Tax losses have become a hot property in sports M&A. In the world of golf, Jon Rahm and Bryson De Chambeau are rare talents. But for BC Partners, the private equity firm negotiating to acquire the remnants of troubled sports league LIV Golf, real value lies somewhere else: in tax losses.

The Saudi-backed LIV, which was launched as a renegade rival to the much more established PGA Tour, managed to rack up an impressive $5bn in net operating losses over five years as it signed up acclaimed players and awarded big prizes. Those losses can be used to offset future taxable income, should there be any. LIV is now marketing their charms to potential suitors.

BC understands those charms as well as anyone. It invested $150mn last year into Context Logic, a publicly traded investment company that has amassed nearly $3bn of net operating losses. Should it acquire the bones of LIV, which could fetch as much as $300mn, it could apply its tax perk to more sports-related businesses, or any profitable enterprise it chooses to buy.

Judging by Context Logic’s performance, this isn’t a bad strategy. What was once an internet retail business that listed in 2020 fell in value from $14bn to $200mn by 2024. Since BC bought a stake, the company’s shares are up about 80 per cent.

It acquired US Salt, which does what its name suggests, and is currently buying g Chem, a speciality chemicals maker. Mostly, Context Logic leaves its acquired businesses to run themselves without interference. Layered over that is some financial engineering: a private partnership that includes BC as well as Abrams Capital, a buyout firm that was also a previous owner of US Salt.

Granted, sellers of companies Context Logic tries to buy know it comes armed with tax benefits, so are likely to tweak their terms accordingly. How effective its strategy is in terms of financial returns is therefore yet to be seen. Still, the parent company itself isn’t vulnerable to a takeover, or activism because of rules that limit the use of operating losses against future tax bills when a company undergoes a change of control.

Should BC win the LIV auction, it will be in possession of something that looks similar, with plenty of tax-offsetting firepower, albeit in private rather than public hands. Perhaps, if they adhere to the golfing theme, talented players may stick around too. But don’t count on it: unlike the Saudis, BC is probably more concerned with profit than prestige.