We know that Paul Millsap will be playing next year with the Denver Nuggets on a 3-year deal worth $90 million in which the third year is a team option. For this to happen, it can only occur by the Nuggets signing Paul Millsap with salary cap space. A sign and trade is not possible under this pretense, which means the Atlanta Hawks will only have the possibility to gain cap space from Paul Millsap leaving. Removing the $30,108,050 cap hold for Paul Millsap doesn’t actually give the team cap space because of all the cap holds for their other free agents.

The reason why a sign and trade cannot occur is that a contract must be for three years -- not including option years -- for it to be signed and traded. I discussed this contract stipulation previously which is severely limiting for both Atlanta and Denver. It limits Atlanta’s options because they might have been able to accumulate an asset in a potential sign and trade. It is limiting to Denver because the Paul Millsap deal eliminates the majority of their cap space while they could have gotten creative in order to utilize their cap space to make an additional signing before acquiring Paul in a sign and trade. I am going to further explain how this would happen in this article, but Denver has the potential to gain $14,795,633 if they acquire Paul through a sign and trade.

If Paul Millsap and Denver are amenable to changing the third year in his contract from a team option to a fully non-guaranteed contract (admittedly, a big “if”), then a sign and trade is possible. This comes with a minor downside for both of them. In the event that Paul is on a team option, then declining his team option would still give Denver Early Bird rights to re-sign Paul -- most likely at a smaller contract value. However, if the third year is non-guaranteed and Denver wishes to avoid payment then they would place Millsap on waivers. And placing Millsap on waivers would mean that Denver no longer holds Early Bird rights on Paul Millsap. That’s the downside, that Denver might want to decline Paul’s option and use his Early Bird rights to re-sign him. But if all Denver wants to do is remove their salary obligations to Paul in the third year, then there is no difference because Denver would not care for his Early Bird rights.

So what might a sign and trade of Paul Millsap to Denver look like? Well to get a glimpse of a situation that would make sense, we should bring in reports of Danilo Gallinari eyeing the Los Angeles Clippers.

Gallinari and Los Angeles Clippers

Danilo Gallinari recently opted out of his contract which would have paid him $16,100,000 for this upcoming season. It seems clear that he is looking for a new contract that would pay him somewhere in that range. Unfortunately for the Clippers, they only have either the Non-Taxpayer Mid-Level Exception (worth $8,406,000) or the Taxpayer Mid-Level Exception (worth $5,192,000). This implies that LAC would need to work out a sign and trade in order to acquire Danilo. This would require moving one of their existing contracts in exchange for Danilo.

Jeff Siegel

The Clippers are free to trade away anyone on their roster right now, although Williams, Beverly, Dekker, Liggins, Harrell, and Wiltjer cannot have their salaries aggregated with others in order to acquire Danilo. Those players can be sent out if another team thinks they are an asset though and it would help grease the wheels for a transaction.

The minimum amount of outgoing salaries for Los Angeles in order to acquire Danilo’s contract depends on the starting salary of Danilo. Danilo’s contract is the incoming salary and Los Angeles would follow this guide for their necessary outgoing salaries (subject to the team waiting to officially re-sign Blake Griffin until after this trade so that they do not run into Luxury Tax issues for the trade):

I think it is safe to assume that Danilo will garner a salary somewhere between $11,533,334 to $24,600,000 and can use the $5 million buffer in trades.

The most obvious situation for Danilo to arrive in Los Angeles is for the Clippers to find a team willing to take on Jamal Crawford seeing as a younger and cheaper version of him recently arrived on their roster in the form of Lou Williams. That would allow Danilo to sign a contract starting at up to $19,246,988. If that isn’t enough money to get Danilo to sign, then adding Brice Johnson can get up to a $20,578,148. You could toss on Diamond Stone too, but I don’t think Danilo should expect that high of a starting salary this offseason.

The goal for the Clippers is to find a destination for Jamal Crawford’s contract. Denver will not want that in return because that would make it infeasible to acquire Paul Millsap, so there must be a third team. And there is almost no way a team is willing to take on Jamal Crawford’s contract without attaching an asset.

The Clippers will need to attach an interesting young player (Dekker or Harrell?), a future draft pick, or cash. But that’s their path to receiving Danilo: find someone willing to take on Crawford with their assets.

Why would Denver sign and trade Gallinari?

Denver might trade for sign and trade Danilo because Los Angeles is offering an asset to Denver (as well as to some third team to take on Crawford). That right there makes it easy enough to understand why Denver would engage in a sign and trade. But things could change drastically if Denver decides it is in their best interest to sign and trade for Paul Millsap instead of signing him with cap space. And they would do this precisely because Denver could use their cap space for an additional signing and finagle outgoing salary to acquire Paul.

Denver’s current cap standing, assuming Paul is signed with cap space which requires renouncing Danilo Gallinari, looks as follows:

Jeff Siegel

Signing Paul through cap space kills any chance of Danilo getting above $8,406,000 from the Clippers and it leaves Denver with a little less than $2 million in cap space. What exactly can they do with $2 million? Not much.

Right now, we know that Paul is signing for a contract starting at $28,571,429. That implies Denver could have $30,542,621 in cap space if they pursue a sign and trade. If they want to waive Mike Miller, then that would push the amount up to $34,042,621 (and then re-sign him later with the Room MLE or Veteran Minimum). That’s a heck of a lot of cap space that they could use! However, if they want to engage in the Danilo sign and trade then we need to earmark his salary in their cap space. Let’s put this at the Jamal Crawford value of $19,246,988. That is $14,795,633 in cap space that they could use for whatever they want. I don’t want to speculate on who they would acquire, but they would definitely be able to acquire a solid player.

Now here’s where things get interesting. Denver needs to send out at least $22,777,143 in salaries to acquire Paul Millsap (obviously they can send out more). We’ve already earmarked the $19,246,988 from Danilo outgoing to the Clippers, so they need to find at least another $3,530,156 in salaries to go to Atlanta. Looking through their roster, this would be someone in the group of Will Barton, Jameer Nelson, Darrell Arthur, Wilson Chandler, or Kenneth Faried. It really depends on who Atlanta would want, although one of those names is abundantly clear from a simple salary cap math perspective: Will Barton.

Atlanta’s Issues

If Atlanta wants to sign and trade away Paul Millsap, the only question becomes whether or not they want to stay over the cap or if they want to renounce most of their cap holds. If Atlanta drops below the salary cap, then they have enough cap space to acquire Jamal Crawford and whatever salary fodder Denver puts in (ie they can easily fit Faried). The cap space scenario is not interesting. What is interesting is if Atlanta wants to stay above the cap and keep the cap holds for the rest of their free agents.

If Atlanta stays above the cap, then a sign and trade of Paul Millsap runs into base-year compensation issues. This limits the amount of salary that Atlanta can bring back in return to his previous salary of $20,072,033. The relevant chart for how much Atlanta can bring back is $25,190,042 in salaries (1.25*$20,072,033 + $100,000):

Here is where we look at the limitations previously described. The Clippers needs to shed Crawford ($14,246,988 incoming) which leaves $10,943,054 in salaries that Atlanta could bring back. We know that Denver needs to move on from at least Will Barton ($3,533,333 incoming) which leaves $7,409,721 in salaries Atlanta could bring back if they so choose. Both Jameer Nelson and Darrell Arthur are other possibilities for Atlanta to acquire, but Faried and Chandler are out of the question unless Atlanta wants to dip into cap space. Kenneth and Wilson make too much salary and Atlanta would need to trade away more salary to acquire either.

But this now becomes the question for Atlanta, what kind of assets can they extract? Atlanta is not going to simply add on more salary and contracts just for nothing. They need an actual reason to engage in this entire exercise.

Might Atlanta be able to acquire Dekker or Harrell from the Clippers? A draft pick from Denver, since Atlanta will free up hypothetical $14,795,633 in cap space with this move? Cash from either?

Shorter Refreshed Version

Overall, a potential 3-way with Atlanta, Denver, and the Clippers could be broken down as such:

Atlanta brings on additional contracts and other assets for a player who was going to leave anyway.

Denver is able to free up a decent chunk of cap space for a current free agent at the cost of a contract like Will Barton or Darrell Arthur.

Los Angeles gets their targeted free agent and moves off a redundant player at the cost of assets that they likely previously acquired from Chris Paul.

What if Denver doesn’t want to sign and trade for Paul Millsap?

If Denver wants to use their cap space for Paul, they lose out of the hypothetical $14,795,633 in cap space I carved out for Denver in this situation. But that doesn’t completely kill a three-way trade.

Denver might still be amenable to sign and trade away Danilo Gallinari for some sort of asset (cash or draft pick?). And Los Angeles would still be in search of a third team to dump off Crawford’s contract. Would Atlanta be open to acquiring Crawford with their cap space and what would be the additional asset that Atlanta would need from the Clippers?

The Clippers may simply walk away from Gallinari because they would need to give assets to both Denver and Atlanta. The entire sign and trade doesn’t crumble, but it becomes a lot less likely.

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In the end, the most likely scenario is Millsap simply signing the reported deal without additional fanfare but a move like this could benefit all parties in various ways. Just a thought.