{"id":31133,"date":"2021-04-27T07:23:32","date_gmt":"2021-04-27T03:23:32","guid":{"rendered":"http:\/\/www.mauritiustimes.com\/mt\/?p=31133"},"modified":"2021-04-27T07:23:32","modified_gmt":"2021-04-27T03:23:32","slug":"football-in-europe-is-being-transformed-by-us-private-equity-firms-heres-how","status":"publish","type":"post","link":"https:\/\/www.mauritiustimes.com\/mt\/football-in-europe-is-being-transformed-by-us-private-equity-firms-heres-how\/","title":{"rendered":"Football in Europe is being transformed by US private equity firms \u2013 here\u2019s how"},"content":{"rendered":"

\"\"<\/strong><\/p>\n

 <\/p>\n

Most fans know that investors are interested in one thing: making money. The problem is, maximising profits often means eroding the connections between clubs and the communities in which they are located<\/em><\/span><\/h4>\n

\"\"<\/span>Liverpool manager Juergen Klopp talks with American owner John W Henry at Anfield in 2016.\u00a0Reuters \/ Phil Noble Livepic<\/a><\/span><\/span><\/p>\n

Football is changing, again. Many fans who have spent years watching their teams, either live in a stadium or on the television, have long had to face the fact that their teams are (more often than not) no longer owned and run locally.<\/span><\/p>\n

Russian oligarchs,\u00a0Gulf nations\u00a0and\u00a0Chinese billionaires\u00a0have regularly bought into European football clubs over the last 20 years. But more recently the money has been flowing across the Atlantic as US private equity firms have seen a lucrative opportunity, caused partly by the pandemic.<\/span><\/p>\n

This is football like we have never seen it before. Transnational investors \u2013 driven by financial returns in a sport fast converging with the entertainment and digital sectors \u2013 are transforming the game into a big bucks global industry. Television helped make top football clubs rich, but streaming could bring them untold riches.<\/span><\/p>\n

COVID-19 didn\u2019t cause football\u2019s private equity boom, but it helped by accelerating and amplifying existing or emerging trends. As football clubs have\u00a0struggled financially, investors have moved in to pick up some bargains. And as people have stayed at home, so the consumption of streaming services like Netflix and Amazon Prime have become entertainment and lifestyle staples, enhancing the relevance of such platforms for sport.<\/span><\/p>\n

Who are the investors?<\/span><\/h4>\n

So who are these major American private equity investors taking over European football? Fenway Sports Group (FSG), the owner of English Premier League champions Liverpool,\u00a0is reportedly\u00a0on the verge of selling over 10% of the club to US investor RedBird Capital Partners for around \u00a3540 million. RedBird appears intent on building a global network of\u00a0football investments. This would be on the back of the \u00a34.7 million recently invested into the club by basketball superstar\u00a0Lebron James.<\/span><\/p>\n

In December, ALK Capital \u2013 another American sports investment business \u2013 acquired the English club\u00a0Burnley\u00a0via a leveraged buyout (similar to how the\u00a0Glazer family\u00a0bought Manchester United in 2005). Leveraging essentially means using a club as collateral to secure a loan in order to buy it.<\/span><\/p>\n

The situation is similar elsewhere. RedBird already holds a\u00a0stake\u00a0in French club Toulouse, while Bordeaux (General American Capital Partners and King Street Capital Management) and\u00a0AS Nancy\u00a0(New City Capital) are also US-owned. Meanwhile, Troyes FC was bought last year by\u00a0City Football Group, in which Californian private equity investor Silver Lake owns shares.<\/span><\/p>\n

The story is the same in Italy, where the\u00a0Elliott Management Corporation\u00a0owns AC Milan and where a private equity consortium consisting of CVC Capital Partners, Advent Capital Management and FSI Capital are pursuing the acquisition of a \u00a31.5 billion stake in the\u00a0new media business\u00a0of premier league Serie A.<\/span><\/p>\n

CVC and Advent are reportedly keen on striking a similar deal with German Football\u2019s\u00a0Bundesliga International, which handles overseas media rights sales.<\/span><\/p>\n

Network analysis<\/span><\/h4>\n

To give a sense of the size and scale of what private equity investors are engaged in and seeking to achieve, we undertook a\u00a0social network analysis\u00a0of a small sample of them. Our aim was to highlight the links when we observed two companies sharing an economic relationship. This resulted in the chart below (click to make it bigger).<\/span><\/p>\n

It is apparent that this private equity investment is not just restricted to Europe or to football. For example, Silver Lake has connections to City Football Group franchises in India, China, Tokyo and Australia. And RedBird\u2019s activities also extend to baseball, through the Boston Red Sox and the New York Yankees.<\/span><\/p>\n

Such investments are part of broader equity portfolios linked to sports like basketball, American football and wrestling. Silver Lake also appears keen to use football as the means of joining the dots between businesses operating in other sectors such as sports retail (like Fanatics, an online licensed clothing store) and entertainment (such as Endeavour, a talent representation agency).<\/span><\/p>\n

Blank cheques and streaming<\/span><\/strong><\/p>\n

The resurgence of\u00a0special purpose acquisition companies, or SPACS, has also given rise to a focus on sport. SPACS (like RedBird) are formed specifically to raise capital via initial public offerings (where shares are sold to institutional and retail investors) for the purposes of acquiring or investing in an existing business. They are sometimes referred to as \u201cblank cheque companies\u201d and are focused on making as much money as possible for the investors involved in them.<\/span><\/p>\n

SPACS and other private equity groups find football very appealing because it is a ready-made product with which people across the world are already engaged. Spectators and fans are willing to\u00a0pay to watch\u00a0sport and routinely\u00a0buy merchandise. So there\u2019s money\u00a0to be made\u00a0and investors know it.<\/span><\/p>\n

But perhaps one of the main reasons these clubs are such a tempting proposition are the opportunities that streaming provides. Consumption habits have changed over the last five years, leading to the consequent erosion of existing broadcasting formats. Over the last two decades, football clubs have benefited from lucrative\u00a0broadcasting contracts. But the likes of Netflix, Amazon Prime and DAZN promise even greater financial returns, especially for the top clubs playing in the biggest leagues.<\/span><\/p>\n

These firms can also put clubs in danger. For instance, ALK\u2019s acquisition of Burnley effectively involved mortgaging the club in order to complete its purchase. The club is now\u00a0\u00a390 million worse off\u00a0than it was before.<\/span><\/p>\n

At Manchester United, there has been a long-running fan\u00a0campaign\u00a0to remove the Glazers. Even at Liverpool,\u00a0not everyone\u00a0is happy with FSG.<\/span><\/p>\n

That\u2019s because blank cheques off the field don\u2019t necessarily bring blank cheques on the field. Most fans know that investors are interested in one thing: making money. The problem is, maximising profits often means eroding the connections between clubs and the communities in which they are located.<\/span><\/p>\n

Paul Widdop<\/strong><\/span>
\nSenior Lecturer in Sport Busines, <\/span>
\nManchester Metropolitan University<\/span><\/p>\n

Simon Chadwick<\/strong><\/span>
\nGlobal Professor of Eurasian Sport, <\/span>
\nDirector of Eurasian Sport, EM Lyon<\/span><\/p>\n

\n

* Published in print edition on 27 April 2021<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

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