The Milwaukee Bucks concluded the 2013–14 National Basketball Association season Wednesday night with a loss to the Atlanta Hawks that gave the team a league-worst 15-67 record that qualifies as the poorest performance in franchise history.
The team fared much better away from the court earlier in the day, as former U.S. Sen. Herb Kohl—who bought the Bucks for just $18 million in 1985—announced that he has agreed to sell the squad to New York financiers Marc Lasry and Wesley Edens for $550 million. Forbes reports that the price is a record sum for the sale of an NBA team.
The two hedge fund managers have publicly pledged to keep the struggling Bucks in Milwaukee, a promise that reportedly helped them win a bidding war for a franchise that—like many North American professional sports team—has seen its value soar in recent years amid a boom in media deals for the broadcast rights to games.
Kohl and the Bucks have turned to a pair of Milwaukee-based Am Law 200 firms for counsel on the transaction, which requires the approval of the NBA’s board of governors.
Quarles & Brady corporate partners Daniel Conley, Patrick Goebel and Nathan Mathews, all of whom are based in Milwaukee, are taking the lead for Kohl on the deal. Conley says his firm has long served as personal counsel to Kohl, who made his fortune with the Kohl’s department store chain and retired from the Senate in 2011. Meanwhile, Foley & Lardner, which has long-standing ties to the 46-year-old franchise, is representing the Bucks in connection with the sale.
Corporate partners Patrick Quick and Kevin Schulz are leading a Foley team working on the transaction that includes tax partner Timothy Voigtman, trusts and estates partner George Dionisopoulos, employee benefits partner Belinda Morgan, corporate partner Patricia Lane, sports industry cochair Irwin Raij, senior antitrust counsel H. Holden Brooks, senior tax counsel Jason Kohout, senior corporate counsel Spencer Moats and associates Garrett Bishop, Nicholas Faleris, Corey Sheahan and G. Tyler Parramore.
Ronald Walter, a retired Foley partner who first began advising the Bucks in 1992, serves as the Bucks’ executive vice president of business administration. He is working on the proposed sale of the franchise along with Bucks chief financial officer Michael Burr, who is also an attorney, and senior director for legal affairs Michael Sneathern.
Over the years, Foley has represented the Bucks in a variety of matters, including the team’s signing of 2007 first-round draft pick Yi Jianlian out of China—a move the team came to regret when the 7-foot center flopped in the NBA before returning to his homeland.
Drafting Yi is just one of many missteps the Bucks have made in recent years on the way to becoming the least valuable of the NBA’s 30 teams, according to a January report in Forbes that pegged the franchise’s worth at $405 million. Despite its last-place ranking on that list, the Bucks drew the interest of at least nine wealthy bidders once the 79-year-old Kohl hired former Manatt, Phelps & Phillips managing partner-turned-investment banker Stephen Greenberg to advise on a potential sale of the team.
The $550 million that Lasry and Edens have agreed to pay for the poor-performing franchise represents a 36 percent premium above Forbes’ valuation. Why so much for the NBA’s worst team? Speaking generally, Foley’s Schulz, who has made presentations about the rising value of pro franchises, says there are several explanations for the whopping sums changing hands in the increasingly exclusive—and profitable—club of sports team owners.
“In many ways sports are DVR-proof,” says Schulz, noting the push by major media companies to control the kind of live content that is immune to viewers’ ability to skip past paid advertising. “Watching a game on delay is tough to do—you might find out the score—and sports itself has a built-in demographic of young males that appeals to key advertisers.”
Besides providing access to content and consumers that programmers crave, Schulz says owning a pro team bestows a kind of prestige that appeals to certain big spenders.
Following the estimated $550 million sale of the Washington Wizards and their home arena and the $450 million sale of the Golden State Warriors in 2010, the league saw a half-dozen other teams switch hands. Two separate groups of private equity titans paid $280 million for the Philadelphia 76ers and $325 million for the Detroit Pistons in 2011. The NBA sold the New Orleans Hornets for $338 million in 2012 and the Memphis Grizzlies went for $377 million later that year. Last year software entrepreneur Vivek Ranadive paid $534 million for the Sacramento Kings.
The NBA, which earlier this year replaced longtime commissioner and former Proskauer Rose partner David Stern with former Cravath, Swaine & Moore associate Adam Silver, has its eyes set on a potentially lucrative new national television contract in 2017. (Silver is also the son of late Proskauer chair Edward Silver.) Teams are also free to negotiate their own local broadcast deals.
While Schulz notes that the Bucks sale is the first NBA deal on which Foley has worked in recent years, the firm has substantial firsthand experience when it comes to the rising value of the teams in other major leagues. Among its most notable sports-related engagements is advising Major League Baseball’s Los Angeles Dodgers on the team’s reported $7 billion media rights deal with Time Warner Cable.
Foley also handled the $223 million sale of MLB’s Milwaukee Brewers in 2005; the $845 million sale of the Chicago Cubs and their historic ballpark Wrigley Field in 2009; the $593 million sale of the Texas Rangers out of bankruptcy in 2010; and the record-setting $2.15 billion bankruptcy sale of the Dodgers in 2012. Foley also advised on the $760 million sale of the National Football League’s Jacksonville Jaguars in 2011.
Representing the Bucks’ buyers is a Paul, Weiss, Rifkind, Wharton & Garrison team led by deputy corporate practice chair Ariel Deckelbaum, corporate partner Kenneth Schneider, tax partner David Sicular and associates Robert Hilton, Stephanie McKinnon and Daniel Mun.
Deckelbaum—who was part of a Paul Weiss team that advised Time Warner Cable on the Dodgers deal last year and is currently counseling the cable giant on its proposed $45 billion sale to Comcast—did not respond to a request for comment about the firm’s work for Lasry and Edens on the Bucks transaction. (As previously reported by The Am Law Daily, the National Basketball Players Association paid $3.6 million to Paul Weiss last year to conduct an internal investigation of the union’s business practices.)
Lasry, the cofounder, chairman and CEO of New York–based Avenue Capital Group, and Edens, the founder and cochair of New York–based Fortress Investment Group, have a history of keeping legions of Am Law 100 corporate lawyers busy with deal work. The pair’s vow to keep the Bucks in Milwaukee was secured by their pledge with Kohl to split the $200 million cost of funding the construction of a new arena for the franchise, which currently plays in the outdated 18,700-seat BMO Bradley Harris Center.
Lasry began his career in finance as a lawyer. After graduating from New York Law School in 1984, he served as a clerk for the late Edward Ryan, a former chief bankruptcy judge for the Southern District of New York. Lasry went on to spend a year with New York bankruptcy boutique Angel & Frankel, which merged two decades later with mid-Atlantic shop Cole, Schotz, Meisel, Forman & Leonard. (Lasry’s sister, Sonia Gardner, is an Avenue Capital cofounder and serves as the hedge fund’s general counsel.)
Cameron MacDougall, general counsel for Fortress Private Equity, is leading an in-house team advising the buyers on the Bucks deal. He did not respond to an email request for comment about the legal team working on the transaction.
Paul Weiss, Quarles and Foley weren’t the only Am Law 200 firms dipping into the pro sports team transactional world this week. Proskauer, which is advising its longtime client the NBA on the Bucks sale, also counseled Major League Soccer on a deal announced Wednesday that will launch the league’s 22nd team.
Proskauer corporate partner Jon Oram, tax partner Alan Parnes and associates Jason Krochak and Zachary Kleiman are working on the reported $70 million deal, which calls for the expansion team to begin playing its home matches in 2017 in a new $1.2 billion, 65,000-seat retractable roof stadium being built by Home Depot billionaire Arthur Blank.
DLA Piper, which advised on an aborted sale of the NBA’s Hawks in 2011 and was one of six Am Law 200 firms to grab a role last year on a $100 million deal to bring an MLS expansion team to New York, is representing Blank on his entry into the rapidly expanding soccer league. Corporate partner Charles “Chuck” Baker, a veteran sports dealmaker who joined DLA from Nixon Peabody in 2010, and associate Richard Rubano are leading a team advising Blank on the MLS expansion deal.
Other DLA lawyers working on the matter include IP partner William Bartow, tax cohead Gerald Rokoff and associates Alexander Steinberg, Kurtis Weaver and Drew Young. Blank also owns the NFL’s Atlanta Falcons, who will share the new stadium with the yet-to-be-named MLS team. (DLA is advising on a new stadium planned for MLB’s Atlanta Braves.)
More noteworthy pro sports teams will also come up for sale this year. Following the death of longtime owner Ralph Wilson in late March, the NFL’s Buffalo Bills will likely be sold sometime later this year. Donald Trump, no stranger to legal battles with the league, has already publicly proclaimed his interest in buying the team, which he has pledged to keep in western New York.
An email sent to Bills general counsel Gregg Brandon inquiring about whether outside counsel has been retained to assist in finding a buyer was returned by a team spokesman who declined to comment on the matter. The spokesman did note that the sales process would comply with NFL rules and the franchise’s “obligations to New York State and Erie County.”