Alan Waxman on the Deals Behind Sixth Street's Sports Empire | The Deal

Key Concepts

• Institutional Capital in Sports: The entry of private equity and institutional investment firms into professional sports leagues.
• Patient Capital: Investment structures that do not require the liquidation of assets within a short timeframe (5–7 years), which is critical for sports ownership.
• Real Estate Adjacency: The strategy of developing infrastructure and real estate around sports venues to justify high team valuations.
• Asymmetric Investment: An investment opportunity where the potential upside significantly outweighs the perceived risk.
• Global Expansion: The strategy of exporting sports brands to international markets to drive revenue growth.
• Scarcity Value: The economic principle that because there are a limited number of teams (e.g., 32 NFL franchises), they function as "beachfront property" with inherent value appreciation.

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1. The Sixth Street Investing Ethos

Alan Waxman, CEO of Sixth Street Partners, defines his firm’s approach as "complete flexibility." The firm operates with an "investor-first architecture," prioritizing smaller, strategy-specific funds over massive, one-size-fits-all vehicles. Their core philosophy centers on:

• Alignment: Seeking partners who share values, culture, and a clear purpose.
• Due Diligence: Evaluating potential partners by observing how they treat employees and junior staff, rather than just analyzing financial statements.
• Long-term Relationships: Viewing sports ownership as a "marriage" rather than a transactional deal.

2. The NFL and the New England Patriots Deal

Waxman detailed the process of becoming a minority investor in the New England Patriots, noting that the NFL’s entry into institutional capital was a rigorous, "proctology-exam" style process.

• The Connection: The deal was facilitated by the NFL’s CFO, Joe Sinclair, who identified a cultural match between Sixth Street and the Kraft family.
• Investment Thesis: The NFL is viewed as a "juggernaut" due to its league-wide leadership (Roger Goodell), scarcity of assets, and the combination of cash flow and appreciation.
• International Growth: Waxman emphasized that the NFL’s international expansion is a massive, under-tapped growth market, citing the success of games in international cities as proof of excess demand.

3. NBA and NWSL: Market Evolution

• NBA: Sixth Street was an early mover in the NBA (San Antonio Spurs) during the COVID-19 pandemic. Waxman notes that the league has "matured" and become more "investable" as capital has flooded in. The global demographic shift—highlighted by the fact that the last eight NBA MVPs were non-Americans—underscores the international growth potential.
• NWSL (BayFC): Sixth Street’s investment in BayFC was described as "asymmetric." Waxman noted that while they paid $53 million for an expansion team, the valuation was justified by the shift of sponsorship revenue from "impact" budgets to "CMO" (Chief Marketing Officer) budgets. He predicts that recent high-priced expansion deals (like those by Melody Hobson and Willow Bay) will prove to be smart investments in the near future.

4. Future of Institutional Control

When asked if institutional capital will ever take full control of an MLB, NBA, or NFL team, Waxman stated:

• The Prediction: It will happen in our lifetime.
• The Justification: As valuations continue to climb, the pool of individual buyers will shrink. To justify these massive valuations, leagues will require "hundreds of billions of dollars" in infrastructure and real estate investment, which institutional firms are uniquely positioned to provide.

5. Fixing Baseball: Proposed Strategies

The panel discussed potential reforms to increase the value and appeal of MLB:

• Alex Rodriguez’s Perspective: He views the current uncertainty (CBA negotiations) as a buying opportunity. He suggests that Commissioner Rob Manfred should integrate regional rights into a unified national strategy, similar to the NFL’s model.
• Alan Waxman’s Perspective: He proposed a "designated player" rule—allowing teams to pay one or two superstars unlimited salaries without disrupting the overall salary cap or competitive balance.
• Union Reform: Rodriguez argued for a more democratic distribution of revenue, ensuring that the 70–80% of revenue currently concentrated among the top 10% of players is shared more broadly.

Synthesis and Conclusion

The overarching theme of the discussion is that professional sports have transitioned from local, family-run assets to global, institutional-grade investments. The primary driver for future growth is not just the games themselves, but the real estate and infrastructure surrounding them and the globalization of the fan base. Waxman’s success is predicated on "patient capital" and a rigorous focus on cultural alignment, suggesting that the next phase of sports ownership will be defined by firms that can bridge the gap between high-valuation assets and long-term, sustainable infrastructure development.