Sports is increasingly being recognized as an asset class where AI improves the experience for fans, owners, and competitors alike by strengthening the underlying economics of teams rather than disrupting them. As leagues adopt more sophisticated analytics, pricing, and engagement tools, AI is bolstering professional sports, not cannibalizing it.

That shift helps explain why, in early January 2026, KKR agreed to acquire Arctos Partners for approximately $1 billion, potentially rising to $1.5 billion with performance incentives (Bloomberg). This isn’t another trophy-asset acquisition. It reflects institutional capital treating professional sports as a mature, cash-flowing asset class, increasingly enhanced by AI-driven optimization rather than threatened by it.

Deal Snapshot: KKR manages over $723 billion in assets (Reuters). They're acquiring Dallas-based Arctos Partners, which holds minority stakes in more than 20 professional sports franchises across the NFL, NBA, MLB, NHL, and MLS, plus European soccer and Formula 1 (Arctos Sports Partners). Arctos closed its Sports Partners Fund II in 2024 with over $4.1 billion in capital commitments (PitchBook).

Sports franchises have delivered approximately 1.97 times the returns of the S&P 500 since 2000, according to the Ross–Arctos Sports Franchise Index (Michigan Ross). J.P. Morgan data shows franchise values have compounded at approximately 13% annually since 1961, outpacing traditional equity markets during most time periods (J.P. Morgan Asset Management).

Predictable Cash Flows: 70% of NFL revenue comes from domestic media contracts, while the NBA generates 54% from media deals. The NFL's 11-year, $111 billion media rights deal and the NBA's $77 billion, 11-year contract with ESPN, NBCUniversal, and Amazon create revenue visibility that most PE investments can't match.

Scarcity Premium: There are only 32 NFL teams, 30 NBA teams, and 30 MLB teams. The average NFL franchise is valued at $7.2 billion in 2025, up 20% year-over-year. NBA franchises averaged a 113% increase from 2022 (Forbes NBA Valuations).

$270B – Increase in Big 5 North American sports league valuations since 2019. Available institutional capital as of Q1 2025: less than $11 billion (Deloitte Sports Investment Outlook).

$147.7B – Estimated worth of teams across MLB, NBA, MLS, and NHL with PE minority ownership stakes as of August 2024 (Sportico Valuations Database).

Capital is abundant. Assets are finite. AI widens that imbalance by improving margins without increasing supply.

A Secondaries Business: Arctos built a substantial secondaries business that allows limited partners in private equity funds to exit positions early. KKR currently lacks a dedicated secondary business. This acquisition gives them entry into one of private equity's fastest-growing segments.

Years of Relationship Capital: Arctos is the only private investment firm approved to own equity across all five major North American men's professional leagues. Building these relationships and securing regulatory approvals took years. KKR is buying a regulatory moat that can't be replicated organically.

Vertical Integration: KKR already owns Varsity Brands ($4.75 billion acquisition in 2024), serving 8 million youth athletes annually, and PlayOn! Sports, which operates high school sports streaming through the NFHS Network. The Arctos acquisition creates a vertically integrated sports investment platform spanning youth sports, high school streaming, and professional team ownership.

Competitive Positioning: Apollo Global Management and CVC Capital Partners recently formed dedicated sports divisions. KKR is establishing dominance before competitors can scale their own platforms.

Liquidity for Legacy Owners: More than half of NBA and NFL teams have considered minority-stake sales in recent years (Front Office Sports). The Patriots' Robert Kraft sold an 8% stake at a $9 billion valuation in 2025, while the Giants' Mara and Tisch families sold a combined 10% stake to Julia Koch and her family at a $10.5 billion valuation (Sportico). Founding families access liquidity without ceding operational control.

Expanded Ownership Rules: In August 2024, the NFL approved private equity funds to hold up to 10% of teams, with minimum $2 billion fund sizes and six-year holding periods (Sportico). The NBA, NHL, and MLS allow up to 30% institutional ownership (with individual funds capped at 20%), while MLB allows up to 30% total with individual funds capped at 15% (Sportico).

Operational Changes: Fenway Sports Group increased Liverpool FC's revenue over 100% by investing in training facilities, data analytics, and executive talent, raising the club's valuation to $5.4 billion from a $478 million purchase price in 2010 (Forbes Soccer Valuations).

Record Valuations in 2025: The Los Angeles Lakers sold for $10 billion to Mark Walter (ESPN). The Boston Celtics traded at a $6.1 billion valuation (Sportico). The New York Giants' minority stake sale to the Koch family implied a valuation of $10 billion (Front Office Sports).

Women's Sports Growth: The WNBA saw average franchise values rise 180% year-over-year (Sportico WNBA Valuations), with teams now valued at several hundred million dollars. The National Women's Soccer League allows majority institutional ownership, with Angel City FC selling a controlling stake at a $250 million valuation (LA Times).

Shrinking Buyer Pool: Deloitte identifies a "barbell effect" where capital flows disproportionately toward premium properties and high-growth emerging sports, leaving mid-tier franchises in challenging positions (Deloitte Sports Investment Outlook). As valuations for even average franchises push past $2–3 billion, the number of individuals capable of control purchases diminishes and AI becomes the differentiator that separates investable teams from stagnating ones. Teams that deploy advanced analytics for pricing, media monetization, player performance, injury prevention, and fan lifetime value can demonstrate superior margins, more predictable cash flows, and scalable operating models, making them materially more attractive to institutional capital than stagnating peers.

Creative Capital Structures: Within the middle market of sports, teams are increasingly turning to creative capital structures to support growth and professionalization ahead of valuation re-rating events. Minority private equity stakes, strategic lending, and phased ownership transitions are becoming more common as operators seek to scale operations, invest in infrastructure, and strengthen front-office capabilities without forcing full control sales. This trend is particularly visible across leagues such as the United Soccer League, WNBA, National Women’s Soccer League, and Minor League Baseball, where ownership groups are balancing near-term capital needs with long-term value creation.

A clear example is Angel City FC, which used a structured ownership transition to bring in institutional capital while preserving control, ultimately supporting a step-change in valuation. Similarly, several USL Championship clubs have leveraged minority investment and stadium-adjacent real estate partnerships to fund infrastructure and media growth without requiring full control sales (Angel City closes sale of controlling stake to Bay, Iger) (USL adds ex-Carlyle Group CEO as vice chair with eye toward new first division).

Geographically, these teams are often based in emerging secondary markets, where favorable demographics and limited competition for live entertainment create the conditions for disciplined, scalable growth. Paired with AI-enabled operational sophistication, this combination creates the potential for differentiated value creation relative to entry price.

Media Rights Asymmetry: Unlike the NFL and NBA, where long-term national broadcast agreements underpin franchise valuations, many middle-market sports leagues and teams are not underwritten primarily on media revenue. Instead, valuations tend to be driven by local market fundamentals, venue economics, sponsorships, and community engagement. As media distribution models continue to evolve, this dynamic creates optionality rather than dependency for investors, with potential upside that is not fully reflected at entry.

This opportunity is increasingly evident in soccer, particularly within leagues like the United Soccer League (USL). The USL is scaling a differentiated league structure, including its announced move toward promotion and relegation and the development of a three-tier professional system, with the top division expected to qualify for U.S. Soccer–sanctioned Tier 1 status. While media rights are not central to the current underwriting of these teams, continued league maturation and structural evolution could enhance long-term commercial relevance without requiring investors to rely on media upside at the outset.

Operational Sophistication Matters: Mid-tier franchises that demonstrate professional management, diversified revenue streams, and strong community engagement attract disproportionate institutional interest. Teams are creating entertainment districts around stadiums featuring restaurants, retail, apartments, and hotels (CBRE Sports & Entertainment).

Sources: Sportico, Sportico

Stadium and Mixed-Use Development: Teams are creating entertainment districts around stadiums featuring restaurants, retail, apartments, and hotels, transforming franchises into real estate platforms that generate year-round revenue beyond game days (Food & Beverage Tomorrow: F&B’s crucial role in the success of sports and entertainment complexes | CBRE).

Women's Sports Acceleration: The Gainbridge Super League launched in August 2024 as a Division One professional women’s soccer league and is increasingly attracting investors and operators seeking exposure to pro women’s soccer in the U.S., particularly as National Women's Soccer League franchise fees continue to climb. The Atlanta NWSL expansion franchise fee of more than $160 million highlights how quickly entry valuations are re-rating across the women’s game (NWSL officially awards 17th franchise to Atlanta | Reuters). More broadly, the WNBA, NWSL, and women’s soccer globally now represent the most dynamic growth segments in sports investment, driven by accelerating media demand and institutional capital inflows.

Global Expansion: European football and international markets offer diversification. The NBA is pursuing ownership groups for a potential basketball league in Europe, estimating 270 million potential basketball fans in an untapped market (CNBC). Franchises in cities like London, Berlin and Paris could sell for at least $500 million, with the NBA targeting an October 2027 launch.

Sports Infrastructure & Technology: Analytics, fan engagement, and stadium technology investments continue to drive operational improvements and new revenue streams across all leagues.

First Wave of PE Exits: Deloitte anticipates the first significant wave of PE exits in 2025–2026 (Deloitte).

Sources: Sportico, Sportico, Akin Gump Strauss Hauer & Feld LLP

The KKR–Arctos transaction marks one of the most meaningful inflection points in sports’ evolution into an institutional asset class. What began as trophy assets for wealthy individuals has matured into scaled investment platforms managed by the world’s largest alternative asset managers.

While 2024 was widely labeled “The Year of Private Equity in Sports,” 2026 appears poised to make that shift permanent. League approval processes are expanding, institutional capital is lining up to deploy, and franchise valuations continue to re-rate upward, placing the industry at a structural inflection point.

The question is no longer whether private equity belongs in sports. It is how capital, paired with AI-enabled operating leverage, may reshape franchise economics over the next decade. Unlike other industries where automation can replace core labor or diminish demand, AI in sports is largely additive. It can enhance pricing efficiency, media monetization, fan engagement, and on-field performance without reducing the scarcity, emotional attachment, or live experience that ultimately drive value. In that sense, AI has the potential to strengthen the underlying fundamentals of sports franchises, supporting long-term value creation across a finite set of assets.

This newsletter is for informational and educational purposes only and does not constitute investment advice, an offer to sell, or a solicitation of an offer to buy any securities. All financial data presented represents historical performance of specific venues and should not be construed as indicative of future results. Past performance does not guarantee future results. Investment in sports venues and related assets involves significant risk, including potential loss of principal. The behavioral economics concepts discussed are based on academic research and historical case studies that may not apply to all situations or guarantee similar outcomes. No representation is made that any investment approach discussed herein will or is likely to achieve results similar to those shown. Any investment decision should be made only after careful consideration of all relevant factors and consultation with qualified financial, tax, and legal advisors. Momentous Sports and Magnolia Hill Partners make no representations or warranties regarding the accuracy or completeness of this information and disclaim any liability arising from your use of this information. This material has not been prepared in accordance with requirements designed to ensure unbiased reporting, and there are no restrictions on trading in the securities discussed herein prior to publication. For qualified accredited investors interested in learning more about our educational materials and investment approach, please contact us directly for a confidential discussion.