Private equity has been in the sports world for several years now, but the European Super League fiasco has shed more light on team and competition funding than ever.
“There has been a massive and very powerful push towards the announcement of the European Super League. It is not supported by the EP, but it put the financial investment in sport in a rather negative light,” he said. said Dan Parr, Commercial Director of InSport Education.
“But given some of the challenges that currently exist in the world of sport, private equity will play an important role in helping rights holders and teams meet the challenges of the pandemic and position themselves well for growth and development. futures in the modern world of sports and entertainment, âhe said.
The most publicized transactions of recent years are those of CVC Capital Partners Investment of Â£ 365million in Six Nations Championship, and Silver Lake’s $ 500million stake in Manchester City football club owner. Both were for minority stakes.
Silver Lake also recently made a $ 270 million offer for a 12.5% ââstake in the commercial rights of the famous New Zealand All Blacks rugby team, which was met resistance both fans and players. In fact, New Zealand rugby has agreed to meet with the country’s Rugby Players Association to discuss a possible float of public shares instead.
But the involvement of private equity in sport goes far beyond these headline-grabbing deals. US investment group Oaktree Capital took over struggling French club of Caen Last year; The Italian football club Catania has been acquired by Sport Investment Group Italia; US women’s basketball team Atlanta Dream has been sold to Northland Investment; and the South African rugby team The Sharks was acquired by MVM Holdings.
According to Adam Sommerfeld, managing partner of Certus Capital, many of the transactions that take place behind the scenes do not involve controlling stakes. Instead, most clubs choose to sell minority stakes, preferred stock, or debt transactions, where they retain management control.
Meanwhile, the failure of the European Super League has helped raise some uncertainty for private equity buyers, according to Sommerfeld, who worried potential investors in some deals he worked on following rumors.
Mark Yeo, partner at Squire Patton Boggs, also added that debt-only games have become more prevalent as some private equity firms see an opportunity to be somewhere between a bank and a traditional buyout group, in terms of interest rate offered on their debt.
“This model offers sports companies a way to access money at a lower price than that offered by traditional retirement homes, but without feeling psychologically that they are giving a piece of the pie,” he said. -he declares.
But, some fans will still be concerned that a club will accept such loans, given the leverage that a lender can exert on the club. âWhat if a payment isn’t made on time, then does the lender have some control or some leverage?
âFans may fear that the lender may ultimately put the club under administration if they are not paid back. You wouldn’t have this concern without this debt. But if they don’t get an investment, they might not have a club, âYeo added.
There is so much activity right now because now is a great time for private equity to invest in an industry that is only set to grow. Many teams and organizations have been hit hard by Covid-19 and the restrictions that have accompanied it.
This created an outside investment opportunity, necessary to support clubs unable to generate the expected income for months, and lowered prices. Clubs that may have previously shunned private equity are now open to him.
Although there have been some that have rejected the attention of private equity, such as the German Bundesliga. CVC Capital Partners, Bridgepoint, Intermediate Capital Group and KKR have reportedly been among the bidders for the league’s international media rights, according to the Financial Time. But last week, football clubs in the country’s top two divisions voted against a deal.
Fans weren’t so forgiving either.
Private equity’s reputation as a vulture fund that strip assets to their bones and then sell them for profit has raised concerns among fans who don’t want buyout groups in control of their sports. favorite.
This fan outcry over private equity ownership should be tested further, particularly in European football, as US buyout funds enter the fray to shift attention from the game itself to the game. entertainment.
For Darren Bailey, consultant at the Charles Russell Speechlys law firm, there is an unprecedented battle between the American model and the European model of sports mixing. In the United States, the focus is more on the profitability and entertainment value of games, and this approach is expected to create tensions.
Yeo agrees. âMany physical education houses in the United States believe they have a sophisticated model and strategy for marketing sport and football,â he said.
âMany of these people have worked in organizations like the NBA, NFL, MLS and MLB and can see opportunities in European sport to improve business income, including by leveraging more of the women’s team, putting together an e-sports team and other ideas on how the company can do better commercially to increase the value of what it invests in. ‘
Regulatory change on the horizon
Many agree that this increased focus from private equity and discussions regarding the European Super League will lead to some regulatory changes.
âThere is a wave of interest in the campaign for better regulation of football club ownership right now,â Yeo said. âThe sport will want to find a balance between making sure there is more control over who can invest in clubs and how they can do it, while also making sure it is not too closed and difficult to find investors and owners. “
He added: âFrom an investor’s perspective, he will ensure that his list of potential exit contenders is not drastically reduced in order to make the proposed initial investment less attractive. If club ownership is properly and fairly regulated, the whole football environment will be more stable.
But any regulatory change should not completely block investments in the sport, according to Parr. Private equity can provide access to much-needed capital for organizations, in addition to providing expertise and management skills that can help propel businesses forward, Parr said.
“I think in a lot of sports history and tradition play an important role, but they can also be an obstacle to progress and there is a general resistance to change in sport and often you need an agency external to come and make a big difference and bring about this change that cannot be achieved internally, âhe added.
‘They [private equity] can, and that’s not necessarily a bad thing. What ESL has shown us is that fan power and respect for history is important and needs to be considered and should be part of this process.
âBut that should not be allowed to impede the progress and evolution and development of sports, teams and organizations. Private equity has a huge role to play, it can play a positive role if delivered and managed with the right incentives in mind. ‘