Why two iconic football clubs are up for sale at the same time

The balance has always tipped in favor of the biggest football clubs, says the professor of sports finance

LONDON – Two of the world’s biggest and most profitable soccer teams are on the market at the same time, and that’s no coincidence, analysts say.

In November, the owners of first Liverpool and then Manchester United confirmed they were open to further investment offers, with the potential for outright sales of the English top-flight clubs.

Liverpool’s owner, American sports conglomerate Fenway Sports Group, is believed to have put a total value of around 3.3 billion pounds ($3.97 billion) on the club, 12 years after acquiring it for 300 million pounds Goldman Sachs and Morgan Stanley have prepared a sales platform for interested parties, The Athletic first reported.

Meanwhile, New York-listed Manchester United shares jumped 18% on the November news. 23 that their owners were also opening up to investment opportunities. The total takeover of the club is expected to reach £5 billion or more.

The club’s majority owner, the American Glazer family, has had a tumultuous relationship with fans since acquiring a controlling stake in 2005 for £790m in a controversial and highly leveraged deal that added to a significant debt pile at the club

Beyond any personal motivations of the owners, “certain market factors will make the timing of these sales not coincidental,” Dan Harraghy, senior sports analyst at market research firm Ampere Analysis, told CNBC.

Big money competition

A recurring complaint from Manchester United fans of the Glazers is the lack of investment in the club, both in facilities and players.

But any future increase in funding comes in an increasingly competitive field of Premier League clubs such as Manchester City – majority-owned by Dubai’s royal sheikh Mansour bin Zayed Al Nahyan – and Newcastle, bought last year by a group of investment led by the Saudi. Arab Public Investment Fund.

“From a financial point of view, the current owners [of Liverpool and Manchester United] will take into account the level of investment required to keep up with rival clubs who have owners with deeper pockets, both domestically and in Europe,” said Harraghy, also citing Paris Saint Germain, which from Qatar

“State-funded Middle Eastern owners allow clubs to spend heavily on both club infrastructure and player acquisitions to continue to improve their footballing and financial performance.”

Old Trafford Stadium, home of Manchester United Football Club. In November, the club issued a statement saying that the Glazer family, which is the club’s majority owner, “will consider all strategic alternatives, including further investment in the club, a sale or other transactions involving the company “.

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While the Glazers have been paid in dividends since 2016 (although they have lowered payouts amid current ownership discussions), Manchester United posted an increase in revenue but a net loss of £115.5m of pounds for fiscal year 2022, from a net loss of 92.2 million pounds. last year.

In its most recently published results, Liverpool posted a pre-tax loss of £4.8m in the year to May 2021 and a loss of £46.3m in 2020, with the pandemic affect match day revenue.

“Those in charge may no longer see the expenditure as sustainable given the level of competition they face,” Harraghy ​​added.

Failure of the European Super League

The implosion of a company that was intended to create a new revenue stream for the big clubs may have caused owners to question their ability to improve profitability.

The announcement of a new European Super League in the spring of 2021 that would give automatic entry to 15 founding clubs, including Liverpool and Manchester United, was met with widespread criticism and accusations of money grabbing in cost of the party, which was soon cancelled.

The balance has always tipped in favor of the biggest football clubs, says the professor of sports finance

Guaranteed revenue, particularly broadcast revenue over which participating clubs would have had significant control, was a key motivation behind the league. The Premier League has become a relatively more open competition, meaning top teams are less assured of getting into tournaments like the Champions League each year, Harraghy ​​said.

“Losing the qualification can be a significant hit to a club’s revenue,” he said.

Interest of investors

At the same time, European football has numerous teams “that have brand cache and a global fan base that makes them highly sought-after investments,” said David Bishop, partner and sports specialist at LEK Consulting.

“Sports investment activity has also received a bit of a jolt post-Covid as many sports bodies and teams have come to the market offering equity positions, often to help manage cash flow issues arising from Covid.”

This has helped expand deal flow and understanding of the space, he said, noting recent sports capital deployments by investment firms such as CVC, Silverlake, Redbird Capital and Dyal Capital. These include rugby, French and Spanish soccer leagues, Indian Premier League cricket and sports analytics businesses.

Walter Isaacson reacts to Elon Musk's Manchester United tweet

“The US market, especially MLB, NBA, NFL, is now quite mature and well invested, so investors have also started to look for more US-type sports opportunities in international markets,” Bishop continued.

“In the cases of Liverpool and Manchester United, both owners have held onto the clubs for a long time, and both assets have appreciated greatly as their leagues and their brands and their global fans have developed. Whether it’s a good time to buy is pretty situation specific, but overall these are assets that should be pretty resilient over the medium to long term,” he told CNBC.

Income opportunities

Media rights are increasingly important to leagues, particularly internationally, and investors will have noted the significant growth in the English Premier League’s global audience, Bishop said.

There is also potential to further monetize international fan bases through overseas experiences, merchandising and games, as is being seen in reverse in the UK, which is attracting huge audiences for American football and basketball games.

Angus Buchanan, managing director of The Sports Consultancy, also cited US private equity and institutional interest in football clubs as one of the main reasons why the Glazers and Fenway Sports Group may feel it is a good time to sell.

“Both have been successful in the ‘phase 1′ of converting clubs’ brand equity and international fan bases into revenue, but have seen growth flatten out in recent years,” he said.

LONDON, ENGLAND – OCTOBER 30: Jerry Jeudy #10 of the Denver Broncos runs for a touchdown against the Jacksonville Jaguars during the second quarter of the NFL game between the Denver Broncos and the Jacksonville Jaguars at Wembley Stadium on the 30 of October 2022 in London, England. (Photo by Dan Mullan/Getty Images)

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Manchester United, in particular, set a new paradigm for the sale of broadcast rights and global partnerships, from Japanese noodle maker Nissin to Middle Eastern banks.

In 2022, Premier League broadcast revenue was higher internationally than domestically for the first time.

A new owner would look to develop “phase two,” Harraghy ​​said: taking highly engaged, cross-generational fan bases and developing “more digital and sophisticated” revenue strategies, using database information and direct targeting to fans with more offers.

“I would be projecting some aggressive growth numbers to any potential investor,” Harraghy ​​said.

Chelsea Quick Sale

Premier League club owners will have been closely watching Chelsea’s quick sale in May, which came amid a British crackdown on the assets of Russian oligarchs following Russia’s invasion of Ukraine in February. A consortium led by US investor Todd Boehly paid £4.25bn for the club (with £1.75bn earmarked for future investment) after the government confirmed the proceeds would not go to previous owner Roman Abramovich.

Of particular interest will have been the sum obtained, which Harraghy ​​described as unprecedented for a Premier League club, and media reports of up to 200 interested parties.

Analyst Angus Buchanan said the sell-off was likely “a bit of a catalyst” for November’s action.

“Maybe the owners of the club have seen a bit more activity in the market, and now there is a fixed benchmark in terms of the valuation and the level of interest,” he said.

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