The recently reported interest by Italian private equity house Clessidra for Serie A heavyweight AS Roma will come as a surprise to many – especially those that question whether the private equity model is really suited to football club investments. Emanuel Eftimiu takes a closer look.

One has to go as far back as 1997 to come across an example of a private equity house investing in a football club. In that instance Charterhouse Development Capital in the UK invested £15.6m for a 36% equity stake in the then Premiership club Sheffield Wednesday; the same year Electra Fleming also acquired a 25% shareholding in Derby County for £10m. Both investors subsequently had to write off their investments when the clubs hit financial troubles.

Since then private equity funds' involvement with clubs has been limited. Instead the segment has strictly been the preserve of international billionaires and other high-net-worth individuals, some of whom have actually completed private equity-style buyouts. In 2005 the Glazer family acquired Manchester United in a highly-leveraged transaction, while in 2007 US buyout veteran Tom Hicks took joint control of Liverpool FC - the club which had also attracted interest from Dubai International Capital. Applying the private equity buyout model, though, is proving to be problematic in both cases, as the Glazers as well as Hicks and his joint owner George Gillett are haunted by the original leverage used to carry out the acquisitions.

Indeed, as Keith Harris, chairman of investment bank Seymour Pierce, highlights, the incompatibility of football clubs and leverage is one of the major reasons behind the fact that the private equity model is bound to fail in the sport. "The cash flows are unpredictable. The industry therefore doesn't lend itself to excessive leverage - in fact, arguably not very much leverage at all".

What is more, while private equity prides itself on selecting the best management team for its portfolio companies, holding them accountable for the success and failure of the business, the accountability of management in the football industry is very different. "In football the people that are critical to the success of the club, i.e. coaches, training staff and the like, are far removed from the management of the business. But ultimately they are the ones who influence spending on the playing squad," notes Harris.

In fact, the impact the chief executive can have on the income the club generates is actually rather limited. As Harris points out 50-60% of income at a top flight football club stems from media revenues, which are centrally negotiated - in this instance by the Premier League or Football League. And while these revenues are in a way inherited by a new CEO, so is the biggest cost factor: the wage bill. "If you look at the Premiership there are maybe one or two clubs that control their wage costs, the others go along with the flow. It's a wonderful business if you are a player or an agent but not necessarily if you are an owner," notes Harris.

That said, as with any asset it comes down to purchase price and as Harris admits one can make money from owning a football club. "One should not generalise. If you buy at the right multiple, are prepared to nurture the club and take a view that digitally derived revenues are yet to become a dominant force in say seven to ten years, there is a margin to be earned on that."

Clessidra might be doing just that as it is reported to be joining UniCredit and pharmaceuticals company Angelini to hold equal shares of up to 67% in AS Roma. The club's current market value of some €150m is only half of what it used to be before the financial crisis, while it ranked 12th in the Deloitte's review of the world's top earning clubs with revenues of €146.4m.

One thing is certain: the popularity of football has arguably never been higher and nor has the sheer weight of capital tied up in the sport been as great. And while the form book suggests that private equity players have more chance of scoring an own goal than a win, there may yet be ways of making investments in the sport work. After all private equity investors have a deserved reputation of being resourceful goalmouth poachers...