Business

Global investors hunt smaller European teams to ride football boom

Sitting mid-table in the second division of Spanish football, Sporting Gijón operates in a different financial league to the likes of Chelsea FC and AC Milan, elite teams that secured record-breaking price tags earlier this year.

Yet clubs like Sporting in the northern coastal city of Gijón are now at the forefront of a wave of international investment chasing teams outside Europe’s top five leagues. In June, the club was acquired by Grupo Orlegi, a Mexican investment fund seeking to build a global network of sports teams, for around €40mn.

“It’s not a matter of size”, says Alejandro Irarragorri, a former metals trader who founded Orlegi. “We looked at first division teams, but none of them provided us with the potential for the future that Gijón does.”

He plans to turn the team’s youth academy into one of the best in Europe, a popular strategy among investors. “I’m sure that in the next weeks and months you’ll be hearing about Sporting in a very different way,” he says.

The Sporting Gijón takeover is just one of a flurry of recent deals involving clubs in smaller leagues, with stakes changing hands at teams in Portugal, Belgium and the Netherlands, and in the lower divisions of Spain, France and England.

Each country offers something slightly different. Portugal is a hot-bed for developing players and selling them for profit, Spain’s tight spending limits have kept a lid on costs, while in England some chase the dream of reaching the Premier League.

But target clubs often share certain characteristics such as up-to-date infrastructure, the possibility of swift promotion, an established youth development system — and proximity to somewhere foreign investors might like to spend a lot of time. For example, Venezia in Italy’s Serie B is controlled by Duncan Niederauer, former chief executive of NYSE.

“US investors have a fundamental thesis that European football is undervalued commercially”, said Tim Bridge, lead partner of the sports business group at Deloitte, adding that teams in smaller leagues come at a price many find “quite compelling”.

Last month Mark Attanasio, owner of the Milwaukee Brewers baseball team, purchased a minority stake in Norwich City, a second-tier English club, while Vitesse Arnhem in the Dutch league was taken over by Common Group, a New York-based investment group.

Club Deportivo Leganés, a second tier Spanish side, was bought in June by Blue Crow, a Texas-based investment fund led by Jeff Luhnow — the former general manager of Major League Baseball’s Houston Astros, who left the sport following a cheating scandal. Local press say the takeover valued the club at just under €40mn.

“The cost of buying into a big five team is pretty high — we knew that wasn’t going to be the aisle we’d be shopping in”, says Luhnow, whose investment fund also owns Mexican team Cancun FC.

French Ligue 2 club FC Girondins de Bordeaux, once home to Zinedine Zidane but recently plagued by financial difficulties, is among the teams now being targeted by investors, according to people familiar with the matter.

Second tier Spanish team CD Leganés was bought in June by Blue Crow, a Texas-based investment fund © Mutsu Kawamori/AFLO via Reuters

US investors are the most active, but others are also looking to buy. This week Qatar Sports Investments, which owns French champions Paris Saint-Germain, paid €19mn for a 22 per cent stake in SC Braga, a top tier Portuguese team.

Much of the interest stems from the range of opportunities available, in contrast to the US where sports franchises are rarely sold and fetch very high prices when they do. The Denver Broncos NFL team sold earlier this year for more than $4.6bn, a record for a sports team anywhere in the world.

With the value of top tier football clubs also surging — Chelsea FC sold for £2.5bn earlier this year — many buyers have been drawn into lower leagues by price, often in the low tens of millions of euros, for clubs they see as having high potential for growth if performance on the pitch were to improve.

The new arrivals join a growing band of international investors, mainly from the US, with overseas shareholders now present at more than two dozen teams playing in Europe’s smaller leagues.

US private equity billionaire David Blitzer’s list of football investments include Alcorcón in Spain, ADO Den Haag in the Netherlands and Waasland-Beveren in Belgium. Michael Eisner, former chief executive of Disney, owns Portsmouth in the third tier of English football.

More are expected to join them, in part thanks to the dollar’s surge against both the euro and sterling.

“We’re representing prospective investors . . . pursuing second and third division clubs in attractive cities with devoted fan bases as well as potential stadium or real estate development opportunities,” said Charles Baker, a partner at US law firm Sidley who has represented Chelsea owner Todd Boehly.

Although majority-owned by Kyril Louis-Dreyfus, Sunderland could be the next big target, according to Neil Barlow, a private equity partner at Clifford Chance, who recently advised US investment firm Sixth Street on its deal to acquire a slice of Barcelona’s TV rights.

At CD Leganés, on the outskirts of Madrid, Luhnow hopes to deploy data analytics techniques widely used to improve scouting and on pitch performance in baseball to help the club push for promotion to Spain’s top division.

“We are very focused on finding and developing talent — and using those players to win games and win competitions, and ultimately generate resources to reinvest back in the club,” he said.

However, Bridge at Deloitte warns that investing in the lower leagues comes with its own risks. The finances further down England’s football pyramid are increasingly precarious as owners spend big in the chase for promotion to the Premier League. The average wages to revenue ratio in the Championship reached 125 per cent last season, according to Deloitte.

“To take a football club to the top leagues requires very significant investment, nobody should overlook that,” he says. “Many investors come in with their eyes firmly shut to the realities of the football industry.”

File source

Tags
Show More

Related Articles

Back to top button
Close