PlayMetrics has acquired SportsEngine, marking a significant consolidation move among major youth sports management platforms.
The deal was finalized about six months after Comcast cable network spinoff Versant first signaled a desire to offload SportEngine — and about 11 months after Genstar Capital acquired PlayMetrics and merged it with Stack Sports.
The press release said that PlayMetrics will take on “substantially all the assets of SportsEngine” including “SportsEngine's full suite of software and payments products, including its club, league, tournament, and studio management platforms.”
PlayMetrics CEO Mike Doernberg indicated that SE customers will be moved over to PlayMetrics: "PlayMetrics has redefined what technology can do for youth sports — and this acquisition accelerates that mission further and faster than we could before. SportsEngine customers can expect the same great service they rely on today and will gain access to the full depth of technology offerings PlayMetrics has built.”
Terms of the deal were not disclosed, but a Bloomberg article reiterated that SportsEngine’s advisor, Lazard, was seeking $400M-$500M. This was perhaps floated as an anchoring mechanism, as SportsEngine was initially reported to be valued at $150M-$200M.
We’re hearing things landed much closer to the latter.
Here’s what we learned over the weekend:
The deal was in the ballpark of $150M, or only 1x-2x revenues — well short of the publicly-floated asking price
Revenue: SE’s gross revenue was said to be north of $120M, but net revenue was substantially under $100M
SE’s profitable background screening tool, NCSI, was not included the deal and will likely be sold off separately
SportsEngine’s customer base has remained largely flat, or even down slightly, over the last couple years, with bottom line numbers slightly over or under break-even, depending on how things were accounted for
NCSI (not included in the deal) accounted for much of the profit
PlayMetrics is likely to re-platform SE’s customers onto PlayMetrics
🧪 Our analysis:
This is not a great comp for the industry, especially other tech platforms. On the heels of LiveBarn selling for $400M (off a reported $80M in revenue), SportsEngine, one of the largest platforms in terms of customers in youth sports, was seeking a similar valuation, but appears to have landed nowhere close. At face value, this is a shocking valuation. LiveBarn is a different business and profitable, but the difference between 5x and what SportsEngine got is dramatic.
That said, SportsEngine was uniquely impaired given its substantial market share, but significant expenses. It’s also tough to innovate when going through an ownership change (NBC spinning out Versant) and a sale process. All this while other pure-play platforms were doubling down or raising capital. In other words, SE may not be indicative of the state of other youth sports registration platform businesses. It basically had to go to a strategic buyer since it would have been difficult for the business to stand on its own under a new buyer who couldn’t have used it to bolster larger platform ambitions the way PlayMetrics can.
PlayMetrics is the clear winner here, as it gains a substantial customer base on favorable terms. With SE customers, it will likely become the largest youth sports management platform.
It also gets SE’s live-streaming and video capabilities, and the recent AI enhancements through its partnership with Pixellot.
While PlayMetrics will certainly have the advantage, a mandatory re-platforming of SportsEngine customers could present an opportunity for competitors in an industry where switching costs are high. SportsEngine has lots of concentration around a small handful of customers. Operators may evaluate all options.
It’s becoming clear that a handful of scaled platforms will emerge in this segment, and that standalone software may have diminishing returns. Expect furious competition to build the biggest tech flywheel among a handful of competitors. The Platform Wars™ are real.
Ropes & Gray was PlayMetrics’ legal counsel on the deal; LionTree Advisors was its exclusive financial advisor. Gibson Dunn was legal counsel for Versant and Lazard was its exclusive financial advisor.
Last week, on the heels of Fastbreak CEO John Stewart saying “technology is basically a commodity that has no real value. That’s not what makes a company”, I wrote we may soon learn how true that was if SportsEngine was sold at a discount.
Here we are. I sense a divergence. On one side, you have scaled platform players that will be able to command premium valuations as switching costs will become too high for many operators. And then you have software companies that will be re-rated based only on the value of their current customers.
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