ZUFFA PURCHASES STRIKEFORCE

The Anatomy of the Zuffa-Strikeforce Deal

In the end, the impetus to the surprising Zuffa-Strikeforce deal was not the UFC's goal of world domination, or the expensive contract of Fedor Emelianenko. Instead, it was a ball and a hoop.

In May 2008, San Jose, California-based Silicon Valley Sports & Entertainment (SVSE) acquired a 50 percent stake in Strikeforce and became its major financial engine. The relationship helped spur the expansion of the upstart MMA promotion, but it ultimately came with an unforeseen cost. SVSE had long desired to bring an NBA franchise to San Jose, and as that goal started to become more attainable, SVSE found itself faced with a decision: Look over the continued growth of Strikeforce, or focus on its core arena sports businesses with an eye on professional basketball.

With that, Strikeforce was the odd man out.

When Strikeforce founder and CEO Scott Coker heard the news that SVSE was looking for a way out of MMA, there was no initial panic.

"When they told me, they basically said we've got to put a package together and get out there and start looking for a new partner," Coker told MMA Fighting. "When your financial partner says that, you react and start taking some action right away."

The process of finding a new team to assume an ownership stake though, mostly fell on SVSE.

According to sources with knowledge of the situation, at least two potential suitors were identified, while other published reports say there was a third. One of them was a familiar name: Zuffa, the parent company of the UFC.

"These guys have built a great brand," Zuffa co-owner Lorenzo Fertitta said of Strikeforce. "It's a good-looking product on TV. We started thinking about it a little bit more and just thought that it just made sense to have Strikeforce in the family here."

Coker had first met Fertitta and UFC president Dana White several years before, sometime in 2002. Back then, Coker was working for the kickboxing promotion K-1, while White and Fertitta -- along with third partner Frank Fertitta -- were only a year into their ownership of the UFC.

At the time, Coker knew little about MMA, but knew enough to be aware that the group was taking on a seemingly Sisyphean challenge in buying into a sport with a damaged public reputation and few welcoming venues. As a fellow promoter, though, he was impressed by their moxie. In Las Vegas to promote a kickboxing show, he visited the Zuffa offices to introduce himself and invite them to his event.

Coker doesn't recall for sure if they attended, but does remember that his visit was brief and the tone of it was friendly. Among the lasting impressions was that the Zuffa offices were quite different than they are now; smaller, far less populated than the current bustling buildings that are "bursting at the seams."

Strikeforce grew organically from Coker's work in kickboxing. The organization hosted its first MMA event in March 2006 at the arena that would become its de facto home, the HP Pavilion in San Jose. That card featured a "Who's Who" of names, including Nate Diaz, Cung Le, Clay Guida, Josh Thomson and Gilbert Melendez. But the main event -- a battle of Bay Area fighters Frank Shamrock and Cesar Gracie -- was unquestionably the big draw.

The Strikeforce-California pairing seemed to be a perfect marriage. The Bay Area in particular had already been the home of several well known MMA gyms and had a major martial arts fan base. Less than four months after the state sanctioned MMA, they were the first game in town. Over 18,000 fans came out to watch Shamrock knock out Gracie in just 20 seconds, setting a since-broken North American MMA attendance record. With that, a phenomenon was born. In fact, when the UFC came to the state the next month, they drew almost 5,000 fewer fans.

Still, they were largely considered a regional show at the time, hosting nine straight events in California. That all changed in May 2008, when he and SVSE formed a joint venture named Explosion Entertainment, LLC., to run Strikeforce. Largely due to the financial and industry-wide clout provided by the new ownership group, Strikeforce became a national player. The partnership gave Strikeforce the financing to acquire most of the talent and video library from the ruins of EliteXC for $3 million, and they soon followed by signing major television deals with Showtime and CBS.

In August 2009, the relative peace between UFC and Strikeforce ended. The shot that started the war was Strikeforce signing coveted free agent Emelianenko, who had become White's Moby Dick, an unattainable target. While White always maintained a personal respect for Coker, he soon trashed the league, calling it "Strike-farce."

By that time, though, it was clear that the promotion had some staying power; when Emelianenko made his Strikeforce debut on CBS, nearly 5.5 million people tuned in to watch his fight.

While Coker continued successfully running events and adding to his roster -- which currently houses about 140 fighters -- unfolding events in another sport would soon impact his company's future.

In early December 2010, the NBA confirmed that the league would buy the New Orleans Hornets from majority owner George Shinn after negotiations on another possible sale reached an impasse. The NBA, however, has no intention of holding the team for long. It is actively seeking a buyer.

Coker confirmed to MMA Fighting that SVSE is interested in bringing an NBA team to San Jose, and according to various media reports, so is Oracle CEO and billionaire Larry Ellison.

The Ellison-SVSE team is no surprise pairing, given that in 2006, the duo reportedly banded together in a failed attempt to buy the Seattle SuperSonics. This one, though, has some legs, and combined with an increased unwillingness to invest in a risky growth phase for Strikeforce, SVSE moved swiftly to divest itself of its ownership stake in its MMA brand. Talks with Zuffa began in mid-December, slowed down over the holiday season, and resumed after the New Year. By the second week of March, a deal was in place, brokered by Evolution Media Capital, a New York-based media and sports investment bank. Zuffa would buy out the Strikeforce ownership group while keeping Coker in place to pilot the ship.

For Coker, who had run the Strikeforce brand for years as a kickboxing promotion before moving into MMA, it was a bittersweet moment.

"Was it emotional? Sure," he said. "But I knew it was time. It's been with me for a long time. But I knew the financial reality, and we needed another partner. When I look at [Zuffa's] resources and ability to blow Strikeforce up, I think it was a great choice. They know the business and how to operate, so it makes me feel really good we're going to continue."

Since the deal, "business as usual" has been the overused catch phrase to describe the companies. Strikeforce events will continue to air on Showtime, sign their own talent, and the rosters will be kept separate. A source with knowledge of the situation told MMA Fighting that representatives for a recently cut UFC fighter asked to have his contract transferred to Strikeforce, but was told it was not possible and that he would have to approach Strikeforce management about a new deal. To date, the only major change is legalizing elbows to the head on the ground, something allowed under MMA's unified rules but previously barred in Strikeforce. Fights will continue to take place in the hexagon, the Heavyweight Grand Prix will go forward, and future company planning resumes. Even Strikeforce's offices are expected to stay in the Bay Area.

Coker hasn't skipped a beat in continuing the business of growing Strikeforce. He signed a long-term employment deal and says he never contemplated walking away from the brand. He recently met with Showtime to reassure them everything would continue as normal. According to sources, the broadcast deal runs into 2012 but has options that can extend it to 2014.

He also recently traveled to Las Vegas to meet with his new teammates, who he said, made him feel quite welcome.

Largely for accounting reasons, Zuffa bought its new brand through one of its subsidiaries. The company is called Forza, LLC. The word is Italian, and it means "force." Whether it's a nod to the power of the UFC-Strikeforce pairing, a play on the latter company's name, or the way in which the Fertittas and White have taken over the MMA world, it seems fitting.

"I'm going to continue to work my ass off and do as much as I can with all the new toys I have to get this thing up to warp speed," Coker said. "They love MMA. I can see it in their eyes."