More than a third of football clubs in Europe’s “big five” leagues are funded by private capital, new research has found, a sharp change in ownership which will pose long-term questions for the game.
Chelsea, Milan, Newcastle and Atalanta are examples of teams owned entirely by private capital, in the shape of private equity funds. But according to the financial analysis firm PitchBook, 35% of top-flight clubs in England, France, Germany, Italy and Spain have acquired private investment in some form.
Private capital refers to a number of different investment models, including private equity, venture capital funds and consortiums that take on debt secured against the asset they hope to buy, so-called leveraged buyouts. Sovereign wealth funds, such as Saudi Arabia’s PIF, can also be described in this way.
What each group has in common is private ownership, which means they do not conform to the same levels of transparency as public companies, and a model that regards acquisitions as investments. Private equity funds also customarily focus on raising the profitability of their investments before selling them, and their prevalence marks a shift in the ownership model for European clubs.
PitchBook’s research shows a boom in investment and acquisition over the past two years. The report says that whereas $240m was spent on merger and acquisition deals in football in 2019, that number had risen to just under $5bn in 2022, and is potentially set to double this year, to more than $10bn.
The analysts argue that a sudden rise in demand can be explained by two factors: a growth in private equity which has led to assets under management rising from €2.1tn in 2013 to €4.6tn in 2022; and a rise in financially distressed clubs because of Covid-19.
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“Following the loss of revenue caused by the lack of matchday revenues from the pandemic, football clubs have had to find new ways to refinance their debts and strengthen their balance sheets,” says PitchBook analyst, Nicolas Moura. “Private capital players such as PE firms have seized this opportunity to enter the football market.”
PitchBook argues that the strategy for most private equity investors will be to find revenue growth and cost-cutting before looking to “crystalise” their returns within a decade. The research finds a strong correlation between a growth in PE investment and a rise in American owners in European football (the US is home to 60% of private equity finance).
“There is a typical case for PE to restructure football clubs by implementing experienced management, cutting unnecessary costs, lowering the wage/revenue structure and growing revenue in order to improve [profit] margins,” Moura says. “The timeframe is also in line with PE return horizons, as restructuring and rebuilding a football club can take several seasons before results are crystalised. PEs also typically look to crystalise their investment returns within seven to 10 years.”
