Peters Says to Expect Major Changes to the Organization Before End of Season

[Stoner]

I somehow don't see selling a minority stake as a "major change to the organization." What would change?

Major staff promotions sounds more like it.

[Stoner]

1 hour ago, nfreeman said:

These seem like the 2 most likely possibilities.

I really hope it’s the latter, as there is a very high risk that the former will illuminate for many here the old saying about being careful what you wish for.

I think/am hoping that the Sabres’ value is sufficiently depressed right so as to make TP decide not to sell.

As a related point, if Petey is right about this, he clearly becomes (if he’s not already) the Sabres media guy with the best sources, innit?

Who, pray tell, wished for 20% of the team to be sold to a private equity firm?

[Thorner]

8 minutes ago, PASabreFan said:

I somehow don't see selling a minority stake as a "major change to the organization." What would change?

Major staff promotions sounds more like it.

It's probably another top-shelf analytics guru being added that's well respected in the community. 

[Taro T]

2 hours ago, Porous Five Hole said:

You guys…Terry is worth five billion dollars. This isn’t about cashing out 150 million via 20% sale.  
 

Also, throwing their commitment to the Sabres and the region out the window when asking for $700 million for a football stadium from the county and the state would be crazy. 
 

The Bills more than cover any Sabres losses.  

Hochul wants the stadium deal done sooner than later.  Would be surprised if it isn't done before the primaries.

After that deal is set, any/all announcements on the Sabres could be on the table.

[nucci]

3 hours ago, bunomatic said:

Hate this news . My first thought based on the Pegulas track record is Terry has grown impatient and wants a reset. Not likely but I wouldn’t be surprised.

isn't that what this season is?

[Pimlach]

1 hour ago, pi2000 said:

Fwiw, one of my sources says there are no plans to remove the GM title from Adams.

I hope that doesn’t mean Karmanos is leaving.  

[nfreeman]

1 hour ago, PASabreFan said:

I somehow don't see selling a minority stake as a "major change to the organization." What would change?

Major staff promotions sounds more like it.

1 hour ago, PASabreFan said:

Who, pray tell, wished for 20% of the team to be sold to a private equity firm?

If a private equity firm buys into a sports franchise -- or anything else, for that matter -- as a 20% to 30% owner, it doesn't just sit quietly in the corner.  It has rights and plenty of input into operations.  This would absolutely be a major change to the organization.

In many, if not most, cases the deal for the minority stake will include terms for a potential purchase of the whole thing.  It's at least 50/50 that the buyer would end up being the new owner of the team within a few years.  And they will have zero interest in funding $10MM per year in operating losses.

Don't kid yourself.

 

[bunomatic]

29 minutes ago, nucci said:

isn't that what this season is?

One among many. Which is what frightens me. Let this plan play out before you (Terry) fire everyone and start it all again.

[Thorner]

Makes me glad Bettman is comish, honestly. 

[Weave]

48 minutes ago, nfreeman said:

If a private equity firm buys into a sports franchise -- or anything else, for that matter -- as a 20% to 30% owner, it doesn't just sit quietly in the corner.  It has rights and plenty of input into operations.  This would absolutely be a major change to the organization.

In many, if not most, cases the deal for the minority stake will include terms for a potential purchase of the whole thing.  It's at least 50/50 that the buyer would end up being the new owner of the team within a few years.  And they will have zero interest in funding $10MM per year in operating losses.

Don't kid yourself.

 

An equity firm would make OSP look like a Karen loose in the shopping district on Black Friday.

[LabattBlue]

5 hours ago, Taro T said:

Considering what the league just approved regarding private equity minor partnerships, would expect something along the lines of a 20-30% stake getting sold.

Scary thought. 😞

[Porous Five Hole]

3 hours ago, SabresVet said:

They two franchises may be under the same PSE roof, but no business is going to look to one side of the house to cover another.  I'm 100% confident they're viewing both teams on their own and as such, that each stands on their own financially.

At the same time, the prospect of building a new Bills stadium is impacting their financial decision making with the Sabres.  They can't keep losing millions as they did in 2019-20:

https://subscribe.buffalonews.com/e/limit-reached-bn?returnURL=https://buffalonews.com/sports/sabres/sabres-lost-10-9-million-value-dropped-in-2020-according-to-forbes/article_9e2c7828-3a3b-11eb-b9e4-17ec3fa4b12d.html

I could definitely see them selling part of the Sabres to provide some liquidity to put toward a new stadium that, despite an initial proposal, will cost them I'm guessing a couple hundred million.  Especially now that 55% of the Key Bank Arena isn't selling out on average each home game.  

I respect your take, but liquidity isn’t an issue for T Pegs. 
If your take is to not cross streams and the Sabres are cashing out to invest in the county owned Key Bank facility…I could make a case for that. 

[JohnC]

1 hour ago, nfreeman said:

If a private equity firm buys into a sports franchise -- or anything else, for that matter -- as a 20% to 30% owner, it doesn't just sit quietly in the corner.  It has rights and plenty of input into operations.  This would absolutely be a major change to the organization.

In many, if not most, cases the deal for the minority stake will include terms for a potential purchase of the whole thing.  It's at least 50/50 that the buyer would end up being the new owner of the team within a few years.  And they will have zero interest in funding $10MM per year in operating losses.

Don't kid yourself.

 

A minority owner in a sports franchise has little say in the franchise operation because the majority owner has nearly complete control on how it is run unless the majority owner wants to yield that authority. (I don't see that happening under the Pegulas. My opinion.)  A good example of that is that the two minority owners of the Redskins sold their shares to Dan Snyder, the majority owner, because they had no influence in how the franchise was to be run. This is an example where the majority owner had the authority and the minority owners had little to none. The league made an exception with Dan Snyder's buyout by allowing him to borrow beyond the limit allowed in the league so he could buy the minority shares with borrowed money. The league made an exception in this case because it wanted the conflict between the minority share majority owners to end. 

However, I wouldn't be surprised if there would be some sell-off of the franchise in order to finance the upgrading of the arena which the Pegulas control. 

With respect to a future purchase clause to buy it all depends on what the contract states. (As you noted.)  

[Weave]

33 minutes ago, JohnC said:

A minority owner in a sports franchise has little say in the franchise operation because the majority owner has nearly complete control on how it is run unless the majority owner wants to yield that authority. (I don't see that happening under the Pegulas. My opinion.)  A good example of that is that the two minority owners of the Redskins sold their shares to Dan Snyder, the majority owner, because they had no influence in how the franchise was to be run. This is an example where the majority owner had the authority and the minority owners had little to none. The league made an exception with Dan Snyder's buyout by allowing him to borrow beyond the limit allowed in the league so he could buy the minority shares with borrowed money. The league made an exception in this case because it wanted the conflict between the minority share majority owners to end. 

However, I wouldn't be surprised if there would be some sell-off of the franchise in order to finance the upgrading of the arena which the Pegulas control. 

With respect to a future purchase clause to buy it all depends on what the contract states. (As you noted.)  

A private equity firm would almost certainly demand some level of control as a condition of sale.

[SDS]

17 minutes ago, Weave said:

A private equity firm would almost certainly demand some level of control as a condition of sale.

Why? Isn’t it the case that most franchises just increase in value over time? Why not just a long term investment?

[Weave]

5 minutes ago, SDS said:

Why? Isn’t it the case that most franchises just increase in value over time? Why not just a long term investment?

I was thinking more along the lines of my experiences working for companies that were sold to private equity firms.  You make a good point.

[Curt]

37 minutes ago, Weave said:

A private equity firm would almost certainly demand some level of control as a condition of sale.

I’m not so sure.  Some private equity firms have already bought into multiple teams.  I believe one has a 20% stake in 3 or 4 teams already.  They most certainly don’t have control over the operations of multiple teams.

I think that is why there are limits on the % that an equity firm can own.  They aren’t allowed to by enough to have any real control.

[LGR4GM]

3 hours ago, nfreeman said:

If a private equity firm buys into a sports franchise -- or anything else, for that matter -- as a 20% to 30% owner, it doesn't just sit quietly in the corner.  It has rights and plenty of input into operations.  This would absolutely be a major change to the organization.

In many, if not most, cases the deal for the minority stake will include terms for a potential purchase of the whole thing.  It's at least 50/50 that the buyer would end up being the new owner of the team within a few years.  And they will have zero interest in funding $10MM per year in operating losses.

Don't kid yourself.

 

They can't become majority owners of its a equity firm, isn't that part of this

[Weave]

26 minutes ago, Curt said:

I’m not so sure.  Some private equity firms have already bought into multiple teams.  I believe one has a 20% stake in 3 or 4 teams already.  They most certainly don’t have control over the operations of multiple teams.

I think that is why there are limits on the % that an equity firm can own.  They aren’t allowed to by enough to have any real control.

That would most certainly be a negotiating point in any purchase.  Minority ownership =/= no influence unless it is negotiated that way.

*no idea if there is already a league rule regarding this.

[woods-racer]

I believe that Peters is onto something. He's been good about getting a scoop and it coming to fruition. Way to vague though for me to obsess over at this time.

[PerreaultForever]

Pat LaFontaine coming in as senior advisor 🙂

I don't see how selling a minority share is an "organizational change" and I doubt Terry would give control to a minority owner so I doubt any of that is true.

Karmanos to Vancouver is a possible I suppose. Higher status for him to stay? Maybe.  Given the history of Terry's team I doubt whatever change this is will be anything I'd be on board with but you never know. Maybe finally after all this time he'll admit he's been wrong and change it all the right way. But I doubt it.  

[spndnchz]

9 hours ago, LGR4GM said:

I bet they sell 30% to an equity firm and use that money for either the Bills or to fix keybank

Not a bad investment. 

[JohnC]

13 hours ago, Weave said:

A private equity firm would almost certainly demand some level of control as a condition of sale.

The majority owner of a sports franchise would never agree to such a condition unless he/she no longer had an interest in running the franchise.  In that situation the owners would simply sell the business, or at least the majority stake. That's not the case with the Pegulas. 

[Weave]

43 minutes ago, JohnC said:

The majority owner of a sports franchise would never agree to such a condition unless he/she no longer had an interest in running the franchise.  In that situation the owners would simply sell the business, or at least the majority stake. That's not the case with the Pegulas. 

I'm not suggesting day-to-day operation of the franchise.  I'm talking about influencing business decisions.  100's of millions of dollars are rarely given up without some level of influence on the outcome.  Granted, a major professional sports team may be the one singular exception based on historical team values, but I wouldn't expect an organization who's business plan is based solely on return on investment to take a passive stance.

Edited January 16, 2022 by Weave

[woods-racer]

4 minutes ago, Weave said:

I'm not suggesting day-to-day operation of the franchise.  I'm talking about influencing business decisions.  100's of millions of dollars are rarely given up without some level of influence on the outcome.  Granted, a major professional sports team may be the one singular exception based on historical team values, but I wouldn't expect an organization who's business plan is based solely on return on investment to take a passive stance.

I can see an investment group investing in something that they believe needs none of their input for their investment to grow. If an investment group does see where many clubs are lack luster in their hospitality portion of the business and want more control of the game day experience, or if the club owns their venue all events at the arena, that will attract proactive investors.