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When the American investment company 777 Partners decided that the world of sports would become its new playground, it did everything. was football. Like a collector of old football shirts, the company based in Miami has acquired a list of fine specimens from the magnificent world game palette in France.
Last spring, he also came to acquire Everton, but his inability to fulfill the strict property conditions of the Premier League and the problems in the Australian airline belonging to 777, Bonza, postponed the owner of the club and the Agreement failed. In October, 777 partners collapsed, leaving its high and dry football assets. “777 probably went too far, too quickly, without sufficient intelligence on the European sports market – investments inside and outside football,” explains Rob Wilson, founder of Investinsoccer.com, a service Advice in strategic sport which helps to associate the potential owners of football clubs with the best sports workers.
The major investment capital attack
For all its misadventures, the sporting adventure of 777 partners was far from an isolated case. During the last decade, investment capital capital has flocked to the sport industry, attracted by its world attraction as a league with a database of arrow fans like the Premier League offer immense possibilities of growth to Investors. Annual global investment in the sports industry has tripled at more than $ 30 billion in 15 years, according to CNBC data. In the United States, the world’s largest sports market, in just two decades, the average values of the NBA team increased by 1,176% and 523% NFL assessments, estimates JPMorgan Chase. Changes in the media landscape have transformed sport into a golden goose for streaming platforms like Amazon Prime, massively increasing the rights of games. Digital technology has also transformed sports into a new courageous world for marketing specialists, with stadium sponsorships, digital dashboards, jumbotrons and brand areas offering new opportunities.
If investment in investment in established sports has its criticism, for the least popular, is a boon
Team owners welcomed the sudden interest of institutional investors, who rocked what was once a slow industry and often losses. “Given the restrictions on the quantity of investment capital companies, it provides liquidity and an exit to inherited owners who would otherwise interest a very illiquid market,” explains Michael Rueda, head of American sports and entertainment at the office of Withers Withers lawyers, adding: “It is not necessarily an asset of vanity now – it is a real business with growth potential.”
As the most popular sport in the world, football has been a major target for investment. The pandemic has deprived many clubs of income sources such as ticket sales and television rights, which makes their owners less skeptical of investors with little football expertise. According to the Financial Data Company Pitchbook, a total of 5.4 thousand the action companies rushed to benefit from economies of scale, because the acquisition of participations in European clubs allows them to share resources through the ‘Atlantic.
Ares, a company that manages around $ 450 billion, has invested in Chelsea and Inter Miami, while Sixth Street is a major investor in San Antonio Spurs and Real Madrid.
“Revenues are raised in several European leagues (See Fig 1) And for clubs that are constantly playing in UEFA competitions, but losses are common, which creates a potential for efficiency gains, “explains Christina Philippou, who teaches accounting and the financing of sport at the University of Portsmouth, adding: “Many investors in investment are with the idea of controlling costs and increasing marketing as a means of allowing the extraction of profit, in particular those that seek to learn models of The American sports league which is much more commercial. “Another reason why the investment in investment has increased is better regulation, in particular the improvement of the rules of the UEFA financial show, according to Rob Wilson:” A one regulatory framework begins to take a firmer grip on financial sustainability. »»
Despite the buzz that all the investment has created, a certain skepticism remains in certain parts of the sports industry. Last August, the National Football League (NFL) became the last major American sports league to allow the capital investment capital, allowing investors to buy issues up to 10% in its teams, provided that they keep them for at least six years. He has selected six investment capital powers as a preferred buyers in the premise that they can invest significant sums from the start. As the most lucrative league in the world with a media rights agreement of $ 110 billion to its credit, the NFL had enough latitude to maintain its strict property rules than those established by other leagues, which have Permitted investors to acquire 30% of participations and, in some cases, even the control even teams.
“They want to benefit from institutional investors, but in a way that does not change the composition of the game and the way it is governed,” explains George Pyne, founder of the Bruin Capital Investment Fund, who invests in the sector of sport, addition: “With only 10%, the investor has no rights. For the owners, it is important not to abandon these rights for the integrity of the game. ”The League is also aware of the public skepticism on the priorities of the Private Equity, explains Roy Lockhart, director general of the global consulting company Stax, Specialized in investment capital: “The owners of the NFL always wish to project the image of the long-standing family property as a typical model, and where this was the case, victory has always been a priority in addition to financial success . By including these restrictions because they open franchises in investment in investment, they are able to maintain this illusion while preparing for a future where franchises are treated more like investment vehicles than passionate projects. »»
Own goal?
The massive influx of capital has aroused fears that there is already a bubble in certain parts of the sport sector. In the case of football, this led to “massively swollen” assessments on the basis of “easy concepts” on growth, warned Gerry Cardinale, owner of AC Milan, at a summit of companies last September . “The problem with my crowd is that they are asset managers. They just want to buy things, and it is not ideal for companies based on intellectual property, “said the founder of the Redbird Partners’ investment company.
Cardinal’s declaration echoes a broader concern concerning the financial sustainability of European football. Many of his emblematic clubs are mired in a growing debt spiral; In 2023, the top five European leagues owed a total of more than 10 billion euros. A 2023 report commissioned by the British government has revealed that many English clubs are “managed in an unsustainable manner” and rely on the financing and subscription of losses, which increases the possibility of insolvency.
A major risk is that the inflation of club values can assess future investors, support Philippou of the University of Portsmouth, co-author of the report: “This is good for short-term owners, but poses a potential problem to Long -term if the evaluations are pushed too high to allow clubs to find buyers, especially if the financial landscape where loss of loss is the standard continues, which can lead to insolvency events. As an example of what could be wrong, she points to the English rugby league, which saw three high -level teams go bankrupt last year. For clubs, the main concern is that debt transactions involving investment capital companies that are looking for rapid yields could possibly leave them high and dry, as in the case of 777 partners. Last October, Moody’s warned that an increasing number of investment capital groups were struggling in high debts, Chelsea’s co-owner, Clearlake, was distinguished as one of the companies with the highest lever ratios.
It is not necessarily an asset of vanity now – it is a real business with a growth potential
Another concern is that investment capital companies are not equipped with the patience necessary to prosper in a relatively non-liquid industry which is smaller than their traditional objectives and requires long-term investments. “A challenge is that the sports teams are not necessarily investment in high cash flow flows. These are investments that are difficult to repress, which is the opposite of what classic investment capital is, “explains Pyne de Bruin.
A particular problem with which American companies are faced during investment abroad are differences in sports regulations and cultures. European football clubs need constant investments to avoid relegation and participate in competitions like the Champions League, while American franchises are less risky and offer outsiders the opportunity to sign promising young athletes thanks to the system annual draft. In addition, measures that in other industries are accepted without any problem, such as cost reduction and the pursuit of new commercial opportunities, can cause a fierce reaction in sports if fans perceive them as a threat to history and the identity of their team. Demonstrations that have involved German football fans launching chocolate and tennis balls on the field have forced the Bundesliga to abandon its plan to sell a participation of up to eight percent in its activity of the media rights to a Investment Capital Company.
Everything in the game
If investment in investment in established sports has its detractors, for the least popular, it is a boon. The explosion of female sports, for example, can be partly attributed to the recent influx of private capital. Sixth Street entered the game last year by becoming the main investor of the Bay FC, the last entry of the National League for American Women more and more popular. “An increasingly common consideration for investors in European football is the ability to invest in two markets with a single purchase: the market for mature men and the efficient women’s football market but with strong growth,” explains Philippou. Sports like the butt and pickleball also have the opportunity to attract a wider audience thanks to investments that creates a virtuous circle of growth. “With income growth, there is a role for the investment capital to play as the values of the league are increasing and the need to increase capital,” explains Rueda de Withers. “This is the only way to develop a business.”