The deal’s ownership structure has not yet been finalized and it awaits approval from the NBA. Earlier this week, when the NBA formally announced Meruelo as the Hawks’ owner, he refused to address specifics on the transaction, only saying former majority owners Bruce Levenson and Michael Gearon Jr. would retain minority shares “for a period of time.” Reports pegged the sale to Meruelo at $300 million, which also includes the debt on the Hawks’ arena.
Xavier Gutierrez, CIO and president of California-based Meruelo Capital, declined to comment on specifics of the deal, as well: “As the transaction is still pending NBA approval, we are unable to provide any comment about the deal and its structure.”
It is, in fact, league mandate that a team be controlled by one entity and one alone, so Meruelo Capital Partners had no choice but to take a minority position as part of its namesake’s investment. The private equity firm has a broad mandate, covering investments in construction and property management to a hotel to a television station to restaurant investments. Meruelo himself launched the Pizza Loco chain in the mid-1980s before establishing his own investment firm. He will become the first Hispanic owner of an NBA franchise in league history.
He will also be inheriting a franchise in transition that could lose multiple superstars as the NBA simultaneously struggles through a labor lockout. The Hawks will be facing some hefty operating expenses if they hope to retain the superstar talents of Josh Smith and Jamal Crawford that made Atlanta a playoff contender in recent years. It is widely expected they will lose one of their top players to free agency; losing both would prove a major and immediate setback for Atlanta — and Meruelo.
Private equity firms and their bosses — like Meruelo and Detroit Pistons owner Tom Gores — are treading into potentially choppy waters in their out-of-Cali adventures. The NBA is counting a lot of money-losing teams among its ranks after years of ambitious expansion into new markets. Further, for both PE bosses, their respective teams are coming off recent seasons where they were championship contenders and the hometown crowd has come to expect a winner. (In Gores’ case, he will have championship banners less than a decade old hanging in the Auburn Palace to remind him of fans’ expectations.)
Mattress consumers won’t be too hurt if you pare down the quality of their product, but sports fans will react much differently if the PE-backers of their beloved hometown teams treat franchises as strip-and-flip operations. Also, the impact on the brand will be immediately felt if operators of professional sports franchises fail to sufficiently maintain their acquisition.
So, Meruelo and his PE firm may be the new owners of the Atlanta Hawks, but the fans that pack the Hawks’ arena and buy their merchandise are really the ones that control the team’s future.