Why Private Equity Hasn’t Heard Soccer’s Final Whistle

The European Super League may have been shown the red card, but private equity investors are still big fans of sports  

Soccer is big business the world over, but an ambitious move by investors created a stink in Europe this week as clubs were accused of putting profits over fans. The European Super League appears to have failed before it started, as six English clubs pulled out from the deal after backlash from fans and stakeholders. But with private equity dry powder for Europe-focused strategies standing at $416bn according to Preqin Pro, investors will still be on the lookout for other opportunities in sports. 

The Short-Lived European Super League
With a €3.3bn ($3.9bn) debt deal underwritten by JPMorgan Chase, 12 clubs had opted to join the European Super League, which was to be modeled on an American-style closed league. In a closed league there is no threat of relegation, making it a safe bet for teams as this avoids the inevitable drop in viewing figures and revenues that would come with that. 

Investors such as RedBird, which holds a stake in the New York Yankees’ regional sports network; Fenway Sports Group, which owns the Boston Red Sox and England’s Liverpool FC; and Silver Lake, which has stakes in the New York Knicks and the New York Rangers, have received reliable returns as the teams are assured their spot in the league. 

Plans were for 15 teams in the Super League to remain in the league each year, with five rotating spots for other clubs. This way, revenue streams through prize money, broadcasting rights, and sponsorship would have been secured. But as Pep Guardiola, Manchester City manager, said: “Sport is not sport if losing doesn’t matter.” 

Private Equity in Sport
Never fans of losing, a handful of private market investors have taken large stakes in the sports market over the years – although not always without controversy. The Glazer family’s 2005 takeover of Manchester United has been unpopular with fans as it plunged the club into debt (over £500mn worth) for the first time since 1931. 

Silver Lake, the US technology firm with baseball club holdings, took a $500mn stake in City Football Group, the parent company of Manchester City, in 2019 and invests in the mixed martial arts Ultimate Fighting Championship. It’s also in talks with New Zealand Rugby about investment in the All Blacks, a move proving controversial with players. 

European fund manager CVC Capital Partners has a long history of sports investment, including past ownership of Formula One and MotoGP, its involvement in Six Nations rugby, and interest in Italy’s top football league, Serie A. CVC is reported to have made returns of $4.4bn over its 11-year ownership of Formula One. Now the private equity investor is looking further afield, closing a $300mn global volleyball deal.

Future Opportunities
Despite potential difficulties from fan bases, the soccer industry offers opportunities for private market investors. Right now, men’s clubs need help to recover from the financial shocks of the COVID-19 pandemic, and women’s clubs are poised to capitalize on their growth potential. 

Deloitte projects revenues at England’s Premier League clubs will rise to €6.2bn ($7.5bn), a €1.3bn ($1.6bn) increase, over 2020/2021. The top league clubs in Spain (La Liga), Italy (Serie A), and France (Ligue 1) are expected to rise as well, after falls in the 2019/2020 year, as revenue resumes its upward growth trend. There is speculation, according to Deloitte, that leagues such as League 1, a French professional league, which have lost revenue through difficulties with broadcast rights, are considering private equity investment to enhance their financial positions. 

Opportunities abound outside the top tiers, too. Deloitte says the potential for women’s soccer has never been stronger, predicting global interest in the sport with the Olympics, the UEFA Women’s Euros, and the World Cup taking place over consecutive years. FIFA doubled its investment to $1bn in women’s football for 2019 until 2022, and BT and Sky are investing £8mn ($11.1mn) a year in England’s Super League, the top women’s league in the country. 

A joint report from The Sports Consultancy and BDO says that emerging sports, particularly e-sports and women’s sport, are seeing “exceptional growth” and are well positioned for investment. These markets could provide opportunities for private equity investors, with lower risk of incurring the wrath of fans, players, and even governments.