Five billion euros for Chelsea, around 10 million for Red Star, 20 million for Toulouse FC, the takeovers of European clubs are multiplying. Their common denominator? Being transferred to the American flag after acquisitions by investment funds. The latest, AC Milan, formalized Wednesday June 1 its passage under the cut of the RedBird fund.
In the game of numbers and cancellation of debts, clubs are exchanged like Panini cards. But the arrival of these funds from individual owners could redefine the rules of the game and reactivate the specter of a lucrative Super League in Europe.
“Initially, a few American franchise owners came into football: the Glazer family at Manchester United, John Henry at Liverpool, Frank McCourt at Marseille. But what is new is that we are now seeing funds appearing investment”, to analyse Luc Arrondel, CNRS researcher and specialist in football economics.
Behind the technical term, investment funds are collective investments that collect and invest their members’ money for profit. The objective of the investment fund is clear: to make money.
“Fundraising in Sportech represents 27 billion euros worldwide, including 12 in the USA, 6 in Asia and only 3 in Europe in 2021, even if this is 3 times greater than in 2020.
Mark Wyatt, Head of Corporate Finance KPMGduring a round table of the Sporsora organization on investment funds in May 2022
Europe is a promising market: with the inflation of the price of players, its exponentially increasing TV rights and the capital gains made during the resale of certain clubs, the probability of making a profit is strong. Enough to stir up the interest of these investment funds at a time when European clubs, weakened by the Covid-19, need liquidity.
This is a major step in the great and prestigious history of @RedStarFC, 125 years long. Following a consultation and approval procedure, the Red Star club is now 100% owned by 777 Partners ⤵️
—Red Star FC ✪ (@RedStarFC) May 11, 2022
The 777 Partners fund, based in Miami, thus bought the Red Star on May 11. Clearlake Capital, a private equity firm, holds 60% of chelsea after its acquisition for five billion euros. To Toulouse, it is the RedBird fund which has been in charge since 2020. The general manager of the TFC, Olivier Jaubert, summed up the expectations as follows: “The starting point is RedBird’s desire to invest in football in Europe with clear criteria: it needed a financially healthy club, a dynamic metropolis, quality infrastructure and an efficient training center. (…) Today funds do not come into football to lose money.”
If these actors are unknown in Europe, they are not in the United States. These investment funds are already ubiquitous in baseball, American football (NFL), basketball (NBA) and Nascar (motorsport). But in the United States, the sports economy is highly regulated. A law obliges private equity firms to hold no more than 20% of the capital of a single club in these leagues.
It is therefore tempting for these funds to invest across the Atlantic. “These groups also believe they have specialist sports promotion skills that could be used in various markets, explains Victor Matheson, an economist specializing in football at Holy Cross University in Worcester, Massachusetts (USA).
“There are synergies between these sports. For example, John Henry owns Fenway Park, a baseball stadium in Boston. He can use that stadium and its advertising and promotional networks to host exhibition matches featuring Liverpool .”
Victor MathesonFranceinfo:sport
RedBird, which entered the capital of Toulouse FC in May, also has in its portfolio the New York Yankees baseball team, the Dallas Cowboys in American football, the American women’s football team and shares in NFL and Women’s NBA. Its arrival in Europe is therefore not a surprise and is part of this diversification.
Whether investment funds all have a pecuniary motivationthese latter operate under ddifferent strategies. Some invest in timeshare of big clubs (Chelsea)in struggling clubs (Toulouse) Where in small clubs (Red Star, SCO Angers)haswith the desire to resell them by realizing a capital gain. Finally, some invest in leagues. In May, CVC invested 1.5 billion euros in Ligue 1, or 15% of the shares, with the certainty of drawing income from it. “You buy shares so you have the right to part of the income generated by the commercial company, it’s mathematical and very interesting for these funds”, testifies Luc Arrondel.
Faced with the staggering prices of European clubs and leagues, investment funds therefore tend to outclass personal fortunes. A change of style that does not leave fans indifferent.
“In some cases, owners are there more for the glory and the titles than for the money. Roman Abramovich is certainly one of them. He ran the team more like a toy than a business. If you’re a fan, you certainly hope to have this kind of owner, willing to overspend on his team.”
Victor Matheson, economist at Holy Cross UniversityFranceinfo:sport
However, an investment fund can be an interesting economic windfall for European clubs. “If it were only harmful, why would the clubs accept? The clubs are in financial difficulty and it can help them to revive. In Toulouse, for example, we can see that it works. They will go back to Ligue 1, touch TV rights, maybe sell a few players from the academy… On the other hand, in Bordeaux, it seems that King Street is only looking for profitability. The situations can be very different”, adds Luc Arrondel.
These investment funds could nevertheless change the structure of European football. Future Chelsea owner Todd Boehly owns the Dodgers (American football) and this year renegotiated NFL TV rights to the tune of $10 billion a year. His arrival in Europe is not linked to chance.
“The Americans don’t come to lose money. I think they have in mind the creation of a Super League, which is very similar to the way team sports are managed in the United States, and which is would be accompanied by a renegotiation of TV rights”
Luc Arrondel, sports economistFranceinfo:sport
Another consequence, “on could have an Americanization of European football with a lot more planning and dthe salary-profit sharing negotiations carried out at the start of each season between the owners and the players” explains Luc Arrondel. Until now, in Europe, it is the players who capture most of the income generated by football. Investment funds could change the balance in place.