It is the most wonderful time of the year for football fans. English Premier League, LaLiga and Serie A games are once again a weekend fixture, while weekday evenings (or afternoons in the US) are reserved for the Champions League. The best star-studded European tournament begins its third week with two crucial matches on Tuesday: Qatar-owned Paris Saint-Germain will face Manchester City, backed by Abu Dhabi. At the same time, AC Milan, backed by Elliott Management Corporation, will face last year’s La Liga champions Atletico Madrid, whose 34% stake was acquired by Ares Management Company in June for $ 212million. of dollars.
These matches, if not the tournament, represent a significant opportunity for private equity firms to prove the skeptics wrong. “Football is a tricky business for private equity firms with relatively short-term investment horizons,” said a Brazilian PE analyst who has followed similar deals and asked to remain anonymous during a briefing. telephone interview with Sporty. “Putting together a team can take longer, perhaps more than a decade, and governments have been known to step in to protect such a public good. There is nothing really new here; let’s not forget Hicks Muse and his investments in football in Brazil.
Due to COVID-19, the sports industry has suffered unprecedented revenue losses since World War I. In Europe, the toll of the pandemic on football is estimated between 5 and 8 billion dollars for 2021-2022, according to the consulting firm KPMG. Last May, Statista released a report indicating that the U.S. sports industry could lose more than $ 8 billion in revenue due to non-existent ticket sales, sports-related tourism and lost television revenue. While this has been a difficult time for sports teams, it has provided an opportunity for private equity firms around the world.
Take, for example, AC Milan. Having failed to qualify for the Champions League in each of the past five seasons, plagued by match-fixing scandals and mismanagement, the club were seen as risky for investors. According to SemperMilan.com, the team’s official website, New York-based Elliott Management Corporation, has spent more than $ 800 million since acquiring a 99.93% stake in AC Milan in 2018. Meanwhile, Ares , based in Los Angeles, has invested in a more promising club: Atletico Madrid have won their second league. title in over 20 years last season, beating Real Madrid and FC Barcelona. The Spanish club were still under pressure from COVID-related losses but remain in a stronger position than their Italian rivals.
Considering the Champions League’s total purse – $ 1.285 billion to be divided among the 32 clubs – simply hosting this year’s tournament will provide some financial relief to the clubs involved, but that still isn’t enough to allay investor concerns about short-term returns. At best, clubs can make $ 99 million. In addition to the cash prize, the clubs also share the $ 350 million in broadcast revenue, according to UEFA, the governing body of European football. Even with this additional income, AC Milan and Atletico Madrid will still need the help of their investors to survive the season. Last November, Goal reported that Atletico Madrid’s debt reached $ 1.2 billion at the end of the 2019/2020 season. ACMilan reported $ 226 million in losses for the same period.
The past 18 months, however, have done little to deter private equity firms from betting on football. Most recently, Miami-based 777 Partners acquired Serie A Genoa Cricket and Football Club for $ 175 million, months after acquiring a 15% stake in Spain’s Sevilla. Meanwhile, where some companies have invested in clubs, CVC Capital Partners has decided to buy into the league itself. The company signed a deal to invest $ 2.7 billion in Spain’s La Liga, even though the league’s top clubs were unwilling to be part of the deal. Last month, 38 of the 42 teams that make up the league voted in favor of the investment. The company plans to strengthen the league, focusing on smaller clubs, hoping to close the gap between them and top teams by “investing in brands, fan experience, class infrastructure. global and digital development “.
“What is driving this increased interest? Huge revenues, ”said Salvatore Galatioto, president of Galatioto Sports Partners, in a telephone interview. “There is no business like the sports business. People are more likely to change their religion before changing sports teams. Half of the Fortune 500 companies that existed in 2000 no longer exist. But sport, as the pandemic has shown us, has been remarkably resilient. I’ll tell you the New York Yankees will still be here 100 years and the Apple computer won’t, ”he said.