The Seattle Seahawks takeover will soon become the second-most expensive takeover in sports history.
Second only to the $10bn deal that saw a group led by Mark Walter buy the LA Lakers earlier this year, the Seahawks deal is expected to be approved at an extraordinary meeting of NFL owners in a few weeks’ time.
The Seahawks’ new owners, the Khosla family, are an interesting addition to the NFL family.
For one, they are already minority shareholders in the San Francisco 49ers. They will need to sell that stake as part of the transaction – but given the booming valuations of NFL franchises across the board and the recent decision to approve private equity investment in teams, they won’t be short of buyers.
The family’s patriarch, Vinod Khosla, made his fortune in Silicon Valley. Given that Seattle is increasingly being viewed as one of the AI capitals of the world, his decision to plant a flag in the city is noteworthy in that regard too. Sooner or later, there will be an NBA franchise in Seattle too.
But for all the nuances of the transaction and where the family sits in the makeup of the NFL’s ownership clique, the Seahawks takeover is simply a safe bit of business. The Seahawks’ annual revenue was $624m at the last count, putting it in the top half of NFL teams. Its operating income meanwhile was about $143m, the eighth highest in the league.
And according to the latest details, there is another major advantage for the Khosla family in having bought the franchise.
Khosla family set to benefit from tax breaks after Seahawks takeover
According to a new report from Sportico, the Khosla family could secure a record tax break for an NFL team takeover after the Seahawks deal has been ratified.
Why? Because under US federal tax law, business owners are able to write off – or ‘amortize’ – intangible assets over 15 years.
And given that, as Sportico highlight, roughly nine-tenths of a sports team’s value is made up of intangible assets (player contracts, intellectual property, franchise rights and so on), that can massively offset taxable profits from other businesses in the Khosla empire.
According to Chris Migliaccio, who is a partner at accountancy and consultancy firm Chris Migliaccio, that could be worth hundreds of millions if not billions of dollars in deferred taxes.
“If you look at a sports team, their balance sheet is going to be pretty simple,” Migliaccio told Sportico.
“Amortization can be a very powerful thing, especially if you are someone who’s generating income on a regular basis from non-sports sources. The fact that you have a large tax write-off can make the financial pain of buying a team significantly less.”
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