Private equity (PE) has traditionally been synonymous with major sports leagues like football, basketball, and soccer. However, over the past few years, there has been a noticeable shift as investors have turned their attention to more niche sports, such as volleyball, padel, and other emerging activities. While these sports may not have the global following of mainstream games, their passionate fanbases and untapped growth potential have made them increasingly attractive to private equity firms.

The concept of niche sports may seem like a new trend, but many of these sports have been growing steadily over the past decade. What distinguishes them is their smaller but highly dedicated fanbases, which present a compelling opportunity for investors. With less capital historically invested in these areas, private equity sees a chance to drive growth by injecting capital and expertise into markets ripe for expansion.

The Appeal of Niche Sports

Private equity investment in niche sports is driven by several key factors. First, media rights represent a significant revenue stream for sports leagues, especially as broadcasting becomes more fragmented and digital platforms emerge. Second, owning sports venues and real estate provides additional avenues for revenue generation. Third, the scarcity of investment opportunities in some of these smaller markets increases their value. As the demand for sports content continues to rise, investors are looking for the next big opportunity, and niche sports are stepping into the spotlight.

According to Jeff Collins, managing partner at Cloverlay, a firm that specializes in niche investments, private equity can play a pivotal role in the growth of these sports. “Private equity brings the necessary capital for growth initiatives and provides the expertise needed to improve the product,” Collins says. This combination of funding and business know-how allows these sports to evolve, potentially reaching broader audiences and creating new revenue streams.

Collins also points to the unique characteristics of sports investments. “Sports sit at the intersection of two interesting vectors: live events and intellectual property. This combination makes them particularly attractive for private equity,” he explains. The entertainment value of live sports events, along with the intellectual property tied to leagues and competitions, makes the sector a powerful draw for investors.

The Success Stories: Volleyball and Padel

A prime example of private equity’s growing interest in niche sports is the investment made by CVC Capital Partners in the International Volleyball Federation (FIVB) in 2021. CVC’s $300 million investment transformed the organization into Volleyball World, which introduced new competitions such as the Volleyball Nations League (VNL). The impact has been significant, with VNL attendance in 2024 rising by 13% from the previous year, and live viewership up by 21%. Women’s finals viewership alone saw a staggering 103% increase, highlighting the growing appeal of the sport.

Similarly, the sport of padel, a fast-growing racket sport similar to tennis, has also drawn attention from private equity. In 2023, Qatar Sports Investments acquired the World Padel Tour, rebranding it as Premier Padel. This strategic move unified the sport under the International Padel Federation, signaling its readiness for expansion. Additionally, private equity firms like MCH Private Equity have invested in the sport by funding brands like All For Padel, an Adidas-licensed equipment company.

The Impact of the COVID-19 Pandemic

The COVID-19 pandemic has been a pivotal moment for many industries, and the sports sector is no exception. As team sports were disrupted by the pandemic, outdoor activities gained traction. Sports like hiking, mountain biking, and trekking grew in popularity, as they allowed people to participate in physical activity without the need for large gatherings or team coordination.

Doug Korn, managing partner at Victor Capital Partners, notes that outdoor sports offer unique advantages. “They provide flexibility and convenience, making them more appealing compared to traditional team sports,” Korn says. Private equity firms like Victor Capital have capitalized on this shift by investing in companies that produce products for outdoor activities, such as PrimaLoft, which specializes in technical insulation, and Adventure Ready Brands, known for outdoor medical kits.

The pandemic accelerated a broader shift toward healthier lifestyles, with more people recognizing the importance of physical activity. This has resulted in increased participation in outdoor and niche sports, further driving demand for related products and services.

The Challenges of Investing in Niche Sports

Despite the exciting opportunities in niche sports, investing in this sector is not without its challenges. One of the main hurdles is the relatively small size of the market, which can limit growth potential. As more investors enter the space, competition may intensify, and niche sports could become oversaturated.

Collins advises that investors must carefully evaluate the long-term potential of a sport. “It’s important to choose a sport that has the potential to become a ‘generational form of content,’” he says. This requires understanding the sport’s broader appeal and its capacity to engage a wider audience.

Moreover, choosing sports with high-quality management teams is crucial. Collins emphasizes the importance of leadership with experience in negotiating media deals and managing the business side of sports investments.

Conclusion

Niche sports are emerging as an exciting frontier for private equity investment, offering new opportunities for growth and innovation. With passionate fanbases, expanding global reach, and the potential for large returns, these sports are poised to become the next big thing in the investment world. However, like all investments, they come with risks. Investors must carefully assess the market, choose wisely, and ensure that the management teams behind these sports are equipped to lead them into the future. As the world of sports continues to evolve, private equity is playing a critical role in shaping its future.