The Youth Sports’ M&A Boom

By LeagueApps
June 21, 2018
5 min

The sports economy in the US is booming. Youth sports is playing an increasingly significant role in that economic success, yet its impact is often overlooked. From eight foot hoops to short porches in the outfield, kids playing sports can seem downright quaint. While the fields and courts may be pint-sized, the dollars flooding in are anything but.

An article published by Time last August shone a light on the exploding youth sports market, quantifying the space as a $15 billion industry. Yes, with a “B.” Time’s deep dive into the world of youth sports frequently referenced a report from WinterGreen Research,  an international research firm which provides analysis and forecasting data for everything from nanotech to healthcare. Their data sent shockwaves through the sporting world. This particular line made the rounds on social media, “the nation’s youth-sports industry has grown by 55% since 2010.” That’s the kind of explosive growth that makes investors take notice.

Explosions in tech, facilities, club and team development and a burgeoning “tournacation” economy, have led to a spike in M&A activity in youth sports. For sports organizers, this economic boom presents a variety of opportunities. The sale or expansion of an existing business may jump to mind, but those are just a couple possibilities. Leveraging new facilities or partners are additional ways sports organizers can be meaningfully impacted. To better understand the M&A landscape, we sat down with Steel Sports’ CEO, David Shapiro.

Steel Sports, founded in 2011 by Warren Lichtenstein, is a social impact business that invests in and manages youth sports-related businesses which promote best practices in holistically developing character and teaching life lessons through sports. Before joining Steel Sports in 2015, Shapiro spent 13 years with the Positive Coaching Alliance. This non-profit strives to create positive, character-building experiences that result in “better athletes, better people.” PCA and Steel Sports share the common goal of encouraging personal development through sports. In many ways, it was a natural transition from PCA to Steel Sports for Shapiro. “The difference between PCA and Steel Sports came down to understanding the for-profit side of youth sports. At PCA we were playing more of a consultant role. We were working with existing organizations while giving them the tools to improve. At Steel Sports we’re operating the tournaments, teams and camps, which made the experience much more hands-on with both the athletes, parents, and coaches,” said Shapiro.  

Growing the Steel Sports brand means acquiring companies that fit the mold and focusing on organic growth. “We’re not looking to buy companies and turn over their management teams. We want to use acquisitions as a way to bring on best-in-class people that align with our values,” said Shapiro. A perfect example of this strategy in practice was Steel Sports’ acquisition of UK Elite.

The famed soccer training organization had been thriving in the US for over two decades before Steel Sports acquired them. “Prior to acquiring UK Elite, they had developed some best-in-class curriculum in terms of youth soccer. The way they trained, evaluated and retained their coaches was tremendous to the point when we came in it was merely a question of how can we help them do more. We wanted to help them elevate what they’re doing nationwide,”  remarked Shapiro. Under the guidance of Steel Sports, the soccer juggernaut is now in over 20 states, and is able to offer new product lines. A big focus of UK Elite has been getting their own club teams off the ground, which has been accomplished through a combination of organic growth and acquisition. FCUSA now has 155 club teams in the US and illustrates how separate acquisitions can work together in harmony under the Steel Sports banner.

Many have speculated as to why there is so much money flooding into the youth sports market. Budget cuts at the public school level have certainly played a part, as well as the increased value of securing a college scholarship. A theme that Shapiro returned to over and over again, however, was the customers’ appreciation for quality. “The budget cuts at the school level have played a part, but I really think it’s that parents want and expect more for their children. I, myself, am a volunteer coach. I coach my daughter’s 8U softball team and it’s very easy to see as a volunteer coach that you can’t put in as much as you want. You go to practice and maybe you think about the practice on the drive there. It’s very hard in a volunteer capacity to give as much as you’d like to,” remarked Shapiro. He continued, “I think in general the parent mentality is that while the volunteer experience can be positive, I want someone to give my child the very best experience possible and I have a better chance getting that with someone who is solely focused on this team, camp or tournament as opposed to someone doing this on the side.”

Finding the “very best,” as he puts it, is what Steel Sports has been doing in the M&A game. Identifying a series of desirable characteristics is essential, particularly as they narrow their focus moving forward. “We’re really laser-focused on the programming side of youth sports which includes teams, camps, tournaments, clinics, showcases, event businesses, really anywhere where we’re directly impacting the youth sports experience on the field for a kid,” said Shapiro. What makes an acquisition target stand out to an organization like Steel Sports?

Here are Steel Sports’ six program evaluation metrics for their existing businesses:

  1. Coaching Performance
  2. Staff Retention
  3. Incident Rate (Injuries)
  4. Fun 
  5. Athlete Retention
  6. Professional Development For Coaches

These evaluation criteria may be relevant if your organization is exploring acquisitions, or positioning your organization to be acquired. Even if you’re not, they can be a useful way of thinking about the quality of your organization’s performance. It should come as little surprise that three of the six metrics center around coaching. Evaluating, developing and retaining coaches is a worthwhile investment and one that the customer (parent/athlete) can immediately appreciate.

In an era of earlier and earlier “professionalization,” it’s important to understand why the “fun” category would make this list. In a way, it actually fits perfectly with one of Steel Sports’ strategic goals to provide a variety of experiences spread across multiple companies. “Part of our bigger vision is to have a lot of penetration in a geography to help combat early sports specialization, as we will strive to have the athlete involved in multiple sports and programs throughout the year.”