THE CHALLENGES facing top-level football continue to escalate, ranging from macro-economic to political and social concerns on a global scale. The finances of clubs and leagues are coming under considerable pressure. Just as banks, nation states and corporates sought alternative sources of support during the financial crisis of 2008-10, football is now turning to different and less traditional avenues of financing. The recent aborted discussions around a takeover of Bradford City by a group of investors aiming to harness the potential of Non Fungible Tokens (NFTs) demonstrated that change is coming.
Increasingly, hedge funds, private equity firms and family offices are getting involved in football, offering investment where historic lenders may no longer be prepared to tread with comfort. The reputation of alternative investors has always been a sector with a short-term perspective, one that pursues quick returns and has a limited attention span. Given football is an industry that has hordes of stakeholders, the dynamic between supporters and professional investors from London, New York, Asia and the Middle East, is not necessarily comfortable. Invariably, Wall Street and the Square Mile are mistrusted by football fans.
But sport and private equity are not such unnatural bed fellows, in fact, firms have been dipping their toes in the water for some years. The pandemic has arguably accelerated their involvement. While the reception to private equity has not always been positive, but as more people understand the intention of such companies, the fears have subsided. In fact some of the deals being talked of at present have much longer timeframes than those usually associated with the sector.
The growth in American ownership such as the Fenway Sports Group at Liverpool, the Glazers at Manchester United and Stan Kroenke at Arsenal has experienced mixed relationships with fans. Initially, there was resistance, but ultimately, if a club is successful, the mood shifts substantially. It is not inconceivable that private equity will no longer be looked as a two-horned devil in the near future.
Spain’s La Liga has just announced their deal with CVC has now been approved by 37 of its 42 clubs. There was an attempt to head the transaction off by Real Madrid, Barcelona and Athletic Bilbao with a bank-backed consortium, but the € 2 billion package will give CVC an 8.25% stake in La Liga’s media rights for 50 years. Spanish clubs will be able to spend 70% of the proceeds on infrastructure, 15% on servicing debts and 15% in the transfer market. The three clubs are now challenging the deal, so the story could run for a considerable period.
Likewise, there was resistance in Italy when a group of private equity firms were in talks with Italian league Serie A. This transaction involved the provision of a credit line of € 1.2 billion for a 10% stake in the league. Three of Italy’s most influential clubs, Juventus, Inter Milan and Lazio, blocked the deal, so CVC turned its attention to Spain. However, there is still a possibility that one of the firms may resurrect the proposal.
The Bundesliga also flirted with the idea, but the clubs were mostly very opposed to any private equity investment. KKR, Bridgepoint and CVC were all part of discussions with the aim of a 25% stake in the league’s overseas broadcasting rights. In May 2021, the clubs broke off talks, but interestingly the caveat was, “for now”.
While the possibility of a league transaction is not universally welcomed, clubs have been bought – and sold – by private equity companies. Clubs such as AC Milan, Genoa, Bordeaux, Burnley, Nancy and Toulouse all benefitted from some sort of private equity investment.
It would appear that while banks largely steer clear of football that alternative finance will continue to grow among major clubs. In addition to requiring security for any lending, banks are also reluctant to get into a situation where they have to force a club to fold. If, as promised, the game becomes better regulated, some of those concerns may diminish, but in the meantime, clubs are tapping markets that are willing to provide much-needed funds. How this can be aligned with the emotional aspects of football remains to be seen.
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