M&A in Technology and Sports: the effects of COVID-19 on cross-border transactions

The M&A sector has seen a drop in the volume of deals in the first half of 2020,…
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The M&A sector has seen a drop in the volume of deals in the first half of 2020, 49% down since the previous year. However, more specifically, M&A transactions within technology and sport have also been hit, even following key acquisitions such as Google acquiring Fitbit, Salesforce buying Tableau, and ClickSoftware and PayPal absorbing Honey in 2019. The COVID-19 pandemic has forced the industrial world to a dramatic halt and the geopolitical landscape following cross-border tension has impacted the world of M&A.

The effect of the pandemic has affected the various sub-categories and sectors within technology and sports space differently. For example, we have seen a boost in online activity, notably with the increased reliance on e-sports to provide avid sports enthusiasts with their desired fix of entertainment. Similarly, there’s been a considerable rise in the number of M&A transactions in software, e-industries such as e-commerce, e-pay, e-learning, e-gaming and e-health, alongside data-driven industries such as cyber security, data analytics and logistics. However, the industry has seen issues arising from various fixture standstills and the financial uncertainty from growing disputes arising from broadcasting issues, player contracts and renewals, and sports in countless jurisdictions is now at a standstill.

Nonetheless, in the face of unprecedented change comes opportunity. The growth in esports, investment in Italian football and a potential merger of the ATP and WTA in Tennis has marked a slow and steady increase in the M&A sector.


Esports has gained immense traction in the UK after being hugely popular in Asia and the US, with the pandemic having a catalytic affect. On 26 August 2020, Esports gambling company, Esports Entertainment Group (“EEG”) signed a letter of intent to acquire Esports Gaming League (“EGL”), one of the largest online tournament providers. Whilst they surmounted their popularity as organisers for Call of Duty, FIFA, Fortnite and WST Snooker tournaments, they are also known for their partnership with English Football club Arsenal FC in management of PES eFootball roster for Konami’s eFootball League. EGL generated approximately $1.3million in revenue in 2019 and is positioned for a triple-digit growth over the next few years and thus, this strategic acquisition by EEG will assist the international growth of esports.

Instead of a drastic decline, the pandemic has increased the number of M&A transactions as buyers seek to capitalise on the robust growth and attractive demographics of the gaming sector. “Raven”, a leading esports apparel company has managed to secure $1.4m seed investment from a US-based private equity fund. While concerns have been raised as to the largely unregulated nature of esports, notably around broadcasting and sponsorship rights, COVID-19 has presented an increased desire to watch esports as a form of entertainment. With global esports revenues expected to grow 15.7% year-on-year to $1.1 billion in 2020 and the global esports betting market forecasted to reach $17.2 billion by year end, it’s clear that M&A transactions are not entirely out of the question.


On 17 August 2020, Italian club A.S. Roma and the Texas-based Friedkin Group announced the takeover of an 86.6% stake in the club for a reported €581m, though this was a significant decrease from the pre-pandemic figure of €750m. The sizable reduction highlights the impact of lost match-day, sponsorship and broadcasting income on the valuation of sports clubs. However, this raises the potential for privacy equity houses to broaden their search, seeking a bargain and could encourage sports clubs to find alternative sources of finance to remain afloat. The present regulatory framework of sports club ownership doesn’t restrict the nature or nationality of potential owners. As such, the future of M&A in sports post-pandemic will only pique the interest of private equity and international investors as the marketplace of sports grows to become more international.


Recent talk of a possible merger between the governing bodies of men and women’s tennis (the ATP and WTA respectively) has gained mass public support. Though a possibility, there’s a subtle awareness that a complete merge will be out of the question due to logistical and political obstacles involved in men and women’s tennis. Similarly, the cancellation of long-anticipated tournaments opens the possibility of a reasonable agreement by the respective bodies to cooperate on media, broadcasting and sponsorship rights. Many joint venture agreements are structured so that the returns each party receives are proportionate to the amount they invested. As such, the ATP may argue that they contribute substantially more in terms of media presence, fan base and prize money and refer to their revenue increase to US$139.5m last year, in order to push for greater returns.

As tennis is one of the few sports holding a separate regulatory framework for men and women, a collaborative approach could alter the operational perspectives of the two bodies, changing the overall nature of tennis to be more unilateral.

Capital efficiency

A recent study by EY highlighted that 56% of cross-industry individuals expect to see M&A improve in the short-term following COVID-19. Well-capitalised companies will use M&A to accelerate the rate of their recovery. Thus, greater focus is being placed on capital structures, capital efficiency and funding models. Capital structures will need to be reformed and executives are increasing their regular strategic reviews to address the consistent turbulence across the market.

Outlook for M&A in sports post-COVID-19

With the pandemic causing a clear disruption to the sports and media industries, the long-term consequences will be that transactions will continue despite the suspension of sports competitions. From a legal perspective, there could be a great shift in deal structures, notably around increased equity funding as investors find it increasingly difficult to secure debt finance. Further, the possible changes to contracts to include COVID-19 specific Material Adverse Change (“MAC”) MAC clauses will pose an interesting development to navigate the M&A landscape in the sports industry. Sports are known for their resilience and tenacity. As such, any business looking to engage in future M&A transactions will have to incorporate these well-established traits into their strategic planning post-COVID-19.

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