In the past decade, financial investment and private equity involvement in football has grown exponentially. This week that trend looks set to continue if we are to take the current bidding process for Manchester United at face value. Now entering its third round, the Glazer family hope to conclude a deal by their 28th April deadline with the final fee expected to reach £6 billion despite the current macroeconomic headwinds.
The case of Manchester United and the Glazer family though should act as a stark reminder to potential investors about how not to do things. Ownership has certainly been a tale of two halves for the family. The final profit on their initial investment is expected to reach somewhere between £5-£6 billion. However, from a reputational standpoint, ownership has been a disaster for the family, certainly in comparison to their other crown jewel, the NFL franchise, the Tampa Bay Buccaneers. Fan protests at Manchester United and even death threats against the Glazers date back to the earliest days of ownership in 2005 after the family’s decision to secure the purchase by leveraging more than £500m worth of debt onto the club’s balance sheet whilst injecting just £270m of their own money. Prior to ownership, the club had been debt-free.
Cautionary tales abound and despite the risks involved, it is clear that major investors with expensive appetites are here to stay in the Premier League. The £4.25bn sale of Chelsea F.C. a year ago to private equity investors led by American businessman and investor Todd Boehly is proof of that. Yet following Chelsea’s sustained poor form, the new owners’ first season will be trophyless despite splashing out upwards of almost £500m on new players.
However, there is another United in the Premier League who have quietly and studiously made a positive case study for the successful ownership model. Newcastle United a club which had long lost its lustre during the Ashley era has been rejuvenated thanks to its recent takeover by Saudi Arabia’s Public Investment Fund (PIF). Under new management, the ownership has made efforts to once again reinstate the club front and centre within its local community. Sensible and measured decisions have included re-prioritising the women’s team, investing in and improving training facilities as well as moving the statue of legendary striker Alan Shearer onto stadium land next to the statue of Sir Bobby Robson, which the previous owner denied. Despite accusations of alleged ‘sportswashing’, PIF has made it a priority to engage with the Geordie faithful and ensure the club is once again an institution to be proud of. In the short space of just 18 months, it is clear that they have achieved notable success both on and off the pitch.
Regardless of size and the level of investment, it is clear that the club ownership model in the U.K. presents plenty of opportunities. At the lower levels, Wrexham F.C.’s successful attempt to secure promotion to the football league have been hugely helped by their Hollywood owners Ryan Reynolds and Rob McElhenney and are now one of the most talked about teams in the country and have even become a household name in the United States. It is clear that there is appeal throughout the entire footballing pyramid following last week’s news that Birmingham City in the Championship are looking to sell a minority 24% stake to Tom Wagner, the co-founder of Knighthead Capital Management, which oversees around £7.25bn of investments.
With football becoming ever more popular on the global stage and unlocking new audiences in the process this appeal is likely to remain undimmed as football clubs become ever more valuable as commercial assets. This has created opportunities for investors to hold for the long term and generate significant revenues through a myriad of different channels including broadcast rights, merchandise, ticket sales and sponsorships.
Despite the new risks and challenges, in the years to come we will no doubt see plenty of additional deep-pocketed investors give club ownership a go with varying degrees of success. If one thing is certain it is that football has an enormous and increasingly growing audience base, making investments undertaken sensibly a great way to not only generate profits but also drive positive sentiment. Ultimately positive sentiment is dictated mainly by results but for owners and prospective owners who do not have first-hand knowledge of the market it is vital that they hire professional advisors, including communications professionals who can help them avoid obvious pitfalls and alienating the fanbase.
