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Thy Name is Valuation – Part I

June 5, 2024

Thy Name is Valuation - Part I - SBI Barcelona

In February 2024, Sir Jim Ratcliffe bought 27.7% stake in Manchester United for a reported sum of $1.65bn including all add-ons implying an enterprise valuation of $6.5bn plus at the time of sale. In the world of sports investments, valuation is the key.

In this two-part series, we take a closer look at the valuations of different football leagues and compare them with the valuations of professional sports clubs in the USA

Sportico Valuations 2024 – The Ranking

Sportico compiled the top 50 most valuable football clubs based on the club’s revenues which were subject to a “team-specific multiplier, a factor remaining the standard metric for valuing sports teams in transactions”. According to Sportico, “the team-specific multipliers were based on multiple factors, including: historical sales, market (size, saturation and interest by prospective owners), strength of brand, on-field performance (historical and recent), terms of facility lease, debt burden and additional obligations, as well as expected future team and league economics”

The first notable feature of the list is the presence of 20 MLS teams compared to 24 clubs cumulatively from ‘big five’ leagues

Thy Name is Valuation - Part I - SBI Barcelona

Apart from the MLS and clubs from big five leagues, the remaining 6 comprises of

  • Brazilian Serie A – 1
  • Eredivisie – 1
  • Liga MX – 3
  • Portuguese Primera Liga – 1

The top 15 comprise of 14 clubs from big five leagues, led by Manchester United with a valuation of $6.2bn followed by Real Madrid at $6.06bn and FC Barcelona $5.28bn and 1 from MLS in the form of Los Angeles FC with a valuation of $1.15bn

Equation with Revenue

The interesting contrast with respect to revenue is the league with highest block of teams, that is MLS, having the lowest average revenue of $79mn amongst all leagues. Comparing it with the featured 9 Premier League clubs having the highest average revenue of $697mn and the next highest block of 3 LALIGA clubs having average revenue of $687mn

Thy Name is Valuation - Part I - SBI Barcelona

Even more contrasting is the valuation to revenue multiplier, a globally accepted metric for valuation measurement. Again, MLS clubs have the highest V/R ratio of 9.8, almost double that of Premier League and LALIGA clubs and thrice that of the other ‘big five’ leagues

Valuation to Revenue Multiplier

Low V/R ratio in European football could be attributed to three key factors amongst others

  • Promotion & relegation system
  • Participation uncertainty in European competitions which lead to additional revenues
  • Lesser assets ownership (like own stadium) and/or lesser extent of commercialisation

The absence of above factors in the US professional sports leagues make them deliver guaranteed revenues without any fear of losses and thereby they have higher V/R ratio as given in the chart

Thy Name is Valuation - Part I - SBI Barcelona

V/R ratio in American professional sports leagues are higher than the European football leagues in spite of having lower revenues. A sample comparison can be seen below

Thy Name is Valuation - Part I - SBI Barcelona

Conclusion

With the increasing investments coming in European football especially from American private equity holdings, there can be a change in few factors like increased stadium asset ownership leading to higher revenues. We will keep a close watch in this space.

In the second part, we will focus on European football leagues

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