Donald Erickson, ASA, managing director of Mercer Capital, spoke to the Detroit Free Press, part of the USA Today Network, regarding the current trend of heightened valuations in professional baseball teams. This is particularly timely for the heirs of the Detroit Tigers, whose owner, Mike Ilitch, passed away in early February.
Erickson, a sports valuation expert, offered insight into current professional sports industry trends that explain higher valuations:
Erickson of Mercer Capital said about 80% of the recent valuation surge for Major League teams is from more lucrative TV deals. The rest is from better stadium revenues, including more teams getting to keep 100% of the money generated at new stadiums built with public assistance…The crucial number for determining the Tigers’ potential resale value is the size of the next local TV contract, Erickson said. “The real question will be, in today’s market, what can they renew it for in the next several year?”
Regarding Ilitch’s heirs, Erickson said that “there are various and complex arrangements that families can use to shield the inheritance of a sports team from a massive tax bill, such as trusts and minority ownership stakes.”
Mercer Capital is one of the leaders in sports valuation and related stadium advisory in the country and has considerable interaction and experience with management of the various professional sports leagues. Mercer Capital has also been a leading provider of objective valuations for tax compliance since 1982.
