Title: U.S. Investors Scoring Big in European Soccer: A Playbook for the Multi-Club Model
In the dynamic world of European soccer, U.S. investors are making strategic moves, shifting their focus towards clubs with lower valuations and often outside the marquee tier of the sport. This trend is accompanied by a growing interest in a so-called multi-club model, where investors target smaller clubs with lower valuations, aiming to tap into the international sports market at more accessible deal valuations.
Shifting Landscapes and Global Opportunities
As deep-pocketed investors, ranging from top U.S. private equity and venture capital firms to global rivals like sovereign wealth funds, intensify competition, the focus is expanding beyond the traditional heavyweights. Charles Baker, co-chair of law firm Sidley’s entertainment, sports, and media group, notes, "In terms of private equity and high net worth individuals, soccer is more of a global sport than almost any U.S. sport." The vast global fanbase, coupled with soccer's growing popularity in the U.S., translates into higher revenue opportunities from broadcast media rights deals to merchandising.
Valuations on the Rise
The stakes are high, with revenue multiples for clubs like Manchester United, Chelsea FC, and Newcastle seeing significant increases. PitchBook's report reveals that deal valuations across the top five European soccer leagues skyrocketed from over $70 million in 2018 to approximately $5.2 billion in 2022. Notably, over one-third of the clubs in the "Big Five" leagues are backed by U.S. investors, indicating a strong American presence in European soccer.
Multi-Club Model: A Strategic Play
The multi-club model is gaining traction as investors seek creative ways to enter the European sports market. Lower-tier leagues, such as England's Championship League and League One, offer attractive opportunities at smaller valuations, with teams open to potential buyers and investors. Neil Barlow, an attorney at Clifford Chance, highlights the appeal of these leagues, acknowledging the upside potential of promotion but also the risk of relegation, a unique aspect of soccer where teams drop to lower leagues after a disappointing season.
Expanding Horizons with Synergies
The multi-club model allows investors to snap up multiple teams, creating synergies between comparable clubs. This approach, while minimizing valuation discrepancies, enables investors to transfer players among their owned clubs, building talent and potentially selling to a higher league. U.S. middle-market investors, such as Sixth Street Partners and 777 Partners, are exploring this strategy to leverage governance, technology, and data sharing between clubs, creating a comprehensive and interconnected network.
Future Prospects and Challenges
As larger private equity firms target top-tier teams, middle-market firms are gearing up to raise funds and deploy the multi-club strategy. The recent acquisition of Everton by 777 Partners for a reported $685 million showcases the potential of this approach. However, challenges exist, and successful implementation requires navigating the complexities of European soccer, understanding the nuances of lower-tier leagues, and adapting to the ever-changing dynamics of the sport.
In conclusion, U.S. investors are making bold moves in European soccer, exploring untapped opportunities and reshaping the landscape through the multi-club model. As the beautiful game continues to evolve, these strategic plays could redefine the future of soccer investments and offer a unique avenue for U.S. investors to score big on the international stage.
Really good analysis! It is clear that U.S. influence in world football is growing rapidly. Some would argue that this is bad for European football as a whole because it is getting away from its heritage and following the money. What are your thoughts on whether it is a positive or negative change with the introduction of many American finances?
ReplyDelete-Thomas Crow
I would agree as well the US has definitely started to involve there self more and more every year in football in Europe. They see the potential of revenue in this area and have seen all of the development Europe has had because of football. Do you think this will be worth there investment for the US long term or do you think they should have never involved there self in the first place?
Delete-Chris Capachietti
US investors in European soccer has had a massive influence back home. MLS is on the rise and the money invested there is increasing rapidly. I think the US influence in European soccer has made the US feel more included in the world of soccer. This also may have contributed to the rise in soccer in the US.
ReplyDeleteI believe that U.S. investors' foray into European soccer through the multi-club model reflects a strategic understanding of the sport's global appeal and revenue potential. This trend showcases their willingness to explore innovative approaches to investment, leveraging synergies between clubs to maximize returns. While challenges exist, such as navigating the complexities of European soccer governance and league dynamics, I am optimistic about the long-term prospects of this strategy. It fosters growth for opportunities.
ReplyDelete- Ava Del Giudice