The Showtime Lakers’ $12.5 Billion Sale: A Lesson in Tag-Along and Drag-Along Rights
The Los Angeles Lakers, a cultural staple of the “City of Angels” for its legendary players, iconic purple and gold branding, courtside celebrities, and championship history, captured the attention of the corporate world with their second record-breaking sale in 14 months.
In June 2025, the Buss Family Trust, representing the interests of Jerry Buss’s six children, sold a controlling interest in the team to minority owner Mark Walter for a then-record valuation of $10 billion.
As part of the agreement, former controlling owner Jeanie Buss would remain the team’s ultimate decision-maker for at least five years after the transaction closed, even though the Buss Family Trust retained only a 17.8% stake in the Lakers.
However, on Aug. 12, Mark Walter agreed to sell his majority stake in the team to Bob Iger and Josh Kushner at a reported $12.5 billion valuation. In this transaction, Jeanie’s five other siblings sought to exercise their tag-along rights and sell the remaining 17.8% they still held.
The NBA requires a team’s controlling owner to own at least 15% of the franchise. If this second sale completes, Jeanie Buss will no longer be the team’s governor, the NBA’s term for a franchise’s primary decision-maker. She filed a lawsuit against her five siblings’ decision to sell the family’s remaining shares so that she can remain the Lakers’ governor.
Although the potential sale highlights the lucrative nature of sports franchises and the potential complexities of family trusts affecting significant decisions, it also illustrates that business owners need to understand their shareholder agreements, operating agreements, and other governing documents before selling or buying a business.
What Are Tag-Along Rights?
Tag-along rights are contractual rights that let minority shareholders participate in a sale initiated by the majority shareholder. These rights protect minority shareholders by allowing them to sell their shares in the same transaction, generally at the same price and on the same terms as the majority shareholder.
Shareholders typically include tag-along rights in shareholders’ agreements, operating agreements, or investor rights agreements and negotiate them when they initially invest or form the business.
These contractual protections allow minority investors to sell their shares and receive cash, while helping address their limited bargaining power. Tag-along rights can be especially valuable when a business has significantly appreciated since the original investment.
For example, the Lakers’ increased valuation from $10 billion to $12.5 billion in just over a year may have influenced the Buss siblings’ desire to exercise their tag-along rights and capitalize on the compelling financial opportunity. Without tag-along rights, a sale can leave minority shareholders behind and potentially force them to work with a new majority owner they did not choose.
What Should Shareholders Consider When Negotiating Tag-Along Rights?
Minority shareholders should consider several aspects of a tag-along provision before agreeing to its terms, including:
- The Timeline – Minority shareholders should negotiate the timeline for exercising their tag-along right after receiving a notice of sale. This period, often ranging from 15 to 30 days, must provide enough time for the minority shareholder to evaluate the deal, consult with advisors, and prepare to participate in the transaction.
- Percentage of Shares – Minority shareholders should determine whether they can sell all their shares or only a pro rata portion, a proportional share based on their ownership percentage, when exercising the tag-along right. The distinction can significantly affect how much liquidity a minority shareholder receives from the transaction.
- Enforcement and Remedies – Parties must establish a clear mechanism to enforce tag-along rights, specify the roles of the majority shareholder and the buyer, and set procedures in case the majority shareholder attempts to complete a transaction without honoring the provision.
What Are Drag-Along Rights?
Conversely, drag-along rights are contractual provisions that allow majority shareholders to force or “drag” minority shareholders into the sale of the business, even if they do not want to sell. Generally, minority shareholders receive the same price and terms that the majority shareholder and buyer agree to.
Since drag-along rights can compel a sale, they raise important legal considerations, including whether the provision provides adequate protection for minority shareholders, such as fair price requirements and limitations on the types of transactions that can trigger the right.
When buyers acquire a company, they usually prefer to purchase 100% ownership rather than share rights with a potentially hostile minority group. Drag-along provisions are common in private equity, venture capital, and startup deals because they help ensure minority shareholders cannot block a sale by simply refusing to sell their shares.
What Are Some Common Elements of a Drag-Along Provision?
The scope of drag-along provisions varies depending on the transaction and terms of the applicable agreement. However, common features include:
- Threshold Percentage of Shares – The minimum ownership or voting threshold required to trigger the drag-along right, as specified in the applicable agreement. One larger shareholder could meet the threshold by owning a specified percentage, or multiple shareholders can hold smaller percentages that collectively reach it.
- Notice Requirements – The majority shareholder(s) must give all minority shareholders a drag-along notice informing them of the sale and their obligation to participate. The notice will include the deal’s timing, buyer details, the sale price, and specific deal terms.
- Consideration and Sale Terms – Drag-along provisions may state the form of payment shareholders will receive for their shares, whether cash, stock, or a combination of both. The provision may also specify which transaction types qualify as a sale and the minimum price required to trigger the drag-along right.
- Fiduciary Duty Considerations – In some jurisdictions, majority shareholders exercising drag-along rights may owe fiduciary duties to minority shareholders. They must act in good faith and deal fairly, rather than use the drag-along right solely to benefit themselves at the minority’s expense. The application of fiduciary duties depends on the governing law, the entity’s structure, and the agreement’s specific language.
- Minimum Price or Valuation Floor – Minority shareholders may negotiate a minimum sale price or valuation threshold that prevents the triggering of tag-along rights. This helps minority shareholders avoid a below-market sale and ensure that the transaction reflects a fair value for the business.
Although these are common features, investors or founders often negotiate specific terms before incorporating them into the shareholders’ agreement or governing corporate documents. Parties may also negotiate many of the same elements when drafting tag-along and drag-along provisions.
Tag-Along and Drag-Along Rights in M&A Transactions
As seen in the potential sale of the Los Angeles Lakers, drag-along or tag-along rights can significantly affect various types of corporate transactions or M&A.
Tag-along rights generally allow minority shareholders to participate in a sale, while drag-along rights can require they participate. A shareholders’ agreement, operating agreement, or other governing document may include both provisions, but the terms must work together and not create conflicting obligations.
These terms can reduce conflicts and buyer uncertainty, making organizations more appealing to purchase. The effectiveness of tag-along and drag-along provisions depends on how clearly the agreement defines what triggers the rights, how shareholders must exercise them, and what protections apply if parties do not follow those procedures.
The Lakers’ sale demonstrates how rights attached to minority interests can influence who can sell, who must sell, and who retains control of a business after a transaction. Transactions involving these rights are not always straightforward, as they may still face additional legal considerations, including the terms of family trusts, governing agreements, and court orders.
Before owners sell their interests or buyers acquire a company, they should know whether the applicable shareholders’ agreement, operating agreement, or other governing document includes tag-along or drag-along rights. An experienced corporate and M&A attorney can help parties fully understand their agreement’s terms to minimize disputes and protect majority and minority owners’ interests.
Nicholas J. Vitale is a Corporate and Mergers & Acquisitions Attorney at Lewitt Hackman.