This is Buying Sandlot — the only newsletter that focuses solely on the business of youth sports.
Huge send today. No time for pleasantries.
Let’s get to it.
In the email today:
📝 Breaking Down The PlayMetrics-SportsEngine Deal
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.
🏛️ Youth Sports Bill Coming In Congress
More Perfect Union — a progressive nonprofit news outlet — posted a 15-minute video on Friday titled “How Private Equity Destroyed Youth Sports.”
The report played all the usual notes, plus some news — a trio of Congressional Democrats plan to introduce legislation aimed at youth sports costs later this month.
The Let Kids Play Act will be sponsored by New Jersey Sen. Cory Booker, Connecticut Sen. Chris Murphy and Pennsylvania Rep. Chris Deluzio. All three have spoken out on youth sports matters.
The bill will:
1) Call for a ban on private equity involvement in youth sports.
2) Seek to prohibit “stay to play” practices.
3) Aim to redirect financial resources back into community sports.
The MPU report also features American Economic Liberties Project’s Katherine Van Dyke — not an elected official, but clearly one of the voices drawing the playbook being used.
The former FTC attorney represented private gyms in a lawsuit against Varsity Brands that secured a $43.5M settlement.
Van Dyke also called on Congress to use antitrust law to curb PE’s involvement in youth sports during House testimony last year. She was at Deluzio’s recent field hearing (also featured in the report) in his Pittsburgh-area district and is set to speak at this week’s Project Play Summit in Boston.
Also: The Michigan attorney general’s office has reportedly opened an antitrust investigation into the state’s youth hockey industry and stay-to-play tournaments. A public radio affiliate in the state obtained a questionnaire sent to a youth hockey parent that said prior Buying Sandlot sponsor Black Bear Sports Group is a subject of the probe, but is not the sole focus. BBSG told the radio station it was unaware of any investigation.
⚾️ GameChanger Adds To C-Suite
Vivek Bedi is the Dick’s Sporting Goods-owned platform’s new chief product and technology officer.
The Goldman Sachs veteran previously led Northwestern Mutual’s digital transformation and was a chief product officer for several SaaS and private equity-backed companies. He is also an author, educator and speaker on product, AI and digital transformation.
Bedi will lead engineering, platform strategy and product management for GameChanger.
🧠 Report: Concussion Protocol Compliance Lags
Headcheck Health -- a Canadian company that builds concussion management software for youth, pro and college sports organizations -- recently published a report that found many youth orgs struggle to maintain compliance with established protocols.
Survey of 17 minor hockey associations in Canada
88% rated overall safety as good
70% rate adherence to protocols as good
59% felt compliance tracking and reporting was good
65% say volunteers are sufficiently trained
47% cited communication issues with protocols
"When you have a serious injury like a concussion, you have to make sure that every single step of these protocols gets followed for every player, by every team, every single time. And the most effective way to do that is actually just to follow the protocols," Headcheck CEO Harrison Brown told Buying Sandlot.
"It's the dirtiest secret, I would say, in youth sports. Every single organization, governing body, sport is going to say, 'It's safe to drop your kid off because on our website, we've got this 40-page document.' But nobody asked the second question -- is it actually getting followed?"
Brown said several pending lawsuits in the United Kingdom -- a global insurance hub -- will likely have a knock-on effect in North American within the next year.
"As soon as those work their ways through the courts, it's going to financially change the risk profile of concussion," he said. "We're already seeing a lot of insurance providers are not offering coverage for concussion or they're removing it and saying, 'Hey, if you want concussion covered in your policy, it's going to cost you an extra certain amount of premium.' And those rates are going to go up. ... Right now there is no financial element that's driving it [at the youth level]."
Brown believes the onus falls with organizations -- and that improved adherence to proper protocols -- data collection, reporting, training -- will eventually reduce the cost of concussion-related insurance. Headcheck has built with the goal of interoperability with major management platforms and is offering free audits for organizations.
"This report highlights a pretty significant gap in terms of execution of arguably the most important policy that has to be followed to keep kids safe," Brown said. "The cost is going to go up to actually manage the risk. It's going to force people to actually manage it properly. And then it's going to come down because it'll be part of the culture."
Quick Take: Kyle has written it many times — safety has become table stakes in youth sports. It’s the next major boom space for the industry. And concussion management figures to be one of the more prominent areas moving forward.
🤦♂️ Parents Behaving Badly
A sheriff’s deputy and an umpire threw hands yesterday at a 14U baseball game in Mississippi.
Both men were charged with “fighting not in self-defense.”
The deputy’s son also allegedly punched the umpire. It is not clear if he was charged.
The tournament operator said everyone involved in the altercation has a lifetime ban from the platform’s events.
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