What a potential Celtics sale tells us about NBA ownership right now

When Wyc Grousbeck put the Boston Celtics up for sale this summer, it was just days after Boston won its 18th NBA championship, and Grousbeck was riding high.

His surprise decision to make the franchise available for sale may be less surprising because it is in line with many of Grousbeck’s peers around the league. There might be no better time to be an NBA owner than right now. As revenue grows and team valuations skyrocket, several have decided to cash out, taking large returns on investments made long ago.

The Celtics’ ownership group is set to find out how big theirs will be after buying the franchise for $360 million over 22 years ago. The efforts to sell the team kicked off last month. An online data room opened for potential investors, according to two sources briefed on the matter, after vetting by JP Morgan & Chase and BDT & MSD Partners, the two financial firms advising on the sale. Stephen Pagliuca, who currently owns about 20 percent of the franchise, has already expressed interest and could be one of the front-runners to put a group together to purchase control. At this point, the sale is likely to be completed early next year, according to one person familiar with the process.

When complete, the Celtics will continue a trend across the league. The NBA has seen more turnover at the ownership level than any other major professional sports league in recent years. The Celtics will be the ninth NBA team to have its controlling ownership change hands since 2019; the NHL, NFL and MLB have had 10 combined in that time. There seems to be no overarching theme behind this trend, sports investors and former NBA team owners say. Instead, they point to something simpler: Franchise valuations have climbed so steeply over the last two decades that it’s become a good time to sell.

“It could be that we’re hitting a tipping point a bit,” one investor said. “Most owners that have been in for a while in any of the sports leagues are sort of asset rich and cash poor. Most of the long-term standing owners, I think, if you ask them, I think in their wildest dreams, they could never have imagined that these teams would become these mini Disneys as I call them, or these phenomenal entities that have tremendous economic capacity.”

The spate of sales has been underlined by owners who made significant returns on their investments, no matter when they bought their franchise.

Larry Miller bought the Utah Jazz for roughly $25 million in the mid 1980s; his family sold it to Ryan Smith for $1.66 billion in 2020. Glen Taylor paid $88 million for the Minnesota Timberwolves in 1994 and took a $1.5 billion offer from Marc Lore and Alex Rodriguez (though control of the team is now in dispute). Robert Sarver led a group of investors who bought the Phoenix Suns for a then-record $401 million in 2004; he sold it 18 years later at a $4 billion valuation. Marc Lasry was part of the ownership group that bought the Milwaukee Bucks for $550 million in 2015; eight years later, he sold his 25 percent stake in the team at a $3.5 billion valuation. Michael Jordan paid $275 million for the Charlotte Hornets in 2010 and sold them for $3 billion last year.

Mark Cuban bought the Dallas Mavericks for $285 million in 2000 and sold a majority stake in the team last year for $3.5 billion. Cuban said he sold the Mavericks because he didn’t know if one of his three children, ages 14 to 20, wanted to eventually run the franchise.

“If they don’t,” he said in an email to The Athletic, “it’s a nightmare trying to figure how to deal with estate issues.”

It is likely no coincidence that all but one of the eight franchises that have seen a change in control ownership over the last five years were all initially bought before the current media rights deal, which helped transform the league’s economics. They were also sold right before the NBA finalized its new media rights deal, though the value of that was likely baked into some of the sales prices.

The Celtics are the first team on the market after that media rights deal was finished. The sale already has spring-loaded expectations around the league, though predictions on the ultimate price are wide-ranging. One NBA owner, granted anonymity so they could speak freely, believes the team could sell for close to $6 billion. One sports banker predicted $5.5 billion. The investor believes it will go for $4.75 billion. Forbes values the team at $6 billion; Sportico gives the Celtics a $5.12 billion valuation.

“I think there are tremendous opportunities,” Celtics minority owner Jim Breyer said. “Both potential new investors, additional buying groups. I have no doubt the Celtics’ sale will go extremely well. I don’t know how well. No one can ever predict. The Celtics are a great franchise.”

The result is being watched closely, not just to see if the Celtics set an NBA record, but what it could mean for the future. If the franchise does sell closer to $6 billion, as one NBA owner projected, he believes it could push up the price for a potential expansion franchise, say in Las Vegas, into the $7 billion to $8 billion range.

But this transaction could also prove complex.

Grousbeck is the team’s lead governor; he and his father, Irv, own roughly 30 percent of the franchise, according to sources briefed on the Celtics ownership structure. Wyc Grousbeck owns about 2 percent, those sources said. He declined to comment for this story over the summer and did not respond to recent text messages from The Athletic.

The team is being sold now, Grousbeck said in a July statement, for family and estate-planning purposes. Irv Grousbeck is 90, and Wyc Grousbeck, 63, has multiple siblings. They can bring minority shareholders along in the sale, but they have their own rights if there is a potential sale.

“It’s a really complicated agreement,” said one of the people briefed on the Celtics ownership structure.

Grousbeck said he wants to sell the team in steps, with the majority tranche sold by the winter of 2025, and then retain control until the rest is sold off in 2028. That may prove tricky, especially as NBA commissioner Adam Silver said earlier this year the league may choose to avoid stepped transactions after the current Minnesota Timberwolves saga gets settled. Multiple industry sources pointed out that any prospective owner likely would not want to spend billions of dollars only to wait to take over.

The Celtics’ sale price could also be impacted by the lack of their own arena. They play in the TD Garden, which is owned by Jeremy Jacobs, owner of the NHL’s Bruins. The ability to use professional sports franchises as real estate vehicles is now a key driver among sports owners. Anyone who buys the Celtics will have to continue being a tenant at TD Garden or try to build a new arena, which could mean another sizable expense.

“How does that balance itself out?” the investor said. “It’s, obviously, probably one of the greatest brands in all of sports, but when you start to get to these multi-billion dollar levels, revenue and cash flow becomes more important. It can’t just be a scarcity value around the IP.”

The NBA’s own bylaws are another factor. The Celtics will be above the 2023 collective bargaining agreement’s second apron this season as they defend their championship. Teams above that payroll threshold — set at $188.931 million this season — are hit with draconian team-building restrictions that can prevent them from trading future first-round picks and make it nearly impossible to add to the roster.

But the Celtics also project to run $200 million payrolls over the next few years and to be above the luxury-tax level. The CBA increased the tax rates on the biggest spenders and repeat violators, and the most punitive measures kick in next season. A franchise with a payroll at least $20 million above the luxury-tax line will pay $4.75 for every dollar this season, but that will increase to $7.25 with the 2025-26 season.

That could present the Celtics’ new ownership with an instant decision of whether to pay to keep a title-winning team together or be the one to break it up.

“It’s going to be near impossible to keep great teams together,” said another NBA owner, granted anonymity so they could speak freely. “It’s no longer just about money. It’s now about keeping draft picks and being able to improve your team, and facing a hard cap. No one wants to be an owner that has to break up a championship or great team, because of the (second) apron hard cap. Your fans won’t understand any of this. They will just hate you. I think that’s why Wyc is selling and why he even put a timeline on his involvement that coincides with their contracts expiring.”

Suitors could also benefit from an emerging belief among some sports investors that the growth in NBA franchise values could finally be slowing after two decades of skyrocketing numbers. They still believe the valuations will go up but at a more timid pace. But when, and if, that happens is less certain.

The league is also dealing with a champagne problem: As franchise values go up, there are fewer ultra-wealthy individuals who can buy majority, or even minority, stakes. The NBA has tried to address that by allowing private equity companies and sovereign wealth funds to buy up to 20 percent of a franchise and 30 percent in all.

“The prices have dramatically increased over a 10- and 20-year period of time,” Breyer said. “And the value, both intrinsically and from a league perspective, of NBA franchises will continue to grow, perhaps not at what they’ve grown over the last decade, but the economics long-term are extremely attractive. As evidenced by, of course, the TV rights.”

Even if values stop climbing as steeply, sales are unlikely to stop. Professional sports teams remain attractive assets, and the pull of big offers may be too hard to resist.

“More and more these teams are becoming a huge percentage of people’s net worth,” the sports banker said. “If you’re a billionaire on paper but most of that is illiquid team ownership, you’re a billionaire but cash poor. So now all of a sudden, you have an opportunity to be very cash rich.”

(Illustration: Meech Robinson / The Athletic; top photos: Streeter Lecka, Billie Weiss, Tim Heitman / Getty Images)