The Business of Sports Investing

You'd be forgiven for being ever-so-slightly jealous of Paul Edgerley and John Sherman. After all, it's not all of us who can grow up to own the baseball team in their hometown. 

The April 9 ACG morning breakfast, “The Business of Sports Investing,” featured Sherman, The Kansas City Royals CEO, and Edgerley, a member of the ownership team, telling moderator Joel Goldberg the story of how they and their partners bought the organization in 2019, how they made it through the pandemic season of 2020 and where they see the team heading now. 

The biggest takeaway? Sherman and Edgerley, along with their owner/partners and the front office and on-the-field team, are building an organization where character stands shoulder-to-shoulder with winning. 

That concept isn't a new idea for either the Royals or the rest of the ownership team. Sherman and Edgerley are both longtime entrepreneurs, as are many of their fellow owners, so they know how to build an organization. (And one owner in particular, some guy named Patrick Mahomes, knows a little bit about winning.) 

The building of a character-driven organization really started with the care the team's late, former owner David Glass took in choosing Sherman in the first place. 

Sherman had wanted to buy the Royals for a LONG time. He would call Glass on a regular basis asking if Glass was ready to sell. Time and again Glass wasn't, but Glass did indicate that when he was ready, Sherman was going to be his choice as successor. 

In the meantime, Sherman invested in the Cleveland Indians and became active on a number of Major League Baseball committees. Along the way, he met Edgerley, a native Kansas Citian, with a sports background as a part of the Boston Celtics ownership group. 

In 2019, history shifted when Glass called Sherman this time, ready to sell, and the deal was finalized at the end of November that year. 

"We'd always had a good relationship, but that was a big day when he called," Sherman said. 

The sale was quick, relatively painless and really came as a surprise to most people, virtually unheard of in today's world. Edgerely called the transaction more "relationship-oriented than some private business deals I've been involved with." 

Sherman knew that Glass could have possibly gotten more money, but he knew that Glass was more interested in finding local owners. When Glass called Sherman he asked him to find owners with three characteristics: the ability to write the necessary check, someone who was civically minded and someone who liked baseball. The response was overwhelming, Sherman said. 

"(Glass) knew that Ewing Kauffman (the team's founder and original owner) would have wanted someone to keep the team here," Sherman said. "He didn't want a circus. Some wanted an auction - that's not what he wanted. Even the commission was surprised that we did it without leaks." 

The idea of stability became self-evident just a few months after Sherman bought the team when COVID-19 struck. 

The Royals were the first organization to step up and commit to paying everyone throughout the organization for the entire season - whether or not it was going to happen. It was a bold move, and one that was noticed and admired in and outside of the sports world. For Sherman and Dayton Moore, the team's General Manager, it was simply business as usual. 

"For us it was just about doing the right thing," Sherman said. "It was a crisis and while you don't want to overreact, you also don't want to under react." 

Building an organization that does the right thing starts early with the players the team drafts and the way those men are treated from day one.

"We tell our rookies in Spring Training, many of whom won't make it to the big leagues, 'We hope you become Major League Baseball players, but more importantly, we want you to carry the things you learn here with you through life.'" 

The team also goes out of its way to treat fans with respect. Having people in the stands this year is such a stark and welcome contrast to last year that it is really making an impact and resonating with the owners. They are actively looking for ways to improve the fan experience. 

"I think live sports are just getting more and more popular as long as the in-stadium experience is fantastic," Edgerley said. "People enjoy being there and watching it live, but having their digital feed." 

"The fans are really the owners. We are just the stewards of the team. We want them to have an extraordinary experience. We want to connect and listen to them, to make sure they know they are being listened to and to really focus on our fans - to ‘out-care’ about them. The business side is really working on that. We have to excel at that." 

The team is also, of course, heavily involved with the ongoing negotiations between the MLB and the players' association on the next collective bargaining agreement. No one is in the mood for a work stoppage. 

"I am hopeful about it," Sherman said. "We are going to work hard and I'm optimistic about 2022." 

Royals fans, and indeed the region, can be optimistic that the team isn't going anywhere. 

Edgerley pointed out that with this sale, Kansas City remains a beacon of stability in the sports world - this is only the second time the team has been sold with Sherman as only the third majority owner in the team's history. 

"They all have Kansas City connections, they are philanthropic, and they brought lots of different skills together," Edgerley said. "It can be lonely as an owner. You need people to bounce ideas off of, to use as a sounding board." 

Everyone who has invested in the team is committed to it and to Kansas City - including the most famous member of the group, the Kansas City Chiefs quarterback. 

Sherman assured the crowd that Mahomes' interest isn't just for show. The son of a former major league pitcher is committed to not just the Chiefs and his work there, but to building a home and legacy here. 

"Patrick did it for the right reasons," Sherman said. "He's busy with his day job, but he is very interested in what we are doing."