Cricket is experiencing a period of unprecedented change, with the Twenty20 (T20) format causing disruption to the cricket calendar, to the traditional Test Match format, and to the ambitions and expectations of elite players. This change has been driven in part by evolving audience demographics, with younger and newer fans preferring shorter, more explosive matches, and partly by broadcasters, who have the same desire.
A dopamine rush was provided in 2003 with the advent of T20 cricket. However, the pioneering inventor, the England & Wales Cricket Board (ECB), was forced to watch on as the Indian Premier League (IPL), a T20 franchise tournament, exploded in popularity following its launch in 2007, drawing large crowds and unprecedented revenue from sponsors and broadcasters. The world’s best players now descend on India for the two-month tournament each year, on occasions forgoing the opportunity to play international cricket for their countries — historically the absolute pinnacle for any player.
In a belated response, in 2021 the ECB launched The Hundred — a new franchise competition based on an even shorter form of the game — with 100 balls delivered by bowlers from each side, compared to 120 in a T20 match. As discussed in a previous article, the ECB is now looking to sell stakes in the teams that compete in The Hundred, with a view to generating revenue it will use to support grass-roots cricket and the teams that exist in its traditional county structure.
Controversy as Investors Emerge
Recent weeks have seen potential investors emerge, including current owners of sports franchises globally, high-net-worth individuals, and state-backed investment funds. An irony exists, in that the likely investors include owners of IPL clubs, with as many as six currently rumored to be interested in taking a stake in one of The Hundred franchises. The ECB is aiming to raise £500 million by selling a 49% stake in each of the eight franchises, while the counties that own the grounds where the teams play will retain the remaining 51%.
With this investment, the ECB believes The Hundred can compete with the IPL, and importantly the multitude of other T20 franchise cricket leagues that have emerged globally in recent years. This includes the recently launched Major League Cricket (MLC) tournament in the U.S., with ambitions to tap into the huge, cricket-obsessed South-Asian diaspora in the U.S. and a slice of its huge media rights market. The MLC is already a competition to beware of as it clashes directly with The Hundred and global stars, such as Australia’s Pat Cummins, have chosen to play the tournament rather than The Hundred.
The ECB is therefore under pressure to generate a competitive edge for The Hundred by attracting and retaining top international talent, but this is not without its challenges. Only seven counties currently host teams from The Hundred, with each being gifted a 51% stake in a team, and 11 counties missing out. As a result, the ECB has committed to distributing a portion of the sales proceeds to non-hosting Counties, but this is not straightforward and has created some controversy.
Further tension can be attributed to the format and timing of the tournament. Cricket is a game steeped in tradition, and county members — whose support and membership fees keep the counties above water — typically prefer the longer-form four-day format of the County Championship. The bulk of these County Championship fixtures are being pushed out to the fringes of the UK summer to accommodate The Hundred taking place in a concerted month-long blitz during the summer school holidays. The championship is therefore losing games to poor weather, and the counties are losing players to The Hundred for the fixtures they do play during the period of the tournament.
Whilst the prospect of an influx of capital presents an opportunity for the ECB, these controversies mean that it is not without risk. The ECB is seeking to ensure it gets maximum value, whilst minimizing adjacent reputational damage, and therefore the process of valuing the franchises and undertaking due diligence on potential suitors is key.
Reputational Due Diligence
The ECB will be keen to take investment only from investors that align with their values, with no reputational skeletons in the closet. The ECB does not need to look far for examples of what can go wrong, with countless recent examples of potential investors in Premier League football clubs having their potted history exposed in media reporting.
A factor to consider is that The Hundred has been a driver of the women’s game — with each franchise having a men’s and women’s team, playing at the same stadium on the same day — and is deliberately targeted at a family audience. The demographic of the crowds attending live matches is a testament to its success. Investment from a source that is seen to be contrary to those values will present a credibility problem.
The ECB has emphasized the need to align with investors who share its long-term vision for the growth of cricket and will be keenly aware of the importance of conducting thorough reputational due diligence on potential investors. Reputational diligence is the process of understanding who your investors are, including their track record, business practices, and ethical standpoint. The idea is to identify potential problems in the early stages of interactions, rather than have them emerge during the deal process — or worse, in the media afterward.
Properly executed reputational due diligence will analyze a wealth of publicly available information, ranging from media articles and social media posts to corporate records, financial statements, corporate databases, and asset registers. Investigators with the right skills and experience can identify information that is hard to find, applying a critical lens to consider the credibility and accuracy of what is uncovered, which is important because media reporting in certain jurisdictions can be biased or politically motivated.
Leaked documents, like the Panama Papers and Paradise Papers, can provide insight into offshore structures and beneficial ownership, whilst for companies their track record will give the best view of their culture, business practices, and operating practices. The power of conversation should not be overlooked — speaking directly with people who are familiar with potential investors can be invaluable. Conversations often lead to opinions and insights not available in the public domain, providing much-needed nuance.
The potential for reputational damage cannot be overlooked. Cricket’s infamous dalliance with Allen Stanford is a case in point. An apparent billionaire businessman, Stanford poured millions into West Indies Cricket before convincing the ECB, in 2008, to sign a five-year deal for a series of lucrative T20 matches between England and the West Indies. As the ECB sought to compete with the riches of the IPL, Stanford offered a USD 20 million prize for an England XI to play a West Indies All-Star team in a winner-takes-all game.
To advertise the game, Stanford landed a helicopter on the pitch at Lord’s Cricket Ground, brandishing a briefcase full of cash. It is fair to say that this ruffled feathers among cricket purists and left many wondering whether the sport was being sold to the highest bidder. It later transpired that the briefcase had been stuffed with fake dollar bills and Stanford’s empire collapsed as a $7 billion Ponzi scheme was revealed. This left cricket scrambling to distance itself from Stanford.
Valuing the Franchise
Valuing sports franchises, particularly a relatively new league like The Hundred, is complex. The primary driver of value in most sports leagues is media and broadcasting rights, and The Hundred is no exception. As the tournament continues to grow in popularity, the ECB is banking on a substantial increase in the value of media rights. According to reports, the current domestic TV deal is valued at £38 million, with projections suggesting this could rise to £85 million by 2029, representing a 57% increase.
However, media rights are not the only factor investors will consider. Brand value, fan engagement, and community presence are equally important in determining the long-term success of a franchise. The Hundred’s focus on inclusivity, innovation, and family-friendly appeal gives it a unique position in the market. Investors will be closely watching how the league continues to grow its fan base, both domestically and internationally, as this will be crucial for maximizing the value of the franchises in the years to come.
The Future of The Hundred
The ECB’s long-term goals for The Hundred are hugely ambitious, seeking to establish the tournament as a genuine competitor to the IPL and to burn off the competition from the MLC and equivalents globally. To achieve this, The Hundred must become a destination for the best international talent, continue to expand its fan base, and attract sizeable media rights deals.
Given the rapidly evolving landscape of short-form cricket, there is also a sense that attracting the best players and securing private investment will not be enough. New competitors will surely emerge, and existing competitors will evolve, meaning that the ECB must continue to innovate to keep the tournament fresh and exciting. This will require strategic marketing and a focus on community engagement — and will potentially bridge the divide with more traditional fans who are dubious of The Hundred’s role in the cricket ecosystem.
The tournament has achieved several of its initial objectives — including driving growth in the women’s game and attracting a diverse audience. The next stage in its evolution will be fascinating and the ECB will hope that it will be the catalyst for generating funds that can secure the financial health of cricket in England and Wales for a generation.
Listen to Ankura’s The Business Behind Sport podcast, where the ECB’s plans for investment into the Hundred and the challenges of valuing the franchises, and undertaking appropriate due diligence, are discussed by Ankura experts Torie Hamilton Wilson, Alecia Futerman and Jonathan Brown.
© Copyright 2024. The views expressed herein are those of the author(s) and not necessarily the views of Ankura Consulting Group, LLC., its management, its subsidiaries, its affiliates, or its other professionals. Ankura is not a law firm and cannot provide legal advice.
