Football vs the moneymen: As new private equity owners emerge at leading UK clubs, supporters will find it hard to resist, says ALEX BRUMMER
- Once private equity has a hold of a football club, it will invest for the eventual sale
- PE would prefer the US closed-league model and control every aspect
- Anyone who thought the European Super League is dead is wrong
Usually football talk at this time of year revolves around high-profile transfers as clubs scramble to secure their place in the top divisions or boost their prospects for the Champions League.
The Qatar World Cup, a showcase for the world’s best players, has changed this dynamic. Instead of player deals, it is the leading European clubs that generate financial interest. Both Manchester United and Liverpool are fictionally for sale.
The share register of Britain’s most successful club, Manchester City, is also being reformed. On the mainland, big changes appear to be afoot at Paris Saint-Germain, Juventus is embroiled in an accounting scandal and could be for sale, and Barcelona has mortgaged future earnings to private equity (PE).
Own goal: Once private equity has its claws in a football club, it will invest for the eventual sale
Sports franchises will never be quite like other businesses. Huge investments are needed in a concentrated pool of human capital in the form of the players. Values are distorted by wealthy individuals’ desire for trophies. Yet a creeping financialization is underway.
Manchester United and Juventus are both publicly traded companies, listed on New York’s Nasdaq and Euronext respectively, although the majority of shares are owned by powerful families. That means they are meant to play by the rules of those markets, which explains the resignation last month of most of Juventus’ board.
The biggest change is the growing involvement of PE. The barbarians are at the gate. Los Angeles Dodgers owner Todd Boehley secured control of Chelsea with backing from Clearlake Capital. At Liverpool, RedBird Capital Partners has already acquired a minority stake in a club controlled by John Henry’s Fenway Sports Group.
Henry now wants to cash in, which could potentially mean more PE ownership. RedBird also paid £1bn for control of AC Milan.
If you thought that Manchester City is safely in the hands of the rulers of Abu Dhabi, think again. It just brought in US private equity with Silicon Valley outfit Silver Lake acquiring an 18 percent stake sold by China Media Group.
PE has huge sums to invest. Contrary to what Barcelona and Real Madrid (which took £317m in funding from Sixth Street Capital) might think, it’s rarely a benign owner.
The goal is to install in-house management, identify new revenue streams, cut costs and sell the business quickly.
The most stunning example of private equity ownership in sport was CVC’s stewardship of Formula 1. It bought Bernie Ecclestone’s franchise, invested heavily in digital transformation and emerged with a profit of £3.75 billion when it was resold to John Malone’s Liberty Media.
Once PE has its claws in a football club, it will invest for the eventual sale. For example, PSG could get the new stadium it needs, but would have to pledge branding, digital rights and streaming.
There should be no doubt as to what PE’s ultimate goals are in football. It would prefer the US closed-league model, where it can control every aspect of the business, from player compensation to the number of games played.
Anyone who thought European Super League was dead is wrong. Barcelona, Real Madrid and Juventus are still in favor of it.
As new private equity owners emerge at leading UK clubs, supporters and football organizations will find it hard to resist the power of money involved.