The strategic due diligence focused on sizing the upside opportunity for a motorsports business from direct-to-consumer streaming, potential expansion of media rights revenue, and a new sponsorship strategy. MC[CO] Labs analyzed sports market trends, conducted interviews, and developed three-year revenue forecasts to model the commercial valuation. Their work provided insights into key growth drivers and validated management's strategic plan, informing the client's investment decision-making.

1. MC[CO] LABS
Sports Due Diligence
Commercial Valuation Support for Hedge Fund
Case Study

2. Context
Our Client is a large institutional alternative asset management firm operating with global offices in
multiple investment strategies, including multi-strategy, credit, and real estate.
In the specifics of this engagement, we were asked to lead the strategic due diligence for a sports-related
investment in a large motorsport business. Our work explicitly focused on sizing the upside opportunity
presented by DTC streaming, the potential for media rights revenue expansion, and a new sponsorship
strategy associated with an ownership change and a new Management team taking over the business.
Our approach combined an in-depth analysis of the sports market landscape (media rights, sponsorships,
etc.) with in-depth interviews with customers and other market participants to evaluate the competitive
landscape and ascertain the sponsorship revenue and media rights expansion potential. Additionally, we
delivered an in-depth perspective on the potential size and timing of the company's DTC streaming
service and its impact on the company valuation.
2MC[CO] LABS

4. Key Questions Addressed
4MC[CO] LABS
• What are the key trends and market dynamics characterizing the sports ecosystem, particularly global
motorsports? What is the size of the audience and its current underlying trajectory across sports?
• How is digital impacting the viewership behavior by consumer cohort and what are the implications on the
sports media strategy? What are the key trends impacting media rights and their renewals?
• For the target in question, what is the competitive position vis-à-vis other sports leagues? How does that
competitive position transfers into the future growth potential across key revenue drivers?
• What is the potential of media rights renewals (expert interviews)?
• What are the reasons behind the sponsorship revenue gap (volumes and number of total sponsors), and how
is that expected to be closed in the next five years? How realistic is Management’s plan with regards to
sponsorships?
• What is the potential of the DTC streaming business and what are the expected implications from a content
strategy and investment perspective? What is the potential size of the esports adjacency?
• What is a realistic revenue forecast for the company, assuming a three year time horizon?

5. Approach
5
• Strategic review of key sports trends, as
it relates to media rights, sponsorships,
merchandising sales and gate revenues
• Media Rights: trend analysis to
understand key market dynamics
underlying renewals and core comps
(NBA, NFL, Golf and Tennis)
• Sponsorships: competitive analysis to
understand key elements of
differentiation and competitiveness for
sponsorship dollars conversions
Sports Market
Dynamics
Growth Drivers
Assessment
Commercial Valuation
(3 year forecasts)
• Conduct primary interviews with brand
managers, ad agencies and sports
programmers to determine strength of
the value proposition vis-à-vis
Management’s growth plan
• DTC growth potential: analysis of the
streaming opportunity and expected
revenue scale at 3 years
• Sponsorship Gap: benchmarking
analysis against key sports leagues and
assessment of gap closing potential
• Digital Ad revenues: benchmarking
analysis of ad revenues and potential
upside (pricing/inventory)
• Revenue forecasts simulation at 3 years,
broken down by key revenue streams
• Risk assessment to determine
sensitivity scenarios to different
assumptions
• Valuation impact and implied price
target
4 weeks
Key Strategic Advisory Activities
CoreTopicsAddressed
1 2 3
MC[CO] LABS

6. Step 1. Sports Market Trends
Technology adoption, shifts in viewership behaviors are driving key changes in the
structure of the industry revenue streams, while simultaneously opening new ones.
Distribution
Disruption
Sponsorship
evolution
Live experience
evolution
Sports betting
Esports
1
2
3
4
5
• The effects of a rapidly shifting media landscape, undergoing significant audience
fragmentation, a multiplication of devices and platforms, and changing viewers’
habits.
• Large impact on media rights
($5-8bn impact in US alone)
• Accelerating momentum
• High impact for shifting basis of
competition
• Medium momentum
• Acting as revenue protectors
• Medium momentum
• High impact (1.5-2bn p.a.)
• Accelerating momentum
• Medium impact (300-400mn
pa)
• Accelerating momentum
• Increased sophistication of all sponsorship deals, where brands increasingly
seek greater ROI, integration, engagement and flexibility in their marketing
activations
• The emergence of “smart stadiums”, where live experiences will be augmented
by mobile devices to facilitate mobile ticketing, live replays, expedited food
orders and other applications.
• The legalization of sports wagering across sports markets and countries, creating
both new revenue opportunities, increased fans engagement and sponsorship
integrations.
• The growth of esports play, leagues and acceptance of the videogame experience
and teams as real sports, connected with traditional sports
TREND
AREA (2019-2024)
DESCRIPTION IMPACT &
MOMENTUM
Content extensions6 • Unclear impact
• Low momentum
• The emergence of new content formats (visual overlays, AR/VR, camera angles) to
augment traditional viewing experiences or create new ones
The data revolution7 • Unclear impact
• Accelerating momentum
• Widespread adoption of data gathering, processing and application to optimize
decision making across the entire sports value chain
MC[CO] LABS 6

7. 7MC[CO] LABS
“There is a feeling of rapid change in the industry, change that cuts across
structure, business model and revenue streams…at a time of accelerating
media fragmentation and with the emergence of new platforms, a domino
effect has already being activated with impact felt on media rights,
sponsorships, the creation of new technology driven revenue models and
new formats to engage and communicate with global sports fans”
Former ESPN Programming Executive

8. Step 1. Sport Market Sizing & Growth
8
0
50
100
150
200
250
2014 2015 2016 2017 2018 2019
Gate Media Sponsorships Merchandising
~6%
Global Pro Spectator Sports Revenues
(2014-2019, US$)
Pro Spectator Sports are ~$200-210b business globally, led by the North American
market with 30% share, and with moderate overall growth at ~6%.
Sources: Statista, 2019, PWC (multiple years), Deloitte, Research & Markets
Note: data estimates were triangulated based on top down validation of multiple sources, with mid point reconciliations when
significant differences in methodology and algorithms were encountered.
0
10
20
30
40
50
60
70
80
2014 2015 2016 2017 2018 2019
Gate Media Sponsorships Merchandising
~3.5%
North America Pro Spectator Sports Revenues
(2014-2019, US$) CAGR
(2014-
2019)
1.6%
1.7%
3.5%
6.3%
CAGR
(2014-
2019)
4.5%
5.0%
7.4%
9.0%

9. Step 2. Growth Drivers Assessment
9
For each sports revenue stream, including media rights, we validated the historical
trajectory and extracted the patterns of evolution going forward
0
10
20
30
40
50
60
70
80
2014 2019
FTA Broadcast
Pay MPDV
Digital Bundles
DTC (IP owners)
Global Sports Media Rights
(2014-2019, US$ bn)
+9%
0 20 40
1980
2000
2010
2020
Average Number Of Distributors
(# of bidders, US)
Aggregated and analyzed secondary
data on the sports media rights market,
and validated third-party studies with
one-on-one expert interviews from the
sports TV programming business (expert
networks, N=20)
Analyzed aggregate TV ratings
trajectory in comparison with other TV
and digital content categories to
ascertain share gains.
Projected future growth scenarios, using
three year acceleration rates, adjusted
with other qualitative input such as
increases in number of distributors,
audience composition, and relative fan
base strength power indexes.
Approach
MC[CO] LABS

10. Step 2. Growth Drivers Assessment
8
MC[CO] LABS
Using a detailed benchmarking analysis, we compared the general industry direction
for each revenue driver with our target’s historical performance
Sources: MC[CO] Labs elaboration (proprietary database built ad hoc for this project from third party research and primary
interviews; N=98)
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
Average
benchmark
Formula One
(2017-2020)
0
100
200
300
400
500
600
700
800
2014 2015 2016 2017 2018 2019
F1 Media Rights Revenues (2014-2019) Rights Renewal Multiples (2015-2019)
Built and analyzed a large data set of
over ~100 sports rights deals (and
contract renewals) across league tiers
and geo territories.
Extracted overall insights as it relates to
key drivers and range of increase
(distributors level of consolidation, size
of the fan base, ratings history and
momentum, etc.)
Conducted benchmarking analysis to
evaluate the target’s upside and reveue
conversion timing based on the
renewal pipeline (market by market)
Modeled financial impact on target’s
valuation.
Approach

11. Step 2. Expert Interviews (Customer Survey)
18MC[CO] LABS
A targeted customer survey highlighted a few tactical areas of opportunity to enhance
the top line during the time of turnaround.
(*) This information is confidential and was prepared by MC[CO] Labs solely for the use of our client, and it is not to be relied on by any 3rd party without MC[CO] Labs prior written consent
• Continue to stress “premium franchise” positioning to protect brand prestige and drive audience
affinity among both existing as well as prospective partners.
• Re-inject fuel and passion in the fan base, who have been declining since 2009. Capture new fans and
stop the bleeding amongst younger consumer segments.
• Leverage driver characters to drive off-race engagement and storylines to retain fans’ attention and
develop engagement.
• Expand access to content opportunities for brand partners.
• Expand digital footprint to acquire and engage younger viewers, while creating multiple engagement
touchpoints, content opportunities and ad formats for brands to take advantage of.
• Modernize data/analytics platform
• Provide better alignment between costs and benefits for large sponsorship deals (sponsorship fees
often judged unjustified for the value created, according to some sponsoring partners)
REINFORCE PREMIUM
POSITIONING
STOP THE
AUDIENCE BLEEDING
EXPAND
CONTENT PROPOSITION
IMPROVE DIGITAL
ENGAGEMENT
IMPROVE COST/ROI
RATIO FOR PARTNERS
1
2
3
4
5
KEY opportunities areas
(voice of the customer interviews, N=25)

12. Step 2. DTC Opportunity
(*) This information is confidential and was prepared by MC[CO] Labs solely for the use of our client; it is not to be relied on by any 3rd party without MC[CO] Labs prior written consent
12
Using S-curve comparison, we evaluated the key strategic initiatives presented by
Management in their investor presentation, including DTC video streaming.
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2014 2015 2016 2017 2018 2019
WWE OTT Paid Subs(2014-2019)
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
2018 2019 2020 2021 2022
US International
Benchmarked F1 OTT Paid Subs (2018-2022)
Hours 1500 2700
140
1750 1900 2100 2400
Analyzed the S-curve profiles of ~20
DTC launches (media content
subscriptions) between 2012 and 2018
Created a specific growth model for the
target, basing its future progression on
the most comparable services
(similarities on global appeal, fan base,
competitive dynamics and content
bundles being offered).
Estimated marketing cost to launch,
and expected operating expenses,
based on technology investment,
average subscriber acquisition costs
and other relevant costs to operate.
Derived a base case for a three year
revenue progression, including financial
impact on the bottom line.
Approach

13. Step 3: Revenue forecasts and gap analysis
8
MC[CO] LABS
We created a detailed model to develop a deeper understanding of the revenue gaps,
informing a bottom up analysis for media rights, DTC and sponsorship revenues
Sources: Sports Business Journal, Forbes and other web literature, 2017
(*) Telco (title sponsor candidate), technology (global partner candidate), spirits (title sponsor candidate), energy (title sponsor or
global partners), Credit Cards (title sponsor or global partner)
(**) Assumes 8 incremental sponsors (2 global, 4 title, 2 supplier) converted by 2020, and assuming a 18-24 months sell cycle.
• Global Sponsors (6): DHL
(logistics), Heineken (Beer),
Allianz (Insurance), UBS
(wealth management), Rolex
(Watches), Emirates (Airlines)
• Title Sponsors: Singapore
Airlines (Airlines), Coca Cola
(Energy Drinks), P&G (Gillette)
and others.
• Official Suppliers: TATA, Pirelli
(tires), Daimler (cars), Johnny
Walker (Spirits)
0
10
20
30
40
50
60
F1 MLB NBA NFL PGA FIFA NASCAR
Number of sponsors across tiers
(# of sponsors, 2017)
• Address 4-5 under-
indexing categories (*)
• Deepen penetration of
other categories through
split-rights
• 6-10 incremental
sponsors, with 8 being
base case
• 2 global
• 4 title
• 2 supplier
• 24 mth. sell cycles
Category Gap
Base Case (**):
~$126M
Base
case
2017 2022

14. Step 3: Revenue Forecasts (By Revenue Stream)
8
MC[CO] LABS
:Pricing
• Sponsorship upselling potential based
on development of content and digital
activation capabilities
• Applies to contracts in renewal (3-4 yr.
agreements) and deploys gradually over
a 5 years.
• Deal size ceilings set by comparable
market benchmarks
Volumes
• 8 incremental sponsors (2 global, 4 title,
2 official suppliers)
• Increase of median deal sizes (global:
$40M, title: $10M, supplier: $3M)
• Core categories: technology, credit
card, telcos, beverages
Target sponsorship revenues ($M, 2016-2020)
2016 Increase spend
(upsell)
New
sponsors
~$260M
~$33M (*)
~$126M
~$419M
2022
(*) Assumes 10% churn on existing base
Assumptions
Ultimately, we rolled up our detailed forecasts into a bottom up commercial valuation
at three years, which was used to inform a high-level valuation for the asset.

15. Engagement Recap
15
MC[CO] Role
MC[CO] Deliverables
Client Results
Provided key input on the commercial valuation side of the client’s investment due diligence
process, including: 1) media rights, 2) sponsorships and, 3) DTC streaming
Delivered:
• Sports market sizing and value chain analysis
• Market sizing and growth drivers validation
• Media rights forecasts
• Assessment of DTC video streaming potential
• Sponsorship gap analysis and sponsorship revenue drivers
The client gained a robust understanding of the motorsport industry segment, and its key
drivers of evolution. Our work delivered a base case revenue growth path for the target, and
its underlying risks based on the company’s current positioning, the challenging competitive
dynamics, inherent fan base appeal and trajectory, and the overall alignment of
Management’s strategic plan.
Capabilities Utilized Benchmarking analysis, customer survey, scenario modeling and revenue forecasts.
MC[CO] LABS

16. MC[CO] Labs is a boutique strategy consultancy headquartered in
Los Angeles. We specialize in growth opportunities, corporate
development, and investments at the convergence of media,
technology, and consumer marketing.
We augment our clients’ senior leadership as they set a new vision
for expansion or transformation, evaluate new growth opportunities
and investments, and design the strategic architecture to inform
future growth-inspired action plans.
We specialize in market assessments, strategic planning, and
strategic due diligence. Our work focuses on driving the insights
that inform large scale corporate development moves, growth
strategies, revenue-generating initiatives, and
investments/divestitures (including M&A).
We selectively co-invest with our targeted fund, MC7, focusing on a
targeted number of attractive investment opportunities, in addition
to actively managing a portfolio of TMT-related public equities.
MC[CO] LABS

17. Contact:
Mauro Cellore
Managing Partner
mauro@mccolabs.com
MC[CO] LABS
www.mccolabs.com