Gery Woelful was just on 1250 WSSP

[Fort Minor]

Nothing earth shattering in terms of rumors for actually improving the team. He basically introduced the public to who Ron Walter was (he said he would call him the 2nd most powerful person in the organization), while Cliff was asking why the hell this guy should have any pull within the organization even though he has no experience in the industry.

But here's where it gets a bit interesting for those that are looking closely at the ownership situation. Woelful said there was an investment team that was interested in buying the Bucks last year. He didn't give any names, unfortunately, but he did mention that at the time, the Bucks' value was around $230-$240 million. Since the drafting of Yi, the number has ballooned to over $300 million. Yikes.

He also said the two people most associated with being potential buyers were Herb Kholer and that Leopold guy (but went on to say that he'd be shocked if Leopold put in any stake into buying this team, having just purchased the Minnesota Wild nHL team).

[carmelbrownqueen]

Yi is going to be a real player in this league.. and is a potential cash cow for this franchise. I'm not surprised the value has ballooned.. I just wish Kohl would take one of these offers floating around.

[WEFFPIM]

I'm shocked this team had any sort of value to start.

[0BobLobLaw0]

That would be great.....Herb Kohl to Herb Kohler. I hope Kohler doesn't flush this franchise down the toliet.

[LISTEN2JAZZ]

Who decides what the value of the team is, and what do they base it on? The official federal bureau of pro basketball franchise values?

The real value of a business is the sum of future cash flows. The Bucks cash flows are negative most years, so unless you can predict a 180

[WEFFPIM]

That would be great.....Herb Kohl to Herb Kohler. I hope Kohler doesn't flush this franchise down the toliet.

If he buys this team, that will certainly not be the last joke made of this sort.

[paulpressey25]

Great update......I've seen Kohler at many Bucks games over the years......

Kohler is a top tier businessman....does everything FIRST CLASS. Think Whistling Straights and what he's done with golf there and making Kohler a world class destination.

But I think hoping he'll buy the team is a longshot......

Great to see the focus go on Ron Walter....props to GAD for launching that ship.

[jerrod]

You could sell the Bango Blimp for a couple hundred bucks I guess.

i would buy that


$300 million sounds crazy high


although if it looks like yi's gonna leave at the end of his deal then i would think the value would go down with each guaranteed year of yi being here getting done

[Ryan5UW]

-= original quote snipped =-



i would buy that


$300 million sounds crazy high


although if it looks like yi's gonna leave at the end of his deal then i would think the value would go down with each guaranteed year of yi being here getting done

Yeah, but I'm sure that's not American dollars, so relax

[MickeyDavis]

$300 million? No way. If Kohl is holding out for big money he's crazy.

[fam3381]

Couple months ago Forbes valued the Bucks at $264 million...no notable Yi effect is in their calcs. They estimate operating income of $1.7 million.

http://www.forbes.com/lists/2007/32/biz ... 25937.html

[LISTEN2JAZZ]

A business with income of 1.7 million that grows those earnings by 10% a year (and I'm being overly-generous by assuming that they grow by 10% a year forever) should be worth no more than $100 million.

Even if you pretended that income was $5 million a year, and still pretended that it would grow by 10% a year forever, you'd have a business worth around $250 million.

If you paid $300 million for the Bucks, it is almost inconceivable that you could make your money back by continuing to own it. The only situation where you could make money is if you someday get to sell it to another owner who is also willing to pay a lot more than it's worth.

I would never consider buying a business that would be a guaranteed money loser if I were to own it forever. Who would want to do that? Only a hobbyist (like Kohl), or a philanthropist (ostensibly like Kohl).

Pretty interesting. Puts into perspective the chances that some savvy businessman will swoop in and answer our prayers. Would have to be someone who loves sports.

[El Duderino]

A business with income of 1.7 million that grows those earnings by 10% a year (and I'm being overly-generous by assuming that they grow by 10% a year forever) should be worth no more than $100 million.

Even if you pretended that income was $5 million a year, and still pretended that it would grow by 10% a year forever, you'd have a business worth around $250 million.

If you paid $300 million for the Bucks, it is almost inconceivable that you could make your money back by continuing to own it. The only situation where you could make money is if you someday get to sell it to another owner who is also willing to pay a lot more than it's worth.

I would never consider buying a business that would be a guaranteed money loser if I were to own it forever. Who would want to do that? Only a hobbyist (like Kohl), or a philanthropist (ostensibly like Kohl).

Pretty interesting. Puts into perspective the chances that some savvy businessman will swoop in and answer our prayers. Would have to be someone who loves sports.

Kohl paid something like 15-20 million for the Bucks. Most owners make money in the sale of teams more than via yearly profits.

[fam3381]

A business with income of 1.7 million that grows those earnings by 10% a year (and I'm being overly-generous by assuming that they grow by 10% a year forever) should be worth no more than $100 million.

Which is why it's relevant to consider what other teams earn.

http://www.forbes.com/lists/2007/32/biz ... oArea.html

To provide an idea of the range of dollars teams make, the Bulls had an op income of nearly $60 million while the Knicks lost over $40 million. Smaller market teams are capable of making money, with the Kings ($20 million) and Cavs ($32 million) being obvious examples. Not sure whether the Bucks have ever come close to that or how the BC situation affects them, but it's certainly possible to make money owning an NBA team.

Being a good businessman as well as many exogenous factors help, too

[SheedsWeed]

Damn, 300 million? That's really high.

[Fort Minor]

I'm 99% sure Woelful said "value," not "asking price."

I'm sure he could be off considering he doesn't seem to know nearly the amount of business specifics of the Bucks like fam+adam do.

[LISTEN2JAZZ]

Kohl paid something like 15-20 million for the Bucks. Most owners make money in the sale of teams more than via yearly profits.

I addressed that. I said it was possible to make money if some other owner comes along in the future who is also willing to pay way more than the business is worth. That's called speculation - buying something for more than it's worth, in hopes that you can someday sell it for even more than that.

A lot of people in 1999-2000 used exactly that logic to lose all of their money in the stock market (which is no different at all from buying a team - either way you're buying a business in whole or in part with the goal of making money). They saw others buying businesses for more than they're worth, and selling them for even more than that, and thought they could do the same. It was dumb then, and it's dumb now.

Which is why it's relevant to consider what other teams earn.

That's a good point, and maybe if I had a specific idea for how to dramatically increase revenue, I would factor that into my calculation. Obviously Chicago and New York aren't very relevant to the Bucks' ability to earn, but you mention Sacramento earning $20 million, and Cleveland earning $32 million also.

I'm going to toss out Cleveland though - they have the biggest star in the NBA, and just went to the finals. That's not something that you could replicate, and especially not every year for decades.

If the team generates $20 million in profit every year, it's worth around $200 million. If it generates 20 mil and grows that number by 3% a year forever, then I guess we're in the ballpark of $300 million.

That's an awful lot to swallow though; buying a business that earns $1.7 million a year, under the assumption that you'll make your money back when it immediatly starts generating $20 million+ from here on out. Sounds like pure speculation to me. There are so many opportunities out there to purchase businesses with a much stronger earnings history for less than they're worth under reasonable predictions. You can get a margin of safety if you look elsewhere.

[Epicurus]

Does the depreciation of players' contracts (among other things) not create more cash flow, indeed in this case minimize, or even nullify the tax on the franchise earnings as reported above? Even if no taxable earnings form the franchise ,that depreciation can be extend to the taxpayer's other income.

With Kohl, it seems possible that the sale itself would not be a taxable event as I guess, without direct heirs, he may just use a charitable remainder trust.

Maybe we have an accountant or two here who can tell us all the factors that make a low yearly net income franchise very valuable financially ( I think we appreciate the ego rewards of ownership).

[beyond_the_arc]

Guys, buying this team adds up to a massive write-off against any Owners other income, hence Mark Attanasio buying the Brewers for $220 million PLUS $100 million in assumed debt. Making a profit is a noble goal but many owners only care to not get soaked with losses. You are buying a business to have fun, not to make your entire living on. That's why the Maloofs in Sac own the Palms. The cavs have QuickenLoans (talk about oops), Wayne Huizenga Miami Dolphins-Blockbuster Video. This team could well be worth $300 million to a Chinese owner.

[LISTEN2JAZZ]

I'm not sure I understand your last post, Epi - I don't know what it means to depreciate a liability. If anything a player's contract should appreciate every year, since it becomes more valuable on your balance sheet every time a check is cut, and the balance remaining is reduced.

There's a lot I don't know about accounting though, so maybe this is just one of those things.