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April 2024

Capital Changes Everything

How Money in the Golf Industry is Moving

By Michael Williams

There’s a song by 80’s pop star Cyndi Lauper that is titled “Money Changes Everything.” Certainly, the golf industry is being changed by the way that money is flowing into and throughout the game.

Some of the transactions that have been happening over the last five years are among the most significant the industry has ever seen. Apollo Global Management paid $2.2 billion dollars to acquire private golf club operator Invited (formerly ClubCorp) prior to the pandemic in 2017, and Invited has used that capital to then acquire a range of courses across the country. In 2021, TPG Capital invested in Troon, one of the largest golf course operators in the hospitality industry.

In 2022 KemperSports Management, a leading provider of management, marketing and brand activation services to golf courses, resorts, major sports leagues and Fortune 500 companies, enjoyed an infusion of private equity that has enabled them to acquire blue-chip properties like Streamsong Resort in central Florida.

Clearly, large multi-course owners are getting larger because of the capital available to them in the private equity markets. And there are even small startup companies that had one or two courses a few years ago that are sporting portfolios that boast double-digit locations. As the industry takes note and adjusts to this new environment, the three big questions on everyone’s mind are: 1) what is attracting the money, 2) how long will it last, and 3) how can they get in the game.

Several factors are responsible for the influx of capital. One of the largest factors is the post-Covid golf boom that saw millions of new golfers coming to the game. Millions of new green grass golfers meant a huge growth in the revenue potential for the industry. Another factor is the rise of entertainment golf technology. Led by Topgolf and Toptracer, these new forms of golf are based more on pure entertainment rather than competition, and the response from the public has been overwhelming. According to the National Golf Foundation, there are now more so-called “off-course” golfers than green grass golfers. However, the possibility of converting those Topgolfers into green grass golfers is another signal to investors about the potential for growth in the industry.

Keith Karem, Senior Vice President of Marketing for KemperSports, shared his thoughts on the kind of firms that are choosing golf as an investment and why.

“It's a wide-ranging number of companies and I think that they're attracted to it because we've shown through the pandemic and coming out of the pandemic that golf is just an excellent outlet for sport, for being outdoors with others. It's a good opportunity to decompress, relax, have fun, and it's growing in ways, both in popularity and in its accessibility to segments of the population that typically weren't interested in it before. I think people see it as a sport on an upswing, and there's a lot of opportunity to both grow the game and grow an investment as a result.”

Karem’s observations are confirmed by the myriad of investors flocking to the game that range from established multi-billion-dollar funds to wealthy individuals and celebrities. Just recently, glitterati such as Justin Timberlake and Tiger Woods have invested in golf-related brands, and celebrity chef Danny Meyer committed $20 million to an indoor golf experience in New York City.

As for the reason why golf is seen as an attractive investment at a time when talk of recession has many market pros running for cover, as the old saying goes: follow the money. Notes Karem, “I don't think anything is recession proof, but I do think [golf] is recession resistant in part because golf as an outlet is here to stay. And I think that investment sees that. The popularity is on an uptick and will continue to. And when you take a longer-range view, it doesn't matter whether or not there's a short-term blip. In the long term, it's going to be there.”

With the number of golfers continuing to rise and the markets beginning to feel that the economy dodged a recession-tipped bullet, more institutional and well-heeled individuals will be looking at golf and golf-related enterprises as worthy investments. But that doesn’t mean that attracting that money is easy. Investors are looking for players that have innovative technology or companies that have a long track record of success in the industry.

When asked if private equity chased KemperSports or vice versa, CEO Steve Skinner notes, “We had two or three groups approach us and we really chose the people who we thought were the best fit culturally as much as anything, and who were committed to our long-term vision for the company. And I think that's the key thing.”  Skinner continued, “We wanted people that would fit in and really support our management team's vision. And I think that's another key. These folks were invested in sports in some other sports entities and understood the business and liked golf and bought into our vision.”

Golf is definitely a hot property right now, but the industry has seen more than its share of boom-bust cycles and has the scars to prove it. Nevertheless, operators like Kemper are feeling bullish about the future of the game and the opportunity it represents.

“When we had the Tiger boom, we had this overpopulation of courses; now that's all settled back out and there is a better equilibrium,” notes Karem. “Now, we've hit this nice balance of inventory amount and player growth, and this player growth continues to grow. And as you bring in more golfers to the game, there is this long-term view that it's a stable and wise investment.”

“Overall, I think that the right people are in this business and they're in it for the long haul.”


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