Given ESPN’s recent report that the UFC are in “advanced talks” to sell the business with a reported valuation between $3.5 billion and $4 billion, one cannot help but wonder what the UFC is really worth.
We take a two-pronged approach to generate an estimated valuation of Zuffa. In this first report, we compare the company to some other sports leagues and franchises. In a follow-up report, we will take a closer look at the state of the UFC, including growth prospects, sponsorship deals, as well as labor and legal issues.
Based on that approach, we estimate the company has a valuation of $2.23 billion. This would mean that, subtracting its approximately $467 million of debt, the equity in the company would be worth about $1.76 billion.
We note that one must exercise caution when using an EV/EBITDA multiple valuation approach with the UFC. The company’s business can be volatile given frequent fighter injuries due to the physical demands of mixed martial arts and the unpredictability of the results of actual fights, including championship matches. At one point in 2014, for example, TTM EBITDA dropped by 44%, according to Moody’s. Did the company’s value drop by 44% as well? It would be hard to say. And, based on an old Moody’s credit report, we estimate the company had TTM EBITDA of approximately $140 million as of 9/30/2011. Has the company actually declined in value from 2011 to 2015? Again, it would be hard to say.