FOOTBALL’s elevation to a formally-recognised business sector now attracts accountants, lawyers, financiers, speculators and opportunists, all of which have changed the way we view the game. What was once a haphazard sport is now a gravy train for many, while the entire system now exists in a Darwinian micro climate where growth is a necessity to avoid decline.
While legacy fans wring their hands at the loss of the flat-capped people’s game, globalisation and technology have transformed football into an industry rapidly assuming the characteristics of the corporate world. Whereas in the past, a club was a club, the very idea of one club buying another was unthinkable. Now, a bank’s mergers and acquisitions department is just as likely to discuss with owners the possibility of purchasing another football entity. Welcome to the slightly uncomfortable world of multi-club ownership.
At the moment, acquiring clubs is the name of the game, but at some point, we can probably expect consolidation to rear its head, in other words, clubs merging to attain critical mass, financial efficiency and a stronger brand. The hurdles in achieving this are substantial, not least in convincing fans it might be the right thing to do. But there is a growing appetite for multi-club ownership.
The two most high-profile examples of this are the City Football Group and Red Bull, but there are many across Europe and the list is getting bigger by the year. In the Premier League, there are nine clubs that are part of some sort of portfolio, namely Arsenal, Brentford, Brighton, Crystal Palace, Leicester City, Manchester City, Nottingham Forest, Southampton and West Ham United. There are another nine in the rest of the EFL, including Sunderland, Watford and Cardiff City. Overall, 20% of the 92 are already part of a bigger scheme.
Why is this becoming a trend? Firstly, the football world has become open for a more diversified investor base. American “sports team owners” are now very focused on the Premier League and in fact, own Arsenal, Chelsea, Liverpool and Manchester United, among others. They are not “football people” in the way we once define club owners, they are investors with a little of Wall Street running through their veins. They might want a return (unthinkable in the old days) and they also look for growth.
Football as it stands may have reached or about to reach, saturation point. In other words, much depends on success on the pitch and there are limited ways to make a club even more profitable. In the corporate world, the next phase of company growth may be to bolt-on an acquisition to knock-out a competitor, benefit from the acquired partner’s offering or to gain speedy growth rather than by a slow, organic strategy. For investors in football, buying other clubs offers the chance to spread their investment in the game and also mitigate financial risk.
It can also deliver benefits around synchronised business operations and also create a network that can aid player development and movement and build a pool of players that can benefit the parent company and its subsidiaries. A geographically diverse multi-club structure can also plug into football markets with a regular flow of raw talent, such as South America, Africa and Asia. The more clubs involved, the greater the strategic advantage for the group.
Chelsea’s new owner, Todd Boehly, wants his club to adopt such a model and has already been looking at Brazil and Portugal, among others. Brazil still produces outstanding footballers in abundance and most of the top youngsters want to move to Europe. Indeed, Brazilian clubs need to maintain this player path as it forms part of their business approach. In fact, more players travel between Brazil and Portugal than any other route. Boehly has tried to acquire Santos and the Portuguese club, Portimonense are also on his agenda. Portuguese clubs like Benfica, Sporting and Porto are well connected on player movements from South America and have enjoyed great success in buying and selling young talent from Brazil.
Manchester City’s success has not necessarily been down to its multi-club model, they have huge financial resources, they hire well and they have the world’s number one coach. Their idea may be to create a self-sustaining network, but it is not the reason they are dominating football. And the Red Bull structure has been successful, but it has not elevated the main clubs to elite status – yet. Their overall strategy has a lot to admire, although it has not won them many friends, mostly because their ownership status is at odds with Germany’s traditional football identity. While these two are the most visible examples, there are plenty of others, ranging from private equity firms, venture capitalists, wealthy individuals and sovereign wealth funds. These are not companies involved for any other reason than investment purposes, although in some cases, there are suggestions that attempts at “sportswashing” are taking place, notably when states with suspect human rights records invest in football or other sports.
Yet how does a club gain scale if it is left to grow organically, especially as massive cash injections of the kind that instantly made Chelsea part of the elite may no longer be possible under financial fair play rulings? Becoming part of a larger organisation is possibly one of the few ways it can be achieved, although football is different from other industries and some of the conventional characteristics of corporate life simply do not exist. Human emotions have a big influence on the decision-making process.
It would seem probable that as more driven business people attach themselves to football the expectations and methods of the game’s investors will change and become more aligned to financial markets. There is an underlying sentiment that in the corporate world you “grow, go backwards or die” that will surely become part of the football business’s mantra. As well as acquisitions, more sophisticated products and services will undoubtedly be presented to club owners in the years ahead. We won’t recognise the game we all fell in love with, but that’s supposed to be progress.