Private Equity in Football Clubs

Private Equity in Football Clubs

 

Private equity investment in football is here to stay.

 

What started off bits and pieces has now gained momentum and rapidly progressing. As per Pitchbook, record dealmakings have been signed increasing over the years, from deal values of €66.7m in 2018 to €4.9bn in 2022.

 

Many factors can be attributed to the rapid acceleration of private equity dealmaking, including:

 

• Financial distress of football clubs & leagues in COVID period
• Booming private capital markets
• Commercialisation of football at an accelerated pace

 

It is not just the football clubs that are becoming attractive investment options but also the leagues.

 

• In December 2022, €1.994 billion investment deal was approved between the private equity firm CVC Capital and LaLiga Impulso, a venture set up by the governing body for Spanish football’s top two divisions
• In March 2022, CVC Capital acquired a 13% stake worth 1.5 billion euros ($1.65 billion) in Ligue 1’s media rights business

 

Current Status

 

Aggregate private equity financing status as of August 2023 by league is as follows:

MLS leads the table with 48% teams are either private equity backed (7) or private equity affiliated (7).

The following graph compares this percentage to other top football leagues in Europe, including:

 

• PremierLeague 35%
• LaLiga 15%
• SerieA 25%
• Bundesliga 11%
• Ligue1 56%
• MLS 48%
  

 

 

Biggest Deals

 

Six of the largest private equity deals taken place in European football since 2020 have been varied.

• 5 have been done by US-based investors
• The largest deal is the leveraged buyout of Chelsea FC for €2.99bn by Clearlake Capital led consortium
• Other big private equity deals include the purchase of AC Milan for €1.2 billion, Newcastle United FC for €350.6 million, and Atalanta BC for €275.0 million
• 4 deals are straight buyouts while two are M&A deals
• The interesting thing is a factor called ¨Revenue-to-Valuation Multiplier,¨ often a crucial factor in valuation calculations.In case of the clubs in buyouts, the multiplier factor is:
  • Chelsea: 5.3
  • AC Milan: 4.5
  • Newcastle United: 1.7
  • Atalanta: 2.3

 

The American Influence

 

European football is increasingly being seen as an attractive investment from US-based investors. The number of such investments in clubs in the Big 5 Leagues have increased to 34, out of which 19 / 56% have been done in the last 5 years

 

Below is a league breakdown as per Pitchbook date from August, 2023.

 

Premier League – 10

LaLiga – 6

Serie A – 8

Bundesliga – 2

Ligue1 – 8

 

 

The strong interest from US based investors in football, particularly in the last 5 years, can be broken down to several factors:

• Attraction of global expansion with a proven asset can be one of them
• Growing football popularity in the region, both in terms of playing as well as watching. With the FIFA World Cup to be played in 2026, it is an added factor.
• Another point to note is that 60% of the private equity capital originates from USA

 

Pitchbook further states ‘US participation has effectively been a major reason for the increase in private capital ownership of European football clubs, also driving valuations to new highs’

 

What Makes Investment in Football Attractive

 

From an investment point of view, an attractive proposition can be one or a combination of the following factors: