Bruin Capital's George Pyne - how to raise money, then spend it, build businesses up, then exit with grace

0:03Welcome along to the Leaders Worth Knowing podcast, the sports industry show from Leaders where we talk to the people worth knowing in the business of sport this week. I'm David Cushnan, content director here at Leaders and George Pyne is with me on the show today. George, something of a pioneer when it comes to sports investment. He was, as he tells it ahead of the game, investing through the Bruin Capital business he set up in 2013, way ahead of the curve before institutional investment in sport became as commonplace as it is today. A bit of background on George. He was at NASCAR for a long period during the heyday of the series in the mid-90s as chief operating officer.

0:47In 2006, he joined IMG as president, beginning a nine-year run there, a run which included the creation and growth of IMG College, amongst many other successes. In 2015, though, he went his own way, creating Bruin Capital, which has gone on to invest in companies like Two Circles, Delta Tray, On Location. Those three have resulted in successful exits as well. Bruin's current portfolio includes the likes of Box2Box, the sports documentary production company, and Matchroom Sport, where he's working with Barry and Eddie Hearn. And rather than investing in teams and leagues, the focus for Bruin has always been on what George calls the pipes or the second level enablers, the company's one layer beneath the headline rights holders.

1:33On the show, George talks about the challenge of raising money, of deploying capital, how to work with management teams and the art of the elegant exit. And we at the start of July. That was just before news that Versant, the US media company, announced it was acquiring Full Swing, the golf simulator business from Bruin, for a reported $530 million. And given that Bruin acquired Full Swing in 2021 at a reported valuation of$160 million, that feels like another one of those elegant exits. George was keeping shtum about that pre-announcement, but hopefully this is nonetheless a useful and interesting guide to sports investment, the story of Bruin and how it's all evolving.

2:21So here is George Pine, the CEO and founder of Bruin Capital. George Pine is here. George, it's a pleasure to welcome you to London on what I hear is a fairly regular stopover for you. Yeah, I love coming to London. I'm here, you know, once a month at least. We have five companies in London. So, you know, it's really the hub of operations for Bruin. You're doing the rounds this week. I'm sure we're going to get into some, if not all, of those five companies during the course of this conversation. You have been around, I'm hesitating to call you a veteran, George, but you have been around the sports industry for quite a while.

3:02And I wonder in various guises, and I wonder how now, I think in the 12th year of Bruin Capital, how you might describe yourself to somebody, to a stranger at a high level swanky dinner party. Yeah, well, we're a sports investor, and our point of differentiation really is that we're more operationally focused, that we're not necessarily going to be too financially structured. And the other thing that's unique about Bruin is that we open up markets for what we'd call lower middle market companies. So, you know, what's kind of crazy, it's hard to believe is, you know, we have nine companies today, 4 ,000 employees, 24 offices on the ground, 24 countries, over 100 offices, and we transact in 103 countries.

3:54So we're very international. 80 % of our capital is invested outside the United States. whenever somebody says something like that with lots of big numbers it makes it just makes me think how are you how are you dealing with the how many emails are you getting a day and how you how do you deal with your you know incoming traffic and information we have a lot of really great people i mean we the companies we have great ceos and we have a great group you know growing group of people at bruin 17 or 18 people and uh we've got great great great people so you count and trust on the team around you, which were, you know, just what I do.

4:32Can you believe it's nearly 12 years since you set this thing up? No, I mean, I really can't. It's been quite a journey. I mean, I have to say people, it was a big risk at the time, right? People just sort of, what are you doing? What is he doing? I don't understand it. And, you know, today now everybody's investing in sports, but, you know, when I started, that wasn't really the case. So it's been fun. It was probably a big risk for me. You know, I was 48 years old and I was like, hey, when am I going to take a shot now or when I'm 60? I go, this is my one chance to take a shot. I did. If I knew how hard it was going to be when I started, I'm not sure I would have done it.

5:10I think ignorance and stupidity were a real asset for me. What was the hardest bit? I think the hardest. So far, I guess. Well, I think, you know, it's been pretty consistent. I think raising money is hard. It's just a hard thing to do. And so, you know, and what I do, you have to raise money, you have to deliver for people, you have to manage the companies, you have to find the companies, you have to build the companies, then you have to sell the companies, and then you have to do it all over again. So staying on top of that is a full-time endeavor. This might be a silly question. I'm not sure.

5:43You tell me. Is it harder to raise money in your experience than to deploy it to identify where it goes? Yeah, I think the raising the money is the harder of the two. I haven't done it now four times. It's just, it's hard. Deploying, you know, nothing, I was thinking about coming in today, nothing's easy. I would tell you that there's nothing I get up and say, boy, that's easy to do. But I think the raising the money is certainly the hardest part. You mentioned it at the start there, and I think it's been described, and you have described it in various ways over the years, where and how you invest.

6:22Second level enablers is a phrase I've seen used. I've seen the pipes being used to explain how you do what you do. Just explain what that means and why that has been central to your whole approach, your whole thesis to sport and sports investment. Yeah, when you think about data centers, right, we're not building the data centers, but we're providing the cooling system for the data centers. And so the second level enablers was kind of a fancy way of saying, hey, picks and shovels and infrastructure. And that's really what we've focused on, the kind of the businesses that underpin the sports business.

6:58And they typically have good cash flow dynamics, high cash flow, low capex, high cash conversion, very liquid in businesses that you can add value to. And if you think about it, I think I'm a pretty talented American football family, but I'm really not going to add value to the New York Giants. But when we invest in a company, we can help add value. That can come in opening markets, but also helping CEOs manage growth. because when we get involved, you know, you got to grow. So, you know, you're going to be growing company three, four, five times the size of when they grow. And I think we're good people to be with for that journey because everything doesn't work perfectly.

7:40And when it doesn't work perfectly, like who do you want to be in the boat with? Somebody that's actually done it before and is empathetic. You know, I always tell people I've been fired by a client, I've missed the budget and I've failed miserably. So when things go bad, we're great guys to be around. Now we love the top line. Last night I was in Milan on a sales call for a company that we own. I go on sales calls for every company we own. We love driving the top line, but at the end of the day, you know, it's, it's wide ranging in terms of operations. When you talk about raising money, um, I wonder, is it, is it, is it more of a challenge given that you are looking for maybe the more slightly more under the radar organizations in the sports industry and not necessarily the the glitzy shiny teams leagues is it a different conversation no you know actually it's interesting you know teams are great investments right they've been great for 30 years you know the double digit CAGR growth they're very steady but they're not they're not often liquid right and you can't really add value and so there are a lot of people that will not invest in things that are illiquid and really where there's not value.

8:54Some people will, but a lot of people like the high cash flow, low capex, high cash conversion, certain liquidity. So actually, it's actually been a good niche and it's more traditional from an investment standpoint. I just think if you talk to anybody that does what I do, they're going to tell you raising money is hard to do. We're going to, I wanted to get your reflections on some of the deals that have been important to you. And I've devised a small format to be able to do this. So not necessarily in quickfire form, because I'd love to get into a few of these. If you had to pick out the deal you have done that you found most satisfying, what would that be?

9:37You know, if you look at it, again, I think it's the raising, if you ask me at Bruin, it's probably raising the money, you know raising 250 million then raising 675 million then raising 300 million and then a billion dollars like doing that that's really a validation of a lot of good work so if you said to me what's most satisfying probably that and when you've done that and when you get to the the third round and the fourth round is that a you know difference between first and fourth time you've done it. Did it feel like a much more refined process? Did each time have its own particular challenges of period of time, moment for the world, moment for the markets?

10:22We're getting better at it and we're more at ease with it. And of course, raising a billion dollars, that was a real validation of a lot of good work of a lot of people. So I think we're more comfortable at it today than we were when we started. What about the most creative deal? most creative deal you know for us we do wide-ranging things so but we but financially we're pretty basic and you know we we'd like to take 60 or 70 ownership partnering with management to owning 20 to 40 it's typically kind of down the down the we're kind of down the middle guys so i guess we're not too creative um we're kind of more straightforward uh riskiest deal riskier steel.

11:07So far. So we don't, we don't, I don't look at the, you know, we don't invest if we think it's very risky. So we have a very low risk tolerance. So when we invest in something, the notion that it won't work out is never really there. Now where, where there is risk is like, we expect to be successful. How successful we're going to be is always kind of a question. Some of them you feel, Hey, I'm going to be very successful. And you know, when we look at something with saying, hey, do I believe that that business can generate a 25 % asset level IRR? That's the first flip list. And the second is, can we add value to that business?

11:46And third being, do we believe in the management team? But in terms of risk, we're pretty uninteresting. We're not too risky. What do you look for in a management team then? What are some of the skill sets or the attributes of the leaders of organizations where you go, yeah, this is going to work for us and we are going to be able to work with them. And we've kind of evolved. I've involved my own thinking. Initially, I really want to find someone that has drive, determination, that really wants to be great and wants to go along for a journey of growth because we're going to get a 25 % IRR, you're signing up for a journey of growth.

12:26But I think as we go on, you're really looking for someone who has vision, someone maybe who's done it before, and somebody who's not afraid to bring in the best people and surround themselves with the best people possible to grow because this is a growth journey. What about the most challenging deal so far? Yeah, I find them all to be challenging. I don't think I've ever said, boy, that was easy. I think different deals have different challenges. You know, sometimes, you know, we've had a situation one time where we did diligence and we invested kind of in a notion of a line of product and that line of product didn't work out.

13:07So we were able to, we had a pivot that was challenging. On other situations, you might have industry trends against you. And so you're going to have to pivot as well. And then I think the journey of the growth of really taking an organization and trying, increasing it. You know, we go try to go from 10 million to 50 million or, you know, 25 million to a hundred. And that, and that journey of transformation, you know, is not easy. So I, I have yet to find something that I'd say, boy, that was really easy. I think they've all been kind of challenging, but challenging in different ways. You touched on this earlier, but in a, in a previous, um, life, uh, previous part of your career, you spent a lot of time at NASCAR, as, I think, chief operating officer through the mid-90s and well into the 2000s.

13:57And I just wonder, even though you are not investing in rights holders in sports properties themselves, whether you still lean on that experience of being, you know, in the thick of it, on the front line at an organisation like that, even given the distance now, the sort of, I guess, 20 years since you left NASCAR. Is that still a valuable experience? Does that still sort of inform what you're doing now and how you're thinking about, particularly when you go into some of these organizations you've invested in and are working with the leadership teams? 100%. I mean, when you look at NASCAR and IMG, having done that for 20 years gives me enormous perspective on what's possible in an industry.

14:44And we can really see the potential of companies, not only initially, but during the journey. And what makes us, I think, special and attractive for somebody is like, we know what's realistic and we know what's not realistic. And that gives us a real firm foundation of what decisions to make and how to approach things. And if I didn't have that background, I don't think we would be as effective as we've been. I'm interested in what somebody like you consumes um not in terms of food George in terms of um information and you know paint us a picture of how you gain the information and insight that and intelligence that is is useful for you is it is it part sport part the markets parts sort of macro trends geopolitics break it It really is all, what you said, you know, every day I get up, I read the Wall Street Journal, Financial Times, New York Times, a little partial in New York, New York Post, Bloomberg, CNBC, every single day.

15:51And then, you know, all the, all the various, you know, Sports Pro, all the different various. Sports Business Journal, George. Sports Business Journal, sorry. Yeah. all of the trade publications. And you are right because you have to understand what's going on in the world and how it applies to what you're doing, specifically us when we're on the ground in all these countries. I mean, so for us, understanding the world, understanding economics, understanding sports, understanding the whole situation and how it relates. I mean, interest rates affect us. how companies do affect us, how the sports industry is going affects us.

16:37And you have to kind of weight all that into your decision making. And as an American, it is often said of Americans in general, frankly, but some of the American sports industry that is still a little bit insular and is not necessarily looking internationally outside of the sort of geographical boundaries of the US. But in terms of your role, your position, you talked about the trips to London and the international businesses that you are deeply invested in. Is that something that has changed over time? And do you, you know, would you encourage more US sports executives to have that genuinely sort of global outlook?

17:21Well, I think having a global outlook makes you better irrespective of where you are. I mean, I had the unique background of nine years at IMG, which was enormously helpful to me where I apprenticed internationally and, you know, worked in 30 countries. And today at Bruin, you know, we have 15 advisors around the world. So we have one degree of separation from almost any kind of information, which is enormously helpful. And I do think, you know, you have to understand how to relate to people. And I think, There are different people in different cultures and understanding that your strengths and weaknesses as an American, you need to understand that and you have to understand other people's perceptions of you and you have to be able to work collaboratively.

18:04And I think that is a real skill set in terms of an American going to other parts of the world or vice versa, a European going to America. And so we've been able to straddle that really well. And yes, we are very international, but a lot of our companies really do. What we do is open up America for those companies, which can be a daunting task for a company making 10 or 20 or 30 million of EBITDA. Going to America is a daunting task. We make it less daunting. But again, you really have to have the human skills to work with different people from different backgrounds and understand your background may not apply in a different situation and have the willingness to do that.

18:46I always remember there was a guy named Doug Isabel, Irish. She was the chairman and CEO of Coca-Cola. And when I was early on at IMG and I had a staff meeting and not everyone was very differential. And after the staff meeting, I went to my, I said, gosh, I'd hate to be a diplomat. I go, how do you manage all these people? And I remember sitting with him and he told me, he gave me great advice. He goes, you know, you're going to be in a different territory and somebody is going to want to go from point A to point B and they're going to want to do it differently than you are. And you got to let them do it.

19:16and that is how we roll. You know, we have really, like you said in the beginning, how do you manage all this? Hey, we have great CEOs and we're there to support those guys and work with those guys. But in the end, they're charting their own course and we've got to back them. And kind of having the soft hands of doing that, I think has been important to our success. You talked about sitting in on sales calls at all the organizations that you're invested in. And I imagine you sort of pick and choose clients to sort of lean in on, I suppose. I just wonder in terms of what you personally are bringing to these organizations, what you regard as your biggest skill and whether that has evolved or changed over the period you've been doing this.

20:03Yeah, well, certainly opening up markets. With the network we have, and we're very strong in Europe as well, Australia. So we have a great network, those 15 advisors around the world. So we, we, you know, we opened doors at the highest levels for our companies to, you know, doors that they couldn't open on their own. And that's a real value, but also, um, so that's attractive, but we're also very good in terms of we, the way I've always, how did a guy whose wife taught him how to drive a stick shift and never change motor oil in his life, end up running NASCAR and rules reported into me. And you know, how that happened is I had a very detailed three-year planning process.

20:44So the guy that ran the whole, owned the company said, I want that guy to do that for everybody. And so I'm doing the same process I did 25 years ago at NASCAR and at IMG that we sit down in the fall. I've sit down with every company and I meet with them probably three different times. And we really develop a strategy that's confirmed by the numbers. I think numbers are like cholesterol or blood pressure and they confirm the strategy. So if the strategy is good, the numbers are good. If the strategy is bad, they can't be good numbers, right? And we trace that month in and month out. And we kind of spend our time where the great opportunities are or great problems.

21:22And if we're not needed, that's wonderful too. But my experience over 30 years is that you never get too far away from a person. And you're close with the management team. They know that you're there to help and that if help isn't needed, you're not going to be there. Nobody here is looking to impose their will on anybody. So I think that combination of planning with that kind of combination of top line growth is attractive to, and we've done better with founders, right? If who you work with matters, we're pretty, we're pretty attractive option. And I think it's for both of those reasons, one driving the top line, opening up doors, but also being empathetic.

22:06Like I said, you know, I have failed, so I understand what it's like, or I've had my back to the wall and I know what it's like. And if you've run something and you're the CEO, you know, it's a lonely job. And so having somebody that's there for you, that's not flying the plane, but someone you can say, well, hey, when you went in a storm before, how did you sail through that storm? I think it's helpful. Let's talk in a bit more specific form about some of the organizations that you are currently invested in or have invested in previously. And it strikes me that the story of brewing is very much also the story of the sports industry.

22:43And I guess that, you know, you've sort of clearly anticipated trends and seen trends come and go over that period of time. And I wonder particularly about three of your investments, two circles, Delta Tre and On Location, which each tell a

23:03You've been through an end-to-end process in all three cases. The art of the exit, maybe just reflect a little bit on each of those and how you came to the decision that it was the moment to exit and actually what you left behind in terms of three organizations that are still, you know, absolutely at the forefront of the industry and flourishing. You know, it's funny because it was all new to me as well. what's happened with us on the exits is the management teams having experienced success really want to realize success so you would have thought the investor would have been the guy running to the exits in in each case which is great that the management team is like I want to realize you know what the the success we've created so um that's really kind of how that's played out and you know it's still playing out you know to this very day so you know people work hard.

24:00They're there for five or six years. You know, they want to, they want to realize their success. And of course I'm not a post that I'm a bit of an artist. Like I love the companies. I love building things. I hate selling them, but it's part of the job. Right. So, uh, and you know, look how you sell a company is important. What I've learned, you got to raise the money. You've got to find the companies. You got to buy the company correctly. You have to manage the company, but if you don't sell it correctly, it really, all the other stuff really doesn't matter. So how you sell a company, how you manage the exit is important.

24:32What can go wrong? Well, you may have not understood something about your company when you went to sell it that could be problematic. You may have overestimated an element of your company or you could always underestimate it. So you have a lot of human dynamics with the management team. is naturally, as I was at IMG, apprehensive about what could happen in the future. And so all that needs to be managed carefully to be successful. And on the flip side, what does an elegant exit look like? I think an elegant exit is when the management team finds a partner, a home that they're excited about after our journey.

25:24and, you know, financially everybody succeeds. And so far that's been the case. And I hope it stays that way. But, you know, when you work with these people for five, say Gareth Balsh at Two Circles, like I really appreciate Gareth. We're still friendly to this day. And, you know, I wanted a good outcome for him. And I think he hopefully wanted to have a good outcome for me. And so it's important to me that these guys succeed. succeed. And, you know, I'm happy to say John Piero at Delta Tray, he visited me the last time he was in New York. Gareth, I spoke to about a month ago. John Collins at On Location, I went to, he's running the Islanders.

26:03I went to the Islanders and, you know, it's your life. So far, it's a lifelong friendship. The exit is just part of that journey. And take us inside your world, let's say at the point of an exit of an organization like two circles or delta tray tell us a little bit about your role in terms of not just the the management team that you that you leave behind if you like but in terms of then who you're reporting into how you're communicating that the story you're telling to to the people you know our investors to your investors yeah so so we we we have a quarterly board meetings and we so we had a quarterly meeting two weeks ago and we talk about each company when we think we're going to exit we always say well we can't nobody can predict the future if they did we would be in macau or las vegas we wouldn't be we wouldn't be here but um so we kind of manage that with our investors to say here's here's what we think about the company here's what we think some outcomes could be and here's when we think those outcomes will take place and why and then that also ties So here's the different strategies within those companies.

27:17So we're always, you know, every company, when I'm speaking to an investor at a board meeting, we say, hey, we're looking to exit at this time. Now, of course, things change and, you know, that could, but that's the thought process. So that's important. And then also, you know, you have to hire, there are a lot of talented investment bankers. You have to pick a banker that you think will do a good job for you, and you have to work closely with the bankers. And what we've done at Bruin is we bring the bankers in a couple of years before an exit to give us a review. Hey, what do you think of this company?

27:57If you're us and we have two or three years left, what strategic direction would you take? What decisions would you make? And as you get closer, we spend more time with the bankers. So it does a couple of things. One, it allows us to get input from an outside set of eyes. And two, it educates the banker on the company. And three, it also helps the company to hear from an independent source about what's important. After hearing from us for five years, you might want to hear from somebody else whose job it is to sell. So, in fact, we bring our companies together once a year. and almost every year we'll bring in two or three bankers to present to the companies to talk about you know how they like to take a company to market about what's important and how they should be thinking about things so that you are right yeah you're managing the management team you're managing your investors and in a way you're managing yourself because you got to you got to land the playing and we are in a financialized era of sport now there are so many more investors of all sorts of types and there's nuances different types of whether it's institutions athletes you know celebrity fronted um groups are the are the what's your sense of the financial literacy of the sports industry as this financial world is sort of enveloping them?

29:31Do you, you know, is there work to be done there in your experience in terms of the people who run teams, run leagues, to understand how this wider world of finance works? Or actually, do you feel like there's a good level of sort of mutual understanding? Well, I think when you look at sports, the capitalization of sports has been pretty conservative and that provides opportunities for investors that may not be in other segments. When you look at sports, just take a step back, go higher. Sports right now is the only thing that brings millions of people, in the case of the World Cup, billions of people together that are engaged around the subject matter.