While US sports deals are few and far between, investors have a chance to win abroad.
Today, we often see articles about ultra-rich Americans going abroad and buying football clubs in Europe. Most of them are priced at major North American sports franchise auctions dominated by the National Basketball Association, National Football League, Major League Baseball, and National Hockey League.
But in Europe, there is more room for action. “European sports are becoming increasingly Americanized,” says Laurie Pinto, a veteran investor with more than 30 years of his M&A expertise who has devoted the past decade almost entirely to sports. increase. “Prices for sports teams continue to rise in the United States, so they’re looking for cheaper Europe,” billionaire Dan Snyder said in 1999. ) for his $800 million. This was a record price for a US sports franchise at the time.
Today Bank of America is shopping around the team. Forbes estimates the price tag could put him in excess of $5 billion, making him the sixth most valuable team in the NFL.
Compare that with the recent deals of John Textor, a member of the DuPont family. Through his Eagle Football Holdings, the U.S.-based investor recently acquired OL Groupe from French film company Pathé, Chinese investment fund IDG Capital, and part of Holnest, which is owned by Jean-Michel Aulas’ family, for about eight years. Acquired for €100 million ($805 million). ).
Textor now owns a 90% stake in Olympique Lyon, a majority stake in Brazilian team Botafogo (estimated at $60m) and an 18% stake in Crystal Palace FC for £87.5m (approximately $102.6m). and also owns a second tier club in Belgium. RWD Molenbeek.
The lower the tier, the cheaper the team. For example, his Textor stake in Premier League (top tier) team Crystal Palace, Hollywood stars Ryan Reynolds and Rob McElhenney recently paid fifth tier team Wrexham AFC his Worth more than 48 times his £2 million. “But how long will prices be cheap?” asks Pinto. “There aren’t that many clubs out there.”
Among the higher targets currently on the market are Premier League clubs Manchester United and Liverpool, worth $4.6 billion and $4.5 billion respectively. was sold to Los Angeles Dodgers owner Todd Boley for £4.25 billion, ending the 19-year run of Russian oligarch Roman Abramovich. RedBird Capital Partners completed his €1.2 billion (about $1.4 million) acquisition of Associazione Calcio Milan in August.
But opportunities in the UK and Italy may be drying up, according to Pinto. Coming into 2023, the deal pipeline could be filled with teams from other markets.
“There will be more activity in continental Europe, Spain, Portugal and Germany,” Pinto told Global Finance. Earlier this year, a US consortium agreed to buy his 10% stake in German football club FC Kaiserslautern. In contrast, his Miami CF co-owner Inter has purchased his 51% stake in Spanish football club Real Zaragoza in partnership with Ares Management.
The next major sale could be the German Bundesliga. Major buyout companies Advent, Blackstone, Bridgepoint, CVC and KKR are touring clubs and talking to executives of the German Fusballliga, which runs the Bundesliga, the Financial Times reports. . “Italy and the UK have seen the price of readily available fruit rise, making the rest of Europe look much more appealing,” says Pinto, who has about 20 mandates at her desk.
Big banks are also playing ball. “George Clooney has nothing to me,” said Goldman Sachs managing director Gregory His Carey, referring to the 2009 film Up in the Air.
Carey heads the company’s global sports segment and regularly travels the world to meet with clients and his growing team of advisors. He has been involved in over 50 active buy-side and sell-side projects, including stadium funding.
strength and stamina
One of the attractions of this sector is its stability. “Sports teams are resilient in tough times,” Carey said, adding that while volatile markets, a looming recession and high interest rates have hampered his M&A activity in nearly every sector. He says his M&A in sports is actually on the rise. why? The euro has fallen against the dollar, and huge amounts of money are pouring into sports. Dealogic says that from January 2022 he will have a record 81 sports contracts by October. Total transaction value hovered around $15.13 billion, with about a third going to US-based targets. “He is spending more time on M&A than ever before,” adds Carey.
Meanwhile, the broader M&A landscape remains quiet as global deal activity across all sectors fell to $722 billion in the third quarter alone. This is down 54% from the year-ago quarter and down 38% from the second quarter.
Total annual transaction value is expected to fall below $3.6 trillion in 2020. In the first nine months of the year, global transaction volume reached her $2.97 trillion. That’s about a third lower than his record year contemporaneous in 2021 and about the same as his pre-pandemic 2019 contemporaneous period.
“Sports has stood the test of time,” commented Brian Kantarian, head of the Sports Finance Group at JP Morgan Private Bank. Throughout all recessions, including the Covid-19 pandemic, there has been a direct impact on business, he explains, but when it comes to sports, he explains, the upward trend in values has continued. “Sports’ resilience as an asset class has become more attractive to investors over time,” he says. “It’s not like other companies’ trophies.”
After all, there are only 32 teams in the NFL. Ownership rarely changes, and unlike European football, American football does not accept private equity funds. When an NFL team sells, it’s usually something like Jeff Bezos, who was rumored to be interested in the Seattle Seahawks and, more recently, the Washington Commanders. “When you go abroad, you have more opportunities,” Kantarian says.
Still, owning a football club has many drawbacks. One is relegation, or the “R word” as Pinto calls it. The goal when managing a team like Wrexham is to allow the standings to move from his 5th place to his 4th place each season.
Conversely, you don’t want to end up at the bottom of the league and be relegated or “demoted” to a lower division. Such a relegation would have an economic impact on player payouts and club revenues as the share of broadcast contracts in the domestic and foreign markets would be significantly reduced.
Genova, for example, were relegated from Series A, the top of the Italian football league system, earlier this year. The club has four managers with him as many games as they won last season. Also, in the last 30 years he has had 54 coaching changes. Also in 2022, Watford were relegated to the English Football League Championship division after losing 1-0 to Crystal Palace.
Buyers are even factoring the relegation into their trading terms. Investors would have walked if Real Zaragoza had been relegated to his Third Division. When buying a franchise, you have to “have a good reason” and the new owner “knows what you’re doing,” says Pinto.
Space complexity makes fundraising difficult. Not only is the sports sector facing the same macro challenges as any other industry (rising inflation and interest rates are impacting his M&A and valuations), debt acquisitions are more costly. is applied.
Also, commercial banks are generally reluctant to lend to football clubs. The reason is because of the risks involved and potential fan backlash. This opened the door for Michael Dell to financial firms like his MSD Partners, which helped ALK Capital buy his Burnley for £200 million.
Companies like MSD pounce where traditional banks tend to avoid. Pinto explains that if a customer becomes so engrossed in the game that they find out their bank is lending to a rival club, they may throw a tantrum and change banks.
If you are lucky enough to own a club, the biggest hurdle is making a profit. According to British consultancy Vysyble, the Premier League’s total financial losses over the past 13 years have reached £5.2 billion. From 2020 he lost 1.05 billion pounds in the economy in the 2021 season and from 2019 he surpassed his loss of 1.38 billion pounds in 2020. He has only two examples of economic surpluses: 2016-2017 (£224.4m) and 2017-2018 (£31.6m). “It’s safe to conclude that this is a difficult industry to generate a financial surplus,” says Vysyble co-founder Roger Bell. “Potential investors will be more in their interests if they know this before committing.”