US appetite for English football – no sign of abating

A YEAR ago, Arsenal fans were calling for owner Stan Kroenke to ship-out of North London, Manchester United’s legions were pouring hatred on the Glazer family and Todd Boehly was a relatively unknown figure in English sport. Move the dial forward and Boehly and his consortium now owns Chelsea, the Glazers are supposedly looking for the best exit route from Old Trafford and Arsenal are standing astride the Premier League and all in the garden seems rosy. Nobody appears to be calling for Kroenke to leave the Emirates Stadium, proving that nothing lasts forever in football, not even the ire of dissatisfied customers.

US football club ownership is a growth industry: In 2022, Chelsea and Bournemouth were acquired by American investors, bringing the number of 100%-owned Premier clubs to six and another four that have minority US investment. Almost half of all Premier League revenues in 2021 were earned by US entities.

With Russia and China seemingly out of the picture, the most likely type of investors in English football are from the US or the Middle East. While the US sports team owner seeks some form of return, the likes of Saudi Arabia, Abu Dhabi and Qatar are looking for credibility and a way to improve their image. American owners are very different from the former Chelsea benefactor, Roman Abramovich, who poured money into the club and only asked that he could exercise his power by hiring and firing his managers.

The appeal of clubs from England and the other top football markets is driven by the revenue potential of the leagues, notably from commercial and broadcasting income streams that have grown enormously in the past decade. “There’s a feeling that these markets are not yet saturated, so there’s still scope for growth,” says former investment banker Craig Coben. “And the clubs have enormous fanbases that go back decades, with a degree of fan loyalty stickiness which can be leveraged.” US investors believe the longevity of the clubs, a crucial part of the heritage of English football, creates a certain type of immunity from business obsolescence.

There is a downside for US sports investors in that European leagues are open and clubs can suffer relegation from elite divisions, thereby decimating their income. This is in stark contrast to US structures. “Relegation can be an enormous blow, not just for the clubs, but also the owners,” adds Coben. “In the US, salary caps, the lack of relegation and the so-called college draft that enables less successful teams to have first choice on emerging young talent, all act as a stabilising mechanism.” It also means US team owners, because of greater certainty, can implement greater levels of cost control and future planning.

Coben describes Premier League football as a “hook and claw, somewhat carnivorous league,”, a form of “survival of the fittest”. Nevertheless, the cut and thrust of English football, indeed the European game, does not seem to have deterred partners. “Some have lost their shirts on football, but more recently, data has been informing decision-making. The US is at the forefront in the use of data and this has given investors greater confidence to enter the market,” says Coben.

There’s little doubt the value of elite football clubs has risen substantially over the past 10 years. When Boehly’s consortium purchased Chelsea, £ 4.25 billion changed hands. Abramovich, in 2003, paid Ken Bates, the Chelsea chairman, just £ 140 million for the club. When both Liverpool and Manchester United’s owners suggested they were open to offers for fresh investment, the anticipated valuation of the clubs fluctuated wildly, with United hitting the US$ 5 billion mark. “The top names haven’t just spent a lot of money on players and wages; at the same time, the strategic approach of some clubs has also dramatically increased the value of their franchises,” says Coben.

The value of club brands, a reflection of global franchise building, has also climbed substantially – in 2012, Manchester United’s brand was valued at US$ 853 million but by 2022, it had grown to US$ 1.45 billion. Manchester City, meanwhile saw their brand value rise from US$ 302 million to US$ 1.5 billion (source: Brand Finance). Contributing to this impressive growth rate has been broadcasting fees, increased sponsorship and the increasing polarisation of European football.

Will it continue or is the US penchant for European football assets a passing phase? With the global economy on the brink of a downturn and the ongoing war in Ukraine threatening to turn the lights off across parts of Europe, there will be challenges. “A lot of potential owners are very well capitalised and there is a high level of innovation that can access green-field opportunities in football, but after all is said and done, spending money on football is discretionary, so if the macroeconomic situation deteriorates, that could change investor sentiment. At the moment, however, it is difficult to see the current appetite subsiding,” says Coben.

Manchester United: Club for sale, come take a peep

MANCHESTER UNITED, once one of the prized assets in world football, is for sale, a move that will gladden the hearts of the club’s many followers, who have been calling for the Glazer family to leave Old Trafford. While some will be rejoicing, others may temper their glee as nobody really knows who has the resources to take United off the hands of hard-nosed business people from the US. United will not be sold cheap, they will not be unloaded at a bargain price.

According to some reports, the Glazers will be looking to receive a figure north of £ 7 billion, although estimates from around the industry suggest the price may be anywhere between £ 4 billion and £ 6 billion. In a crisis-torn world, this limits the possible buyers and may even land United fans with another owner they struggle to love.

Regardless of any figure plucking exercises, it has to be remembered that this is one of the world’s top clubs, one of the most cash generative in the history of the game. Although United have fallen from their 1990s/2000s highs on the field, they remain an institution that will, sooner or later, return to profit on the pitch. They have most of the ingredients in place to reclaim their position as the most valuable club and with 75,000 spectators at every game, they have vast support to call upon. Old Trafford is an iconic stadium, but it is in dire need of modernisation to make it a statement home for Britain’s biggest club once more.

The Glazers may have recognised football may have reached something of a tipping point. It could be the days of milk and honey are not quite coming to an end, but maybe stagnating. A combination of peaked broadcasting fees, the pandemic and its post-crisis economic reality, along with growing pressure around energy, food, the climate and geo-politics, has created a perfect storm that creates a degree of uncertainty about the future. Football may have a period of adjustment that means greater challenges around its economic model. In other words, the price of football clubs may be at its peak, therefore the time to offload an asset might just be now. Chelsea changed hands for £ 4.25 billion, Liverpool are on the market and now United are seeking fresh investment (translated – we want to sell). Three of the Premier League’s big six may have new owners pretty soon.

The attraction of United should not be underestimated, but we are in an age when some sports teams may be “too big to buy”. Chelsea attracted a couple of hundred interested parties, but how many were realistic? It may be a case of lowering expectations on the part of the seller, or be prepared for a waiting game. US investors have shown they have an appetite in Premier League football and no less than nine of the 20 clubs have some form of US investment/ownership. United fans may be hoping that Jim Ratcliffe, the owner of INEOS, rekindles his interest in acquiring a football club or perhaps a vehicle like the failed Red Knights group that included former Goldman Sachs economist Jim O’Neil, comes forward.

The size of the deal makes another middle eastern transaction look more likely, which might not please some of the United hordes. Indeed, Dubai has already been mentioned in early dispatches, but they have one of a number of sovereign wealth funds with the resources to meet the Glazer’s demands. However, as we have seen in the past two years, with the Qatar World Cup and the Saudi Arabian takeover of Newcastle United, middle eastern connections are often accompanied by public disapproval.

Manchester United key financial figures 2012-22

£mRevenuesP&L (pre-tax)WagesNet Debt
2021-22583(150)384515
2020-21494(24)322419
2019-20509(21)284474
2018-1962727332204
2017-1859026296254
2016-1758157264213
2015-1651549232261
2014-15395(4)203255
2013-1443341215275
2012-13363(9)181295

The Glazers didn’t get off to a good start when they arrived, loading debt onto the club after a leveraged buyout-type deal. The club has, apparently, consumed £ 1 billion of cash in servicing that debt while the owners have benefitted from regular dividends. So unhappy was a section of the support that a new club sprung-up in 2005 out of the discontent, FC United of Manchester, a fan-owned club that, at its peak, were attracting 3,500 people per game.

Manchester United have spent heavily in the transfer market, some € 2 billion since 2004-05, but they have made some very poor purchases in that time and their recruitment policy, generally, has left a lot to be desired. Furthermore, their wage bill has been astronomical, £ 384 million in 2021-22, more than double the amount paid in 2012-13.

They also repeated huge mistakes around the succession of Sir Alex Ferguson, and since he retired in 2013, United have won just three trophies. They have been missing from the Champions League four times and their last Premier League title win was in 2013. Neighbours City have won 12 prizes in that timeframe and Chelsea six. The most successful manager since Ferguson has been José Mourinho, who won the UEFA Europa League and EFL Cup in 2017 and had a win rate of 58.33%.

The recent debacle around Cristiano Ronaldo really sums up where United are at the moment, a club of their size and stature should not have been courting veterans in the first place but wasting so much money in the process was both foolhardy and directionless. It is no coincidence they announced it was exploring strategic alternatives to enhance the club’s growth immediately after reaching an agreement to allow Ronaldo to leave with immediate effect. United have to ensure they don’t allow the current malaise to continue because it is all too easy for big names to wander into the wilderness. This is absolutely the wrong time to be cast adrift.