BENJAMIN MARK COLE
The proposed sale of the Los Angeles Dodgers, along with the stadium and surrounding land, promises to be one of the most negotiated and intricately structured deals in sports history.
The deal’s complexity all but guarantees a bevy of experts from the financial, legal, and accounting professions and it looks like a lot of homegrown talent will be tapped.
“This sale will involve a number of players. It will be a transaction that is well-organized and disciplined, with lawyers, investment bankers, CPA firms and others on the scene,” said Andy Kane, managing partner of tax and business advisory practices at Arthur Andersen LLP in downtown Los Angeles.
Veteran sports attorney Alan Rothenberg of Latham & Watkins in downtown Los Angeles, which counts the Dodgers among its clients, is the likeliest candidate take a lead role as legal adviser to Peter O’Malley, Dodger owner and chairman. (As of last week, O’Malley was unavailable for comment.)
Rothenberg has extensive experience in sports, having helped manage the Los Angeles Clippers and led the Major Indoor Soccer League.
Rothenberg’s role will be to oversee the drafting of sales documents, and to legally position the company in the most advantageous position concerning taxes upon sale, said experts.
Given Rothenberg’s stature, he may evolve into the lead negotiator, or become a “closer” a negotiator brought in to conclude a deal after most of the details have been settled by associate lawyers.
Another probable local player appears to be Century City-based Houlihan Lokey Howard & Zukin, the corporate evaluation and investment banking shop.
Paul Much, senior managing director in HLHZ’s Chicago office, is a nationally recognized sports franchise evaluation expert who has done work for the Dodgers before.
Much has a reputation as “Mr. Luxury Box,” for his expertise in advising teams or municipalities on adding exclusive suites or skyboxes to stadium facilities.
Normally talkative, Much in recent weeks has declined all comments to the media, citing his relations to the Dodgers. Through a spokesman, he said his disinclination to talk should not be construed as evidence he is in the Dodger camp.
However, HLHZ literature identifies not only the Dodgers, but Dodger Stadium and the Vero Beach Dodgers as clients of the firm in addition to a roll call of 56 other sports enterprises, including the New York Yankees, Atlanta Braves and Boston Red Sox.
HLHZ nameplate partner Jim Zukin was uncharacteristically quiescent last week as well, although he penned a brief note guessing the Dodgers would sell for $300 million.
If formally retained by the Dodgers, it would be HLHZ’s job to present strategies and sales structures that would maximize the price paid to the O’Malley family.
One aspect of the impending sale involves the stadium and land, and the potential for property tax reassessment following a sale. Under state Proposition 13, the land has not been reassessed since 1979.
Charles Ajalat, of the downtown L.A. law firm Ajalat, Polley & Ayoob and a leading expert on property reassessments, last week said he has not been retained by the Dodgers, but he guessed there is a 50-50 chance he ultimately will be.
Ajalat said the value of a sports enterprise may rest in the team, not the land or stadium (which are often money-losers). So a drastically higher assessment of a stadium and surrounding land might not be warranted.
The Dodgers’ tax and auditing firm has been Ernst & Young LLP, led by Mary Ann Sigler, in the firm’s Century City office.
It is not clear what role, if any, Ernst & Young will play in the sale, and the CPA firm last week did not return repeated phone calls.
But in general, a company’s accounting firm has the obligation to set up a “war room” or due diligence room, in which potential buyers can review financial data and other documents relevant to a company’s value, said Dan Barrett, senior manager of Deloitte & Touche in downtown Los Angeles.
“You need documents to present to investors, so that they can evaluate, and do due diligence,” said Barrett.
Other materials might include tax returns, cash flow projections, historical balance sheets and other paperwork, said Kane of Arthur Andersen.
After potential buyers peruse the initial disclosures, they may make bids, dependent on the review of more-detailed documents, such as leases, contracts with players and vendors, reviews of government regulations and other actions, said Kane.
No one knows how long the process will take to play out, said Kane. “This won’t happen in a few weeks. But if it can be (concluded before) the baseball season, that would be a plus. I see this as a 1997 transaction.”