said during a video call. “Whether it’s betting or fantasy, whether it’s fan engagement, venue management, ticketing—everywhere there was a humongous amount of deal activity.”

Drake Star, based in New York, specializes in tech and has completed around 450 transactions over the past 10 years on a worldwide scale. The report takes a look at venture capital, private equity, and publicly traded deals made by companies over the span of a year but does not cover deals made by sports teams themselves.

“While betting has been a key segment over the years, we saw a great amount of uptick in fan engagement, with 1.7 times volume in terms of number of deals and deal value more than 10 times higher than 2021,” Pareek noted. “That’s the key area that has grown a lot.”

The tech report showed compiled 1,014 capital markets deals, with 19 valued over $100 million, as streaming, data, analytics, and esports media remained bullish.

Microsoft’s proposed takeover of gaming developer and publisher Activision was easily the biggest deal at $69 million, though it is yet to be completed and is now facing some opposition from the Biden administration.

Esports tournament organizer ESL Gaming was a significantly distant second after Saudi Arabia’s PIF bought it for $1.1 billion. The hosting of esports events has become a huge deal in recent years. A crossover event in Kansas hosted by Esports Rising and the MLB early last month was highly successful.

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As it pertains to deals, the biggest fan engagement-related one came in the form of One Team’s $1.9 billion sale of RedBird Capital.

Buyer-strategic deals closed at strong valuation multiples. One of the best examples: The New York Times’ acquisition of The Athletic, which was a purchase occurring to the tune of $550 million, which marked an 8.5 multiple of revenue.

Other deals less strategic were closed at lower valuations, especially in Asia. Sports betting company Entai,n based in the Isle of Man, was the most ambitious, spending $2.1 billion on five different deals.

This year hasn’t gotten off to a fast start where sports tech deals are concerned, which is indicative of the drop of pace in Q4 prompted by equity market headwinds, inflation, and economic fears. But, according to Pareek, there’s a lot of money stored up that will be spent on such endeavors before the end of the year.

That is inclusive of $5 billion in recently-launched funds which are sport-specific such as Ares Management. The largest total available for investment is a reported $38 billion from the Saudi’s Savvy Games Fund. That should see to numerous fantasy and esports deals in 2023.

“There’s a lot of money that’s been raised in the past year, and I would think a lot of that is going to be deployed this year,” Pareek explained.

“We feel fan engagement is still big, and also generative AI, generating more content based on the content you have to feed fans more of what they love … and event and ticket management. There is big innovation looming in this space which is very encouraging.”

The likes of Entain, Fanatics, Sony, Dazn, and Flutter are all expected to make purchases this year, with private equity-backed ventures Kore, TGI, and Hudl to also get in on the act.

The stock market hasn’t been as active on such a front but it’s also expected to pick up some pace during the second half of the year as IPO announcements are very likely.