WME's investment of UFC is INSANE

Sherwolf

Sherwolf

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Hey guys, I crunched some numbers on this deal and I can't seem to understand what WME was thinking when they agreed to buying the UFC for $4B. In my opinion, the present UFC is 1-3 fights away from being in deep deep trouble with it's marketable fighters. The top 2 being Conor and Ronda.

If Ronda loses her next fight and if Conor loses to Eddie and loses his next fight, the game changes for these two. Who's the closest #3 fighter, Paige? On top of this, WADA has been popping top tier fighters left and right and the rest of the fighters are complaining about pay and talking about joining a union. Seems like a huuuuge gamble to recover a $4B investment. Just very simple math, it would take them 10 years of $400,000,000 net earnings to break even. Now let's look at some more detailed number for anyone interested:

Sales Price $4,000,000,000.00
Average PPV Buys 400,000 (I'm being very generous with this figure)
Cost of PPV $ 55.00
# of annual PPVs' 14
Gross Rev per PPV $22,000,000.00
Gross Annual Revenue $308,000,000.00
Est. Annual Advertising Income $25,000,000.00
Est. Annual Ticket Sales $25,000,000.00
Total Gross Revenue $358,000,000.00
Estimated Annual Fighter Payout $35,800,000.00
Estimated Annual Advertising $89,500,000.00
Retained Earnings $232,700,000.00

Number of years to earn back investment 17.19

So over 17 years to break even based on these figures. I understand WME has deep pockets but there's so many variables that make this a very high risk investment in my opinion. Thoughts?
 
They don't have to make it all back in cash. If the UFC grows by 25% over the next ten years, they could sell it for 5 billion.
 
Sherwolf said:
Hey guys, I crunched some numbers on this deal and I can't seem to understand what WME was thinking when they agreed to buying the UFC for $4B. In my opinion, the present UFC is 1-3 fights away from being in deep deep trouble with it's marketable fighters. The top 2 being Conor and Ronda.

If Ronda loses her next fight and if Conor loses to Eddie and loses his next fight, the game changes for these two. Who's the closest #3 fighter, Paige? On top of this, WADA has been popping top tier fighters left and right and the rest of the fighters are complaining about pay and talking about joining a union. Seems like a huuuuge gamble to recover a $4B investment. Just very simple math, it would take them 10 years of $400,000,000 net earnings to break even. Now let's look at some more detailed number for anyone interested:

Sales Price $4,000,000,000.00
Average PPV Buys 400,000 (I'm being very generous with this figure)
Cost of PPV $ 55.00
# of annual PPVs' 14
Gross Rev per PPV $22,000,000.00
Gross Annual Revenue $308,000,000.00
Est. Annual Advertising Income $25,000,000.00
Est. Annual Ticket Sales $25,000,000.00
Total Gross Revenue $358,000,000.00
Estimated Annual Fighter Payout $35,800,000.00
Estimated Annual Advertising $89,500,000.00
Retained Earnings $232,700,000.00

Number of years to earn back investment 17.19

So over 17 years to break even based on these figures. I understand WME has deep pockets but there's so many variables that make this a very high risk investment in my opinion. Thoughts?
Click to expand...
I bet your ECON101 class back in your JC taught you everything you needed to know about major corporation acquisitions...........
 
Last edited:
Fretitta's are probably still in shock someone coughed 4 billion for the purchase lol.
 
I didn't read all that but didn't they get into it to shop the rights around to multiple networks for like 3x more than FOX is currently paying per network in 2018?
 
And aren't they also owned by Silver Lake that is worth like 28 billion?
 
They were conor era noobs

The mafia screwed them over nicely
 
Large scale acquisitions aren't as simple as bottom line proceeds. You can factor in increase in revenues and their effect in potential outside investment, advertising, potential for franchise, IPO, advertisement, and cooperative enterprise.
 
WME should have used your number crunching skills. What a bunch of amateurs.
 
The people who bought it are probably so rich they don't care if they lose money. It would be pretty cool to be able to say you're a part owner of UFC
 
Sherwolf said:
Hey guys, I crunched some numbers on this deal and I can't seem to understand what WME was thinking when they agreed to buying the UFC for $4B. In my opinion, the present UFC is 1-3 fights away from being in deep deep trouble with it's marketable fighters. The top 2 being Conor and Ronda.

If Ronda loses her next fight and if Conor loses to Eddie and loses his next fight, the game changes for these two. Who's the closest #3 fighter, Paige? On top of this, WADA has been popping top tier fighters left and right and the rest of the fighters are complaining about pay and talking about joining a union. Seems like a huuuuge gamble to recover a $4B investment. Just very simple math, it would take them 10 years of $400,000,000 net earnings to break even. Now let's look at some more detailed number for anyone interested:

Sales Price $4,000,000,000.00
Average PPV Buys 400,000 (I'm being very generous with this figure)
Cost of PPV $ 55.00
# of annual PPVs' 14
Gross Rev per PPV $22,000,000.00
Gross Annual Revenue $308,000,000.00
Est. Annual Advertising Income $25,000,000.00
Est. Annual Ticket Sales $25,000,000.00
Total Gross Revenue $358,000,000.00
Estimated Annual Fighter Payout $35,800,000.00
Estimated Annual Advertising $89,500,000.00
Retained Earnings $232,700,000.00

Number of years to earn back investment 17.19

So over 17 years to break even based on these figures. I understand WME has deep pockets but there's so many variables that make this a very high risk investment in my opinion. Thoughts?
Click to expand...

so based on your bullshit numbers the deal doesn't make sense.

So we should listen to you? Or the people that actually know the numbers and run MULTIPLE billion dollar companies.

I think I'll take their investment strategy over yours.
 
I commend you for the effort you've put in but I think you'll find there are many other variables that will come into play over the coming years.
 
Sherwolf said:
Hey guys, I crunched some numbers on this deal and I can't seem to understand what WME was thinking when they agreed to buying the UFC for $4B. In my opinion, the present UFC is 1-3 fights away from being in deep deep trouble with it's marketable fighters. The top 2 being Conor and Ronda.

If Ronda loses her next fight and if Conor loses to Eddie and loses his next fight, the game changes for these two. Who's the closest #3 fighter, Paige? On top of this, WADA has been popping top tier fighters left and right and the rest of the fighters are complaining about pay and talking about joining a union. Seems like a huuuuge gamble to recover a $4B investment. Just very simple math, it would take them 10 years of $400,000,000 net earnings to break even. Now let's look at some more detailed number for anyone interested:

Sales Price $4,000,000,000.00
Average PPV Buys 400,000 (I'm being very generous with this figure)
Cost of PPV $ 55.00
# of annual PPVs' 14
Gross Rev per PPV $22,000,000.00
Gross Annual Revenue $308,000,000.00
Est. Annual Advertising Income $25,000,000.00
Est. Annual Ticket Sales $25,000,000.00
Total Gross Revenue $358,000,000.00
Estimated Annual Fighter Payout $35,800,000.00
Estimated Annual Advertising $89,500,000.00
Retained Earnings $232,700,000.00

Number of years to earn back investment 17.19

So over 17 years to break even based on these figures. I understand WME has deep pockets but there's so many variables that make this a very high risk investment in my opinion. Thoughts?
Click to expand...

Synergy and taking it public is the plan.
 
It is pretty typical to pay 10x the annual revenue of a business. If I have a business that makes $1 Million a year I should be able to get $10 Million. If my business makes $100k its worth $1M. Pretty basic. Also they can grow the revenue massively if they can get a new Network TV deal in the USA after Fox is done and you haven't factored in TV revenue from Brasil, UK, Canada, China, Japan etc etc.
 
I crunched the numbers on this in a previous thread and it's not a bad deal.

Firstly, profit is the important metric for valuation. EBITDA is a good proxy. From below article, 9 month EBITDA was $132m which means full year is c$176m.

I'm using the Gordan Growth Valuation Model (GGVM) - the staple of investment valuation which discounts the future earnings by a rate of return and incorporates a growth rate for those earnings. Now, to get the growth rate I've used the growth in revenue from the second article I've linked below and also the widely circulated 2015 revenue figure of $600m. Between 2012 and 2015 that gets us a earnings growth rate of 7.72% per annum.

Taking the above growth rate, the $4bn valuation, and reverse engineering the GGVM - we get a rate of return of 12.46% per annum.

A good return, potential to grow EBITDA further through M&A synergy, and with US 10yr yields under 2% - it's not the worst place to park cash, especially with the current global financial landscape

Source:
Current Earnings - http://www.bloodyelbow.com/2016/2/15/10985436/moodys-reports-a-big-2015-for-the-ufc
Revenue Growth - http://www.bloodyelbow.com/2015/10/...odys-and-standard-poors-tell-us-about-the-ufc
 
17 years to make back 4 billion seems like a fantastic deal ?

4 BILLION

But yeah your numbers arent right, you havent included the monthly debt repayments on the loans which are like a million dollars a month, they also have a shit load of non fighter staff who need paying every month plus im sure there are more costs i cant think of right this second
 
Sherwolf said:
Hey guys, I crunched some numbers on this deal and I can't seem to understand what WME was thinking when they agreed to buying the UFC for $4B. In my opinion, the present UFC is 1-3 fights away from being in deep deep trouble with it's marketable fighters. The top 2 being Conor and Ronda.

If Ronda loses her next fight and if Conor loses to Eddie and loses his next fight, the game changes for these two. Who's the closest #3 fighter, Paige? On top of this, WADA has been popping top tier fighters left and right and the rest of the fighters are complaining about pay and talking about joining a union. Seems like a huuuuge gamble to recover a $4B investment. Just very simple math, it would take them 10 years of $400,000,000 net earnings to break even. Now let's look at some more detailed number for anyone interested:

Sales Price $4,000,000,000.00
Average PPV Buys 400,000 (I'm being very generous with this figure)
Cost of PPV $ 55.00
# of annual PPVs' 14
Gross Rev per PPV $22,000,000.00
Gross Annual Revenue $308,000,000.00
Est. Annual Advertising Income $25,000,000.00
Est. Annual Ticket Sales $25,000,000.00
Total Gross Revenue $358,000,000.00
Estimated Annual Fighter Payout $35,800,000.00
Estimated Annual Advertising $89,500,000.00
Retained Earnings $232,700,000.00

Number of years to earn back investment 17.19

So over 17 years to break even based on these figures. I understand WME has deep pockets but there's so many variables that make this a very high risk investment in my opinion. Thoughts?
Click to expand...

What about shirts sold
They have punching bags and gloves too
Fight pass
Live event tickets
 
It is a very profitable investment..

but it is also possible this was done as a power move, and money is irrelevant. It's all about control and influence.
 
funksoulbrother said:
What about shirts sold
They have punching bags and gloves too
Fight pass
Live event tickets
Click to expand...

They're making back a few mil a month off of hotdog branders alone
 
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