Liverpool’s Curtis Jones celebrates scoring their side’s second goal of the sport through the Premier League match on the King Power Stadium, Leicester. Picture date: Monday May 15, 2023.
Tim Goode | Pa Images | Getty Images
For U.S. investors seeking to rating an investment in a European soccer club, a number of the focus is shifting toward the clubs with lower valuations and typically not within the marquee tier of the game overseas.
Some investors, particularly within the U.S., are shifting toward a so-called multi-club model, or investing in smaller clubs with lower valuations, as they struggle to take a bit of the international sports market at smaller deal valuations.
This comes as deep-pocketed investors — from top U.S. private equity and enterprise capital firms to global rivals like sovereign wealth funds — have intensified competition.
“When it comes to private equity and high net price individuals, soccer is more of a worldwide sport than almost any U.S. sport,” said Charles Baker, co-chair of law firm Sidley’s entertainment, sports and media group. “There are huge populations that could be accessed — in each the regions they play in and the world.”
That global nature of soccer fans — and the growing popularity within the U.S. — often translates into higher revenue opportunities from broadcast media rights deals to merchandising.
The owners behind clubs including Manchester United, Chelsea FC and Newcastle have seen revenue multiples step up, and in lots of cases valuations have doubled, PitchBook noted in a report that concluded most clubs would sell at a premium.
Deal valuations across the highest five European soccer leagues have exploded from greater than $70 million in 2018 to roughly $5.2 billion in 2022, according PitchBook. Meanwhile, greater than one-third of the clubs within the so-called “Big Five” leagues in Europe are backed by U.S. investors, including private equity and enterprise capital firms.
The spike in 2022 got here from a consortium led by U.S. investor Todd Boehly and personal equity firm Clearlake Capital acquiring the English Premier League’s Chelsea for greater than $5 billion, in addition to Redbird Capital Partners and Elliott Management’s takeover of Italy’s AC Milan for nearly $1.3 billion.
“These recent transactions have set a precedent when it comes to club valuation but additionally prompted many homeowners to think about selling to [private equity],” in accordance with an analyst report from PitchBook.
Some firms, like Sixth Street Partners, have found different outlets into taking a stake in European soccer, particularly in Spain’s LaLiga. The firm acquired a stake within the Spanish broadcast rights of FC Barcelona, the previous longtime home of superstar Lionel Messi, and in addition paid about $380 million for a stake in Real Madrid’s stadium operations.
The shift is occurring as soccer clubs have been searching for fresh capital following the distress stemming from the sooner days of the Covid pandemic. Revenue decreased as coronavirus restrictions kept fans out of the stands and costs rose, which led to a gap for more U.S. investors to take a stake within the increasingly popular global sport.
Last month, U.S. investor Fenway Sports Group sold a minority stake in Liverpool FC to Dynasty Equity, in a move to assist it pay down debt stemming from the pandemic and costs from upgrading the team’s home field and buying high-profile players.
Various English Premier League clubs have been reportedly open to discussions with buyers, including recently Sheffield United and Manchester United.
Dwight McNeil (L) and Demarai Gray of Everton through the Premier League match between Manchester United and Everton FC at Old Trafford on April 08, 2023 in Manchester, England. The club’s shirts are sponsored by online casino Stake.com.
Tony Mcardle – Everton Fc | Everton Fc | Getty Images
Multi-club moves
This has led some U.S. investors to seek out creative ways into the European sports market.
Lower tier leagues like England’s Championship League and League One are attractive plays at smaller valuations, and every have teams open to buyers and investors, noted Neil Barlow, an attorney at Clifford Probability.
“One thing to be mindful of is relegation — it’s taken PE firms and other financial buyers a little bit of time to get more comfortable with that. At the identical time, they understand the upside of promotion,” said Baker. In soccer, teams face relegation to lower leagues in the event that they have a disappointing season.
Irwin Raij, also co-chair of law firm Sidley’s entertainment, sports and media group, said the firm has seen loads of investors with business plans to take lower tier teams to the next level through investment. “It sounds easier than it’s to implement. We have seen interest from a broad number of investors in that space,” Raij said.
There’s also rising interest in other teams across Europe, letting U.S. middle-market investors snap up multiple teams and move toward a so-called “multi-club” model.
Valuations across these teams are typically according to one another. It also allows for a model through which players could be transferred throughout the assorted clubs owned by the identical investor, build up their talent and potentially being sold to the next league — just like the minor leagues within the U.S.
Through this method, investors “can find synergies between comparable clubs,” either on the identical continent or across the globe, while also leveraging governance, technology and data sharing between the clubs, Barlow said.
“It’s a technique plenty of other U.S.-based investors are circling around deploying,” Barlow said.
Ilkay Gundogan (C) of Manchester City lifts the UEFA Champions League trophy after the team’s victory within the UEFA Champions League 2022/23 final match against Inter at Ataturk Olympic Stadium.
Anadolu Agency | Anadolu Agency | Getty Images
City Football Club is a multi-club outfit that features Abu Dhabi United Group as its majority investor. It is also backed by U.S. private equity firm Silver Lake, and Chinese investors hold a small stake.
City Football Club owns the Premier League’s powerhouse and up to date champion Manchester City, in addition to Major League Soccer’s Recent York City Football Club and Australia’s Melbourne City.
But as larger private equity firms chase the highest teams, middle-market firms wish to raise funds to chase the multi-club strategy, Barlow noted.
One U.S. firm that has been using this strategy is 777 Partners.
The Florida-based company recently agreed to purchase a majority stake within the Premier League’s Everton for a reported $685 million, after constructing its portfolio with other European soccer clubs previously few years.
In 2018, the firm took a stake within the Spain’s Sevilla FC, and followed suit with investments in clubs in various countries from Genoa C.F.C. in Italy and Red Star FC in France to clubs in Brazil and Australia.
