Why private equity groups are rushing into football like never before
This week in the business of sport: Sabrina Ionescu on basketball’s gender pay gap, Olympic groups’ financial hedge against Games cancellation, and more.
Nothing better shows how the attitude of the world’s financial power brokers has changed towards football than the latest deal in the sport, writes Kaye Wiggins, the FT’s private equity correspondent in a special dispatch for Scoreboard.
The Bundesliga, German football’s top league, is seeking to sell an up to €300m stake in a new company that will sell its international broadcast rights — though not its more valuable domestic TV deals.
What’s remarkable is that more than 20 private equity firms have expressed interest in the tender. For the full list of companies circling a Bundesliga investment, read the FT’s exclusive report here.
Many buyout groups involved have little or no record of sports deals, but there are exceptions.
CVC Capital Partners is spending big on rugby and buying into Italy’s Serie A, having previously owned Formula One and MotoGP
Silver Lake helped the US talent agency Endeavor acquire Ultimate Fighting Championship franchise and last year acquired a stake in City Football Group, the parent company of Manchester City.
But further private equity interest is ramping up, for a few reasons.
Rival dealmakers are looking enviously at how CVC pioneered a strategy of buying the entire competition, not just the clubs (the latter, as Elliott Management’s rocky ownership of AC Milan shows, can be tough to make money from) and want in. Call it football “FOMO”.
They’re also under pressure to get money out of the door. Years of low interest rates have led investors — pension funds, sovereign wealth funds, rich family offices — to allocate ever higher sums to private equity in the hope of bigger returns.
Meanwhile, leagues, hit hard by the coronavirus pandemic, are in need of cash.
“Football always used to be super self-sufficient,” one private equity dealmaker said. “Now everyone’s under pressure and they need liquidity.”
That is leading leagues to set up structures that, for the first time, private equity groups see as investable. In the case of Serie A and the Bundesliga, they are creating separate companies that control their media rights.
This trend has its limits. Traditional buyout groups raise money, while charging hefty management fees, by saying they are good at running companies. That’s not the same as buying a small chunk of a league that will continue to be run by others.
“We’re not paid to take minority stakes,” another dealmaker said. “We can do it by exception [but after a while] our LPs will say, you’re supposed to be control investors.”