Worldwide, owning a sports team is somewhat like owning a corporation. This “company” sells tickets and merchandise, but really, it is selling people the opportunity to love a sports team and show their loyalty. This makes it a slightly different company than your average company that sells soaps and the like, but basically they are the same. Currently, all the teams are privately held, but that is no reason for Private Equity firms to not get interested.

Private Equity, depending on who you ask, is either the best thing to happen to the stock markets or the worst. Technically, Private Equity companies are formed by a bunch of rich people that pool in their money and start this company for investing. The business model of private equity companies usually involves buying companies that are near-death or are suffering tremendously (Yahoo!, Crysler, etc…) and buying THE WHOLE company, basically taking it out of the stock markets.

Then, they’ll spend 2-3 years repairing the company. The theory is that since the company is now private, it can make decisions much faster and become more agile and turn the company into profit real soon. Then, they sell off this company for huge profits.  I can see how this model will work in India - Buyout a badly performing team, then put a bunch of “cricket experts” - coaches, new players, psychiatrist etc - and fix up the team, and once it starts winning again, go back and sell it.

With the stock market continuing to slide, all that money is starting to look for better avenues for investments, and the heady cocktail od cricket and bollywood that this IPL extravaganza is, the Private Equity firms are already starting to look for prey. The Times Of India is today reporting that the Chennai team, owned by India Cements, has already been approached by some Private Equity firms and Investment Bankers to buy minority stakes as an investment.

In all the hype, I hope the people don’t forget that this is about cricket, and not (entirely) about money. It is undeniable that once big money starts entering from the stock markets, the incentives of the players will start to change. I predict that they day is not far when the players will be offered ESOPS!