Mexican soccer has a near-religious following, and that fanaticism is spreading to the U.S.

In 2021, four of the top five qualifying matches for the World Cup on ESPN featured matchups between the United States and Mexico, with an average viewership of 1.8 million.

What’s more: In 2021, Christian Pulisic became the first American to play in a Champions League final and hoist the trophy, but the game wasn’t the most popular match broadcast that weekend — Univision’s Liga MX Clausura Final broadcast took the crown.

• Champions League Final viewers (CBS): 2.1 million
• Champions League Final viewers (Univision): 1.6 million
• Liga MX Final viewers (Univision): 3.0 million

Unbeknownst to many, Liga MX is by far the most viewed soccer league in the United States. For the 2021 season, Liga MX nearly doubled the average viewership of MLS matches.

• MLS average viewership on ESPN and Fox: 355,000
• EPL average viewership on NBC: 475,000
• Liga MX average viewership on Univision: 845,000

While the league clearly leads in popularity, it lags from a valuation standpoint.

In 2021, the average MLS club valuation was $550 million, according to Sportico, but valuations for Liga MX franchises are sparse and rarely available. Transfermarkt generates Liga MX club valuations based on aggregate player transfer value, leaving the average valuation at $49 million.

These are by no means apples-to-apples comparisons, with the cited Liga MX valuations only encompassing one aspect of the value that teams provide. Fortunately, in late February, Liga MX club Necaxa added a new set of U.S. investors that valued the franchise at $200 million.

The deal comes on the heels of a first-of-its-kind 1% sale of the company through an NFT sale for $1.5 million and a 2021 investment from the Tylis-Porter group for a 50% stake.

So, why the $200 million valuation? And what made Necaxa such an attractive investment?

The Necaxa Deals

This week I had the opportunity to speak with Sam Porter, co-managing partner and owner of Club Necaxa.

Porter’s career has taken him through the gauntlet of the sports industry. From Sportstars agency to director of basketball operations at Exclusive Sports Group through his role as director of legal and business affairs at Swansea City and D.C United, Porter is entrenched in the industry.

Most recently, he and acclaimed real estate entrepreneur Al Tylis purchased a roughly 50% stake in Necaxa. Less than 12 months after the initial purchase, a new round of investors purchased a 10%-15% stake in the franchise at a $200 million valuation. And there’s still room for growth in the near future.

The Liga MX Opportunity

I asked Porter what he and Tylis saw in Liga MX that was compelling enough to make a bid on one of its teams.

“I was looking at U.S. viewership trends and Liga MX is the most popular [soccer] league in the U.S. in television viewership and TV ratings by a wide margin,” he said.

In Mexico, Liga MX reigns supreme. It’s the equivalent of an NFL — but without leagues like the NBA competing for eyeballs. Beyond the unbridled passion, Census data as of 2020 estimates that the Latino population in the U.S. is around 62 million, with additional research indicating that 37 million are of Mexican descent.

That 62 million figure is larger than the entire respective populations of England, Spain, and Italy.

The States’ Latino population alone presents a large European country’s population worth of growth opportunity for Liga MX.

However, a large addressable market is only as good as the broadcast rights deal that services it. For Liga MX, broadcast rights are currently sold by individual teams, a function that depresses the aggregate value of the league.

Liga MX is the largest league to retain the individual rights model for clubs.

• Up until 2015, Spain’s La Liga had operated under a similar model before allowing for a collective rights model that would distribute income more equitably among its members.
• The change brought about structural changes for La Liga, and the league recently pulled in a combined $5.6 billion rights deal from DAZN and Telefonica.

Commercializing and operationalizing media assets is going to be the key for Liga MX — and by proxy, Necaxa — if it wants to make the best use of its current competitive advantage at home and in the U.S.

That process may be underway.

The league recently agreed to a deal with MLS to start a World Cup-style tournament — the Leagues Cup. The tournament will replace the current and much smaller version of the Leagues Cup tournament and take its name. It will also increase exposure for both MLS and Liga MX clubs while adding more high-profile games to clubs’ schedules.

The leagues have indicated that they would utilize a joint-venture model to sell the international media rights.

Greater North American television exposure and increased access to some of the MLS infrastructure could ultimately spur the changes needed to drive up overall league value.

Understanding Franchise Valuations

Now, let’s look at the big picture.

According to bankers who deal with franchise valuations, many team deals are valued in large part on revenue multiples. The market will value a franchise based on similar transactions for similar assets. These precedent transactions determine the correct multiples and premiums to use when structuring a deal.

Revenue multiples indicate how much a buyer would be willing to pay for the revenues that a team generates. For the NFL, the average revenue multiple has been 5.35x over the past decade and 6.39x in 2020.

The Broncos are expected to fetch a price of approximately $4 billion. Looking at recent multiples of around 6.4x and revenues returning to pre-pandemic levels (around $500 million) yields a value of about $3.2 billion. How do we make up the difference?

Control premium, availability premium, and potential growth (i.e. media rights deals) all play a role in getting to that $4 billion figure that’s been touted for the Broncos sale. The NFL is anticipating an increase in the value of its media rights, and franchises come available so infrequently that the asset class demands values above any historical premiums.

The process is as much an art as it is a science.

Back to Necaxa

Investing in sports franchises has certainly been a hot topic as of late, and there’s been a great deal of coverage around private equity entering the fray through minority ownership in various leagues.

Relative to other leagues, Liga MX presents a unique opportunity. Demographics, potential media rights restructuring and consolidation, and governance and relegation-related changes could quietly build a launchpad for exponential growth. Keep your eyes on this space.