European sports get lifeline from PE funds

Charlie Taylor-Kroll
23 September 2021

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Seeking post-pandemic certainty, European sports teams are diving into the hands of financial sponsors, inspiring an unprecedented run of form for M&A in the space. By Charlie Taylor-Kroll

Across Europe, private equity funds have been muscling in on sports team investments, with football in particular dominating deals in the sector, Dealogic data shows. Spain's top-tier division, La Liga, has attracted the largest valuation to date, with PE behemoth CVC Capital Partners taking a 10% stake in the competition for EUR 2.7bn. Of the 142 sports deals in Europe since the start of 2016, La Liga is one of three targets worth more than EUR 500m.

Year-to-date deal volumes trail last year's total by 10 deals, with failed transactions catching the most attention. The public backlash in April to JP Morgan's proposal for a breakaway European Super League was one of three similar processes caught offside.

Under pressure from its constituent clubs, Germany's Bundesliga ended talks in May with a PE consortium over a 25% stake in the firm that manages the league's broadcasting rights. For the same reason, a deal by Italy's Serie A to sell a 10% stake worth EUR 2bn to CVC, Advent and FSI Fund also was called off. The Bundesliga, though, only walked away "for now", and capital-hungry Serie A was reported last month to have returned to the negotiating table.

Nou money
Many of Europe's clubs, reeling from the cost of two pandemic-afflicted seasons and rocketing wages, need investment to survive. UEFA, European football's governing body, says teams "increasingly rely" on debt and equity injections.

Barcelona FC's wages now exceed revenue, and its debts have soared to EUR 1.35bn, forcing the Camp Nou-based club to part with legendary forward Lionel Messi. But this is not a problem isolated among elite clubs; in the UK, Championship side Derby County FC filed a notice of intent to appoint administrators earlier this week.

Given this need, PE funds are keen to get involved. Recent deals include RedBird Capital Partners' purchase of an 85% stake in French side Toulouse in June last year, and the acquisition by Velocity Sports Partners, the sports-investment arm of ALK Capital, of an 84% stake in English Premier League side Burnley in December.

Scrum cap
Rugby, too, is in dire financial straits. Covid-19 has squeezed broadcast revenue and pummelled ticket sales for a sport that already lacked football's unparalleled popularity.

However, PE funds' firepower could save the professional game. Rugby tournament Six Nations struck a GBP 365m deal with CVC to support its long-term commercial strategy, and governing body World Rugby, having hired Jefferies, Rothschild and Oakwell to explore commercial opportunities, has drawn the interest of KKR.

As in football, scepticism remains, as fans seek to protect their teams from faceless ownership groups. Silver Lake's attempt to buy a stake in the media interests of the iconic All Blacks faces bitter opposition from players.

This lesson transcends the game: PE funds must appease clients and employees alike. Attention to stakeholders will be key if the Bundesliga and Serie A deals progress. Other potential targets include Tottenham Hotspur, which has been linked in reports to the RedBird-affiliated RedBall; Arsenal, which Spotify founder Daniel Ek is courting; Real Zaragoza, which was in talks to sell a majority stake earlier this summer; and Malaga FC, also rumoured to be on RedBird's radar.

Featuring analytics by Jonathan Klonowski.