Financial Investors are expected to show more interest in European football clubs this year as US tycoons, hedge funds and other financial institutions profit from the game with rising TV and commercial revenues.
The €11.6 billion European football industry has recent money making opportunities. There are talks of merging the two British Premier League clubs, Liverpool and Newcastle, and there’s a planned initial public offering for Olympique Lyon in France. “There will be more foreign investment in football,” says Patrick Lynch, a managing director at Morgan Stanley in London, who helped restructure the financial obligations of Germany’s Borussia Dortmund. More than five clubs in Britain are currently owned by financial investors, and the English league has doubled its profits to €2 billion in five years, according to Deloitte & Touche.
“The clubs’ finances will be further boosted when the Premiership’s new TV deals start for 2007/08,” says Paul Rawnsley, a director at the Sports Business Group at Deloitte. “This provides an opportunity to generate returns for investors in the years to come.”
George Gillett, owner of Montreal Canadians ice hockey team, has announced a takeover bid for Liverpool, an 18-time English champion. The team has already opened its books to Dubai International Capital. Newcastle United recently had takeover talks with Belgravia Group, a Jersey-based investment firm and US hedge fund Polygon. Both parties dropped their interest.
“The interest in certain ‘football brands’ is now extending globally, with Premiership matches televised in over 200 countries,” says Rawnsley. “For some, this high level of interest and support also helps support the clubs’ value should an investor want to sell on the club in the future.”
Some caution that breaking into the sport in Europe may be more difficult because stakes are usually held by club members and passionate millionaires. It is more important for investors to be involved in debt deals, says Lawrence Schechter, a director at Schechter & Co Ltd., a London-based investment bank who raised money for Britain’s Newcastle United and Germany’s Schalke 04.
“We expect to see more fund-raising deals in continental Europe” says Schechter. “If you’re unable to raise equity – somebody coming and buying the club – then, you have to raise debt, for which there are a variety of facilities like private placements with institutional investors.”
Schechter also says until a salary cap is placed on players investors will need to bring in more money to attract competitors, players and fans. “Football has become entertainment, globally,” says Lynch. “Players have become icons.”