novelno Chapter 232 Acquiring the Team
Chapter 232 Acquiring the Team
Chapter 232 Acquiring the Team
The office's central air conditioning was tirelessly blowing cool air. The two were chatting when they heard a creak, and the office door was pushed open forcefully.
Ralph walked in looking energetic, the buttons on his suit cuffs gleaming, and even his steps exuding vigor.
"Sit down quickly," Ernst said with a smile and a beckoning gesture.
Of all the companies in Ernst Asset Management, the private equity sector is the most successful.
HVAC and the immigration investment program that is about to be launched are large projects, and many other small and medium-sized projects are also progressing steadily.
For example, the sports industry was one of the reasons Ernst specifically flew to New York this time.
From the daily briefings his secretary sent him, Ernst learned that his company was actually interested in the New York Knicks and was exploring the possibility of an acquisition, so he planned to get involved.
When you have money, diversification is key; you can't put all your eggs in one basket.
Stocks and real estate are child's play; they're entry-level investments.
Who among truly powerful tycoons wouldn't consider making more prestigious investments? Like buying a football team.
It allows you to make money and gain prestige within your social circle.
Moreover, the NBA is currently in its golden early stages of explosive growth. Jordan's emergence has made basketball a global phenomenon, and the league's commercial value has skyrocketed. Acquiring a team now is practically like buying a goose that lays golden eggs.
Moreover, the intangible influence brought by the team is incomparable to that of ordinary industries. Otherwise, how could we say that culture and sports are inseparable? Endorsements by star players, sales of team merchandise, and even the city's exposure are all invisible assets.
Once Ralph was seated on the sofa in the meeting room, Ernst cut to the chase and slammed the briefing on the table. "I've reviewed your private equity department's recent report. Are you planning to acquire the New York Knicks?"
When Ralph heard this, he was taken aback for a moment, but then he felt it was only natural.
In the United States, the sports industry has begun to develop into a gathering place for big shots, either those who own a team like a toy or those who are fervent fans of a certain type of event. It is not surprising that Ernst has taken notice of this.
He nodded. "That's right. As you know, Jordan has raised the commercial value of the NBA to new heights in recent years, and the league has started to expand globally —"
He first counted the NBA's revenue growth on his fingers, and then talked about the current sports market environment.
The main reason is that the end of the Cold War allowed the entire West to relax its guard, and the whole world began to consume in large quantities. Sports and entertainment are undoubtedly two areas with great growth potential.
"That's why we're particularly optimistic about a big market like New York, and after doing our research, we found that the Knicks are willing to be sold," Ralph said, adding, "Although the asking price isn't low right now, there are plenty of people in New York who have money and time to spare, and sports are one of the few ways they can relax. This market is definitely a sure thing."
Ernst already knew exactly what was going on; how could he not know how hot the market was?
In his previous life, he had read many reports about the Knicks, such as how after Dolan bought the team, the Knicks only made the playoffs nine times in twenty-four years, and all of them were eliminated in the first round. Even so, tickets, which cost at least a thousand dollars each, were sold out in twenty minutes.
In contrast, the Nets next door had assembled a super trio, yet tickets, starting at a minimum of $100, took two days to sell out.
This contrast practically screams the New Yorkers' obsession with the Knicks.
However, when it comes to why Americans are so crazy about sports events, there is another very important point: the Western prohibition law.
The West's control over alcohol is abnormal, or rather, it's utterly ridiculous.
Many European countries have semi-banned alcohol policies; after 6 p.m., you can't find a place to buy alcohol.
While the US is slightly more lenient, its open bottle law is still quite unusual.
Once the bottle of alcohol is opened, it is illegal, whether you are in a public place or in your car.
At best, they'll make you pour out all the alcohol; at worst, they'll fine you a thousand dollars.
Americans have very few places to drink alcohol. Apart from bars and restaurants, outdoor sports fields are an exception. However, there is a strange rule that drinks at sports fields must be served in plastic cups.
Ernst always thought it was ridiculous when he wanted to drink. You can drink tobacco on the street and it's not illegal, but opening a bottle of beer is illegal?
This is why, in the West, the only places where you can meet up with friends for a couple of drinks are bars and sports fields.
"Thirty million US dollars, that's not a high price," Ernst said, stroking his chin with a relaxed tone.
Twenty years from now, this team's value will increase a hundredfold. Spending 30 million now is practically a steal.
But as soon as he said that, Ralph was completely stunned, his eyes widening like saucers. "Thirty million dollars? Who told you about thirty million dollars?"
Now it was Ernst's turn to be dumbfounded. Didn't the reports he saw in his previous life all say that Dolan spent 30 million to acquire the Knicks? Were those marketing accounts making things up again?
He swallowed hard and asked, "How much is that?"
Ralph replied, "This acquisition is expected to exceed $6.5 million, and we plan to leverage it. And it's not without competition; Charles Dolan of American Cable Systems is also eyeing the Knicks, and I heard he wants to buy them back for his son to manage."
At this point, he seemed to remember something. "The thirty million dollars you mentioned, you must be referring to the Knicks basketball team, right? There are indeed reports that Charles Dolan wants to spend thirty million dollars to buy the team itself."
And then? Ernst was even more confused. He stared at Ralph, his face full of expressions that said, "I don't understand."
Weren't we just talking about the Knicks? Are there two Knicks?
When Ralph saw Ernst's expression, he knew that Ernst didn't understand the situation of the Knicks, so he quickly explained, "When I say Knicks, I mean the whole asset including Madison Square Garden, not just the basketball team."
"Madison Square Garden has an excellent location. After the acquisition, a little money will be invested in renovations and upgrades, and a large sum of money can be made every year just from ticket sales..."
""
Ernst was stunned for a long time before he finally figured it out. So, thirty million dollars was only enough to buy a spot on the Knicks team, which was just an entry ticket to the NBA.
When Ralph mentioned the Knicks, he was referring to the overall sale price of the stadium and entertainment assets.
I told you, Alexander spent $85 million to buy the Rockets in 1993, how could the Knicks only spend $30 million in 1997? Damn marketing accounts.
Seeing that Ernst understood, Ralph continued to introduce the Knicks' assets: "Besides Madison Square Garden, the Knicks also own concert halls, theaters, and an entertainment company. They hold hundreds of shows in the stadium every year, which are all sure-fire money-makers."
Ernst became increasingly interested as he listened. He leaned forward and asked, "If it's a leveraged buyout, how much cash would be needed? And what would the final price be?"
The principle of leveraged buyouts is very simple: it involves agreeing with the bank to use the Knicks as collateral.
If the acquisition of the Knicks is successful, the acquiring party will only need to contribute a small portion of the funds, with the majority coming from banks.
This debt will fall on the Knicks' shoulders, and they will need to repay it using their annual profits.
"For leveraged acquisitions, the funds required should be around 20% of the acquisition price."
Ralph glanced at Ernst and said meaningfully, "If you were to acquire it personally, you might not have to pay a single penny."
Ernst narrowed his eyes, then laughed heartily.
If he were willing to use other companies' stocks as collateral, there would indeed be plenty of banks willing to help him acquire them outright, and they might even offer him a relatively low interest rate.
Ernst did not express his opinion, but raised his hand to signal the other party to continue.
"As for the transaction price, given the competition from Charles Dolan, it will most likely exceed $700 million, but it certainly won't exceed $800 million."
Ralph paused, then added, "While Charles Dolan's financial strength is not weak, the $800 million is significantly more than expected."
"However, if they want to acquire the Knicks, they need to finalize the plan as soon as possible. If this old guy is determined to buy the Knicks, it is possible that he will raise funds and offer a higher price."
"Eight hundred million dollars—" Ernst muttered the number, thinking it was acceptable.
Now that he had become a famous American tycoon, he felt it was time to start enjoying life, and he decided to start by buying himself this big toy.
Moreover, an asset like the Knicks is both profitable and prestigious, making it an ideal fit.
He picked up his coffee, took a sip, and his eyes showed a newfound confidence. "You guys take charge of this. Try your best to bring the Knicks on."
Ralph smiled and said, "Then I'll send you the detailed acquisition plan later."
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