It’s not always easy being a private equity executive, especially if you find yourself thrust unwillingly into the public spotlight. Back in 2007, Blackstone’s David Blitzer was one of those dragged before the UK government’s Treasury Select Committee to explain, inter alia, why he and his brethren were paying less tax than their cleaners.
But there are upsides. Fast forward four years, and Blitzer has just become a part-owner of the Philadelphia 76ers, one of the oldest and most famous teams in the NBA (this is US basketball we’re talking here, for the uninitiated). The ‘Sixers’, alma mater of legends of the game like Wilt ‘The Stilt’ Chamberlain, Julius ‘Dr. J’ Erving, and ‘Sir’ Charles Barkley, has just been taken over by an investor group that includes Blitzer and is led by another industry bigwig – Apollo founder Joshua Harris.
In true private equity style, the exact terms of the deal were not disclosed. But rumour has it that the new owners paid about $280 million to buy the ‘franchise’ – and the announcement made it very clear that these were personal investments by Harris, Blitzer and co., with no input from their respective employers. Which just goes to show how far all those carry cheques and management fees can go when you’re at the top of the private equity game. (In fact, Forbes magazine reckons Harris has a net worth of about $1.5 billion, so forking out north of $100 million for a basketball team is a mere bagatelle).
Buying sports teams isn’t always a bed of roses; the pair should ask fellow buyout veteran Tom Hicks, fingers still ablaze from his ill-fated spell in charge of Liverpool FC, if they have any doubts on that score. And basketball is a tough place to make money: most NBA teams are loss-making, not least because of the extortionate sums they shell out for their top stars.
However, this doesn’t seem to have stopped a string of normally perfectly sensible private equity types from splashing the cash in this area: Silver Lake’s Jim Davidson co-owns the Golden State Warriors (along with Joe Lacob of Kleiner Perkins), while his co-founders Glenn Hutchins and Dave Roux co-own the Boston Celtics (with Bain Capital’s Steve Pagliuca), and Platinum Equity founder Tom Gores chose to spend some of his estimated $2.4 billion fortune on the Detroit Pistons (bravely, in First Round’s humble opinion). Perhaps they just figure that if you’ve got a billion dollars burning a hole in your pocket, it’s a more interesting way of spending your money than most. After all, how many condos in the Hamptons can one financier use?
Sixers’ fans will judge their new owners purely on results, of course. But as private equity veterans, they should at least be used to that. And as First Round recalls, Blitzer put up a sterling defence before the Select Committee back in the day. If he can bring a similar ethos to the playing staff at his new trophy asset, the Sixers might have a chance of getting past the first round of the play-offs this season.