By Jenni Reid -
CNBC
Two of the biggest and most profitable soccer teams in the world are up for sale at the same time, and it's no coincidence, analysts say.
In November, the owners of Liverpool and then Manchester United confirmed that they were open to further investment offers, with the possibility of selling English top division clubs outright.
Liverpool's owner, US sports conglomerate Fenway Sports Group, is believed to have put the entity's total value at around 3.3 billion pounds (about 3.97 billion dollars), 12 years after acquiring it for 300 million pounds.
Goldman Sachs and Morgan Stanley have prepared a sale offer for those interested, according to The Athletic.
On video: Two fans jump off a bridge to fall into the bus of the Argentine team
Dec 20, 202201:09
For its part, the shares of Manchester United, which are listed in New York, shot up 18% when it was learned on November 23 that their owners were also opening up investment opportunities.
The total acquisition of the club is expected to reach 5 billion pounds or more (about 6 billion dollars).
The club's majority owner, the American Glazer family, has had a tumultuous relationship with fans since taking a majority stake in 2005 for £790 million (nearly $1 billion), in a controversial deal that added significant debt to the club
Regardless of the owners' personal motivations, "certain market factors will make the timing of these sales not a coincidence," Dan Harraghy, a senior sports analyst at market research firm Ampere Analysis, told CNBC.
Competition of great fortunes
A recurring complaint from Manchester United supporters towards the Glazers is the lack of investment in the team, both in facilities and players.
[Why do so many believe a recession is looming in 2023?]
But any future increase in funding comes in an increasingly competitive field of other Premier League clubs such as Manchester City - majority owned by Dubai royal Sheikh Mansour bin Zayed Al Nahyan - and Newcastle, acquired last year by an investment group led by the Saudi Arabian Public Investment Fund.
“From a financial point of view, the current owners [of Liverpool and Manchester United] will consider the level of investment needed to keep up with rival clubs, whose owners have deeper pockets, both at home and in Europe. ”, says Harraghy, also citing the Qatari-owned Paris Saint Germain.
“State-funded Middle Eastern owners allow clubs to spend big on both club infrastructure and player acquisition to further improve their football and financial performance,” he adds.
While the Glazers have paid themselves through dividends since 2016 (although they have abandoned the payments amid ongoing ownership discussions), Manchester United reported an increase in revenue, but £115.5m (about $138 million) net loss for fiscal 2022, from a net loss of 92.2 million pounds ($110 million) the prior year.
At least 27 states in the country will increase minimum wages in 2023
Dec 22, 202201:45
In its most recent results, Liverpool recorded a loss of 4.8 million pounds (about 6 million dollars) before taxes until May 2021 and 46.3 million pounds (about 55 million dollars) in 2020, due to the pandemic. that affected the income of match days.
“Policies may no longer see the spending as sustainable, given the level of competition they face,” Harraghy added.
Failure of the European Super League
The implosion of a company that wanted to create a new source of income for the big clubs could have contributed to owners questioning their ability to improve profitability.
The announcement of a new European Super League in spring 2021, which would give automatic entry to 15 founding clubs including Liverpool and Manchester United, was met with such widespread criticism and accusations of money-raising at the expense of gambling that it soon it was cancelled.
Guaranteed revenue, particularly from broadcasts, over which the participating clubs would have had significant control, was one of the main motivations for the league.
The Premier League has become a relatively more open competition, meaning the top teams are less assured of entry into tournaments like the Champions League each year, Harraghy says.
[Non-payment car repossessions on the rise in the US, leaving thousands of families without transportation]
“Missing out on qualification can be a huge blow to a club's revenue,” says Harraghy.
Investor interest
At the same time, European soccer has numerous teams “that have a cachet of brands and a global fan base that makes them highly sought-after investments,” says David Bishop, partner and sports specialist at LEK Consulting.
“Investing activity in sport has also received a bit of a jolt after COVID-19, as many sporting bodies and teams have come to the market offering equity positions, often to help manage liquidity problems stemming from COVID-19” , precise.
This has helped broaden deal flow and understanding of the sector, he says, pointing to recent equity investments in the sport by investment firms such as CVC, Silverlake, Redbird Capital and Dyal Capital.
These investments span rugby union, the French and Spanish soccer leagues, Indian Premier League cricket, and sports analysis companies.
Argentina national team suspends its celebration by land due to security failures
Dec 20, 202200:45
“The US market, particularly the MLB, NBA and NFL, is now quite mature and well-invested, so investors have also started looking more diligently for US-style sports opportunities in international markets,” Bishop continues. .
“In the cases of Liverpool and Manchester United, the two owners have held the clubs for a long time, and both assets have seen significant appreciation as their leagues and brands and global fan bases have developed.
Whether it is a good time to buy or not depends on each situation, but in general these are assets that should be quite resilient in the medium and long term, ”he told CNBC.
income opportunities
Media rights are increasingly important to leagues, particularly internationally, and investors will have seen the significant growth in the English Premier League's global audience, says Bishop.
There is also potential to further monetize international fan bases through overseas experiences, merchandising and matches, as is being seen the other way round in the UK, which is attracting huge audiences for American football and basketball matches. .
Angus Buchanan, managing director of The Sports Consultancy, also cited the interest of American private capital and institutions in soccer clubs as one of the main reasons why the Glazers and Fenway Sports Group might consider that now is a good time to sell.
[Credit cards: an expert explains how to handle them]
Both have been successful in 'phase one' of converting club brand value and international fan bases into revenue, but in recent years have seen growth level off.
Manchester United, in particular, set a new paradigm in terms of broadcast rights sales and global partnerships, from Japanese noodle maker Nissin to Middle Eastern banks.
In 2022, Premier League broadcast revenue surpassed domestic for the first time.
A new owner would look to develop “phase two,” Harraghy said: take highly captivated, engaged and intergenerational fan bases and develop “more digital and sophisticated” revenue strategies, using data from databases and directly targeting fans with the most offers.
“They would project aggressive growth numbers to any potential investor,” says Harraghy.
Chelsea rush to sell
Owners of Premier League clubs will have been closely following the quick sale of Chelsea in May, which was precipitated amid a UK crackdown on the assets of Russian oligarchs following Russia's invasion of Ukraine in February.
A consortium led by US investor Todd Boehly paid £4.25bn ($5.12bn) for the club, with £1.75bn ($2.1bn) earmarked for future investment, after the government confirmed the proceeds would not go to stop the previous owner, Roman Abramovich.
How to avoid getting into debt during the holidays and enjoy on a limited budget?
Dec 7, 202204:02
Of particular interest will have been the amount reached, which Harraghy called unprecedented for a Premier League club, and media reports from as many as 200 interested parties.
Analyst Angus Buchanan said the sale was probably "somewhat of a catalyst" for November's action.
"Perhaps the club owners have seen a bit more activity in the market, and now there is a fixed benchmark in terms of valuation and the level of interest," he said.