The value of a deal can be as much about marketing as the financials. As recently put forth in an article about smart marketing – no massively successful campaign happens without tension. Them versus us, good versus evil. Case in point, the sale of the Texas Rangers.

The Rangers have been officially and unofficially on the chopping block for over a year, even several months before Hicks walked on the debt in April 2009. Until recently there was only one major contender for the team, Nolan Ryan and his backers. Mr. Ryan is the perfect face to put forward for the Rangers. He had recently rejoined the team as GM, he played for the Rangers and he is just a super popular, well-liked guy in Texas and especially in Dallas.

But the sale of the Rangers failed to really generate much excitement until . . .

Mark Cuban announced his intention to bid.

Mr. Cuban’s announcement lit a fire under fans. All of a sudden it became a question of good versus evil. One radio announcer went so far as to describe the event (the actual auction) as Forces of Good versus Forces of Darkness. You might expect discussion of the sale on Sports radio channels, but this was the teeny-bop music station.

Has a pop station ever broadcast the sale of a sports team in bankruptcy court?

The Rangers’ debtors would have been wise to lure Mr. Cuban in long ago so counter parties could get excited and form bids. If your deal is in a lurch, find an enemy and start the PR campaign.

Recap:

Rangers are being sold, possibly to Nolan Ryan (no one care about the money backers), Fan interest = Level 4 on a scale of 1 to 10.

Mark Cuban versus Nolan Ryan for the heart of North Texas Baseball, Fan interest = Level 9.

By comparison, Steinbrenner comes back from the dead to buy the Boston Red Sox, Fan Interest = Riot, total destruction, Level 13.

(Full disclosure, my family is a Red Sox family)

Writing off Bad Assets – the Human Kind.

When a bad asset has destroyed team morale or driven profits into the ground, the burden of a continued salary obligation can be too much to bear and threaten the success of the enterprise.

The point of paying a CEO big bucks is for his connections and foresight. Connections bring the preferential contracts, banking relations, capital flows, etc. The foresight is what guides the company to grow or contract based on expected market movements. But now CEO Q is gone because he didn’t do very good work, and CEO R can right the ship. Or can he? One tiny problem, CEO Q is still owed $150Million in cash and options. That’s a pretty big obligation to pass on to the next team, but wait, there’s more! CEO P is still being paid for the mess he created and so is CEO O, CEO N. . . .

How much of a company’s current and future capital should be dedicated to paying past human capital mistakes? Is there a better way to reduce this obligation? Let’s put this in more commonly understood terms, the sports analogy:

Sean Avery.

Sean recently caused a stir not befitting a Dallas Star. But Dallas is still on the hook for Sean’s $4Million annual salary for another 3.5 years. That salary has to fit under the salary cap unless Dallas can find a team willing to take Sean and his salary obligation off their hands. So, Dallas has a very expensive player chillin’ in the minors and is short one man in the majors. For a perennial playoff contender, being down one man is not cool.

It would be like giving up your Chief Operations Officer who did good work because you had to pay the last CFO his bloated contract, and by the way you don’t get the use of the CFO. So you’re double damned.

To carry the metaphor further, Dallas is now pretty limited in who they can pick up by the trade deadline for the final dash to the playoffs. Naturally, every team takes a risk with each player signed – some work well, others get traded. But Sean is special. Dallas is super stuck with Sean. He is essentially a big asset . . . a big, non-performing asset . . . a big, non-performing, non-conforming asset chewing up capital the team would rather deploy. Until Dallas is clear of Sean, options for team growth are extraordinarily limited.

So how do you write off a Sean Avery?

Much like the CEO who drives your profits into the ground, there really isn’t a market for Mr. Avery at present. No one is willing to pay for him and his union protects his right to be paid.

Perhaps his union should be picking up the tab.

After all, the players’ union purports to nurture their boys on the ice. By going to the union and telling them he has anger issues (or whatever he claimed at the time), Sean was immediately protected from being booted out of the league. Shouldn’t the union be on the hook financially when a player violates the codes of conduct and then seeks their protection?

For what are the players paying into the union? Protection of the Seans? The union negotiates compensation and vacation, but what skin does the union have in the game? Would on-ice attitudes change and player self-policing increase if the union had to pay the remainder of contracts nullified for bad behavior. Would Todd Bertuzzi still be playing or would his fellow players have kicked him off the planet rather than see him draw salary from the union’s coffers?

In a situation where the market has frozen – as it has for Sean – the union would be the best entity to takeover the failed asset. The bad bank for players. The union supposedly knows how to handle these assets. Perhaps the union can refurbish the asset (reform school?) and redeploy when market conditions pick up. In the meantime, the Dallas Stars should be able to write off the asset to clear their books.

Yet, there is no repository for bad assets. Sure we have prisons, but these bad assets are not criminal (Bertuzzi excepted?), they simply demonstrate bad judgment. There has to be a better way to reduce the burden of bad human assets to the going-concern. Unlike the office printer that no longer works, you can’t toss human assets in the landfill, legally.

Current Business Risk Insurance policies cover injuries, but can it cover a**hole? What about a secondary market where the public can trade on the future cash flows of individual super stars? The now defunct investment banks would have a slew of offerings to bring to market with individual person IPOs: star CEOs and big dollar athletes. Let’s trade on their licensing revenues and future business prospects. It brings transparency to the big contracts and allows the risk and reward to be shared. Sean may prove to be a good investment yet . . . just not in the locker room.

How can we capitalize on bad human assets?