LONDON – Two of the world’s biggest and most profitable football teams are on the market at the same time – and based on analysts, it’s no coincidence.
In November, the owners of first Liverpool after which Manchester United confirmed they were open to latest investment deals, with the potential for a full sale of top English clubs.
Liverpool’s owner, American sports conglomerate Fenway Sports Group, is believed to have valued the club at around £3.3bn ($3.97bn), 12 years after acquiring it for £300m. Goldman Sachs and Morgan Stanley have prepared a sales platform for those interested, The Athletic first reported.
Meanwhile, Latest York-listed Manchester United shares rose 18%. news on November 23 that its owners are opening up to investment opportunities in the same way. The complete takeover of the club is predicted to herald at least £5bn.
The bulk owner of the club, the American Glazer family, has had a tumultuous relationship with fans since he won a controlling stake for £790m in 2005 in a controversial, highly leveraged deal that left the club with a major pile of debt.
Beyond any personal motivations of the owners, “certain market aspects mean the timing of those sales is unquestionably not a coincidence,” Dan Harraghy, senior sports analyst at research firm Ampere Evaluation, told CNBC.
Competition for big money
Certainly one of the repeated complaints from Manchester United fans against the Glazers is the lack of investment in the club, each by way of facilities and players.
But any future increase in funding comes with the increasingly competitive field of other Premier League clubs similar to Manchester City – the majority of which is owned by Dubai’s royal Sheikh Mansour bin Zayed Al Nahyan – and Newcastle, acquired last yr by a Saudi-led investment group Saudi. Arab Public Investment Fund.
“From a financial perspective, the current owners [of Liverpool and Manchester United] will consider the level of investment that’s required to maintain up with rival clubs which have owners with deeper pockets, each domestically and in Europe,” Harraghy said, also citing Qatari-owned Paris Saint Germain.
“Middle Eastern state-funded owners allow clubs to spend big bucks on each club infrastructure and player acquisitions to proceed improving football and financial performance.”
Old Trafford Stadium, home of Manchester United football club. In November, the club issued an announcement indicating that the Glazer family, who are majority owners of the club, would “consider all strategic alternatives, including latest investment in the club, sale or other deals involving the company.”
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While the Glazers have been paying one another dividends since 2016 (although they’ve waived in ongoing ownership discussions), Manchester United reported revenue growth but £115.5m net loss in tax yr 2022, up from £92.2m net loss the previous yr.
Of their recently published results, Liverpool reported a lack of £4.8m pre-tax in the yr to May 2021 and a lack of £46.3m in 2020, with matchday revenue huge in consequence of the pandemic.
“It’s possible that those responsible now not see spending as sustainable given the level of competition they face,” Harraghy added.
The defeat of the European Super League
The implosion of 1 enterprise aimed at making a latest revenue stream for big clubs can have caused owners to query their ability to enhance profitability.
The spring 2021 announcement of a latest European Super League that might give automatic entry to fifteen founding clubs including Liverpool and Manchester United was met with such widespread criticism and accusations of extorting money at the expense of the game that it was soon cancelled.
Guaranteed income, especially from broadcast revenue over which participating clubs would have considerable control, was a key motivation for the league’s founding. The Premier League has turn into a comparatively more open competition, meaning top teams are less confident of entering tournaments like the Champions League annually, Harraghy said.
“Missing qualifying could be a significant hit to a club’s revenue,” he said.
Interest of investors
At the same time, European football has many teams “which have a brand cache and a worldwide fan base, making them highly wanted investments,” said David Bishop, partner and sports specialist at LEK Consulting.
“Sports investment activity has also suffered some post-Covid shake-up as many sports organizations and teams have come onto the market offering equity positions, often to assist manage money flow issues resulting from Covid.”
He said it helped broaden the deal flow and understanding of the space, highlighting recent equity investments in sports by investment firms including CVC, Silverlake, Redbird Capital and Dyal Capital. These include rugby union, French and Spanish football leagues, Indian Premier League cricket and sports evaluation corporations.
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“The US market, specifically MLB, NBA, NFL, is now quite mature and well-invested, so investors have also began looking more closely at US-type sports opportunities in international markets,” continued Bishop.
“In the case of Liverpool and Manchester United, each owners have held the clubs for an extended time and each assets have greatly appreciated as their leagues, brands and global fan bases have grown. Whether or not it’s a great time to purchase is kind of depending on the situation, but generally these are assets that ought to be quite resilient in the medium to long run,” he told CNBC.
Revenue opportunities
Media rights are increasingly necessary to leagues, especially international ones, and investors have seen a major increase in the English Premier League’s global audience, Bishop said.
There’s also the potential to further monetize international fan bases through experiences, merchandising and overseas matches – as seen in the reverse situation in the UK which attracts large audiences to American football and basketball matches.
Angus Buchanan, managing director of The Sports Consultancy, cited U.S. private equity funds and institutional interest in football clubs as the primary reason why Glazers and Fenway Sports Group may imagine the time is true to sell.
“Each have been successful in the ‘first phase’ of converting the value of club brands and international fans into revenue, but have experienced flattened growth lately,” 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 Jacksonville Jaguars at Wembley Stadium on October 30, 2022 in London, England. (Photo: Dan Mullan/Getty Images)
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Manchester United, particularly, has set a latest paradigm for selling broadcasting rights and forging global partnerships, from Japanese noodle maker Nissin to Middle Eastern banks.
In 2022, the Premier League’s broadcast revenue totaled higher internationally than domestically for the first time.
Harraghy said the latest owner would love to develop “Phase Two”: taking up very captivated, engaged, cross-generational fans and developing “more digital and complex” revenue strategies, using database information and going on to fans with more deals.
“They’d anticipate aggressive growth for any potential investor,” Harraghy said.
Chelsea Quick Sale
Premier League club owners watched closely the swift sale of Chelsea in May, which was carried out in a rush amid Britain’s crackdown on Russian oligarchs’ assets following Russia’s invasion of Ukraine in February. A consortium led by American investor Todd Boehly paid £4.25bn for the club (of which £1.75bn was earmarked for future investment) after the government confirmed that the proceeds wouldn’t go to previous owner Roman Abramovich.
Of particular interest will probably be the amount collected, which Harraghy called unprecedented for a Premier League club, and media reports involving up to 200 interested parties.
Analyst Angus Buchanan said the sale was likely “somewhat of a catalyst” for the November stock.
“Perhaps club owners have noticed a bit more activity in the market and now we have now a solid baseline by way of valuation and level of interest,” he said.