Why two legendary soccer golf equipment are on the market on the identical time

LONDON – Two of the biggest and most profitable football teams in the world are on the market at the same time – and it’s no coincidence, according to analysts.

In November, the owners of first Liverpool and then Manchester United confirmed they were open to new investment offers, with the potential for the outright sale of the English top-flight clubs.

Liverpool’s owners, US sports conglomerate Fenway Sports Group, are believed to have invested a total of around £3.3bn ($3.97bn) in the club, 12 years after acquiring it for £300m had. Goldman Sachs and Morgan Stanley have prepared a sales deck for prospects, The Athletic first reported.

Meanwhile, New York-listed Manchester United shares surged 18% on Nov. 23 on news that its owners would similarly open up to investment opportunities. A full takeover of the club is expected to bring in £5billion or more.

The club’s majority owner, the American Glazer family, has had a tumultuous relationship with fans since acquiring a controlling stake for £790million in 2005 in a controversial, heavily leveraged deal that added the club to a sizable mountain of debt.

Personal motivations of the owners aside, “certain market factors mean the timing of these sales is certainly no fluke,” Dan Harraghy, senior sports analyst at market research firm Ampere Analysis, told CNBC.

competition for big money

A recurring complaint from Manchester United fans about the Glazers is a lack of investment in the club, both in facilities and players.

But any future increase in funding comes in an increasingly competitive field from other Premier League clubs such as Manchester City – majority-owned by Dubai’s Royal Sheikh Mansour bin Zayed Al Nahyan – and Newcastle, which was acquired last year by a Saudi-led investment group was taken over Arab Public Investment Fund.

“From a financial point of view, the current owners [of Liverpool and Manchester United] will take into account the level of investment needed to compete with competing clubs with owners with deeper pockets both domestically and in Europe,” said Harraghy, also citing Qatar’s Paris Saint Germain.

“State-funded Middle Eastern owners allow clubs to spend big bucks on club infrastructure and player acquisition to further improve their footballing and financial performance.”

Old Trafford Stadium, home of Manchester United Football Club. In November, the club released a statement saying the Glazer family, who are majority owners of the club, “will consider all strategic alternatives, including new investments in the club, a sale or any other transaction involving the company is”.

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While the Glazers have paid themselves through dividends since 2016 (although they have halted payments amid the current ownership discussions), Manchester United reported an increase in revenue but a net loss of £115.5m for FY2022, down from a net loss of 92 .2 million pounds last year.

In its most recently released results, Liverpool reported a pre-tax loss of £4.8m for the year to May 2021 and a loss of £46.3m in 2020, with the pandemic wiping out matchday revenue.

“It’s possible that given the competition they face, leaders may no longer see spending as sustainable,” Harraghy ​​added.

Failure of the European Super League

The implosion of a company designed to create a new revenue stream for big clubs could have left owners questioning their ability to improve profitability.

The announcement of a new European Super League in spring 2021, which would automatically allow 15 founding clubs including Liverpool and Manchester United entry, was met with such widespread criticism and accusations of greed at the expense of the game that it was soon pulled.

The guaranteed revenue, particularly from broadcast revenue over which participating clubs would have had significant control, was a key motivation for the league. The Premier League has become a relatively more open competition, meaning top teams are less certain of competing in tournaments like the Champions League every year, Harraghy ​​said.

“Failing to qualify can have a significant impact on a club’s income,” he said.

investor interest

At the same time, European football has numerous teams “that have a brand cache and a global fan base, making them very desirable investments,” said David Bishop, partner and sports specialist at LEK Consulting.

“Investing activity in sports has also gotten a bit of a jolt post Covid as many sports federations and teams have come into the market to offer equity positions, often to help deal with cash flow issues arising from Covid.”

This has helped expand deal flow and understanding of the space, he said, citing recent capital commitments to esports by investment firms including CVC, Silverlake, Redbird Capital and Dyal Capital. These include rugby, French and Spanish football leagues, Indian Premier League cricket and sports analysis companies.

“The US market, especially MLB, NBA, NFL, is now quite mature and well invested, so investors have also started to look more intensely for US-like sports opportunities in international markets,” Bishop continued.

“In the case of Liverpool and Manchester United, both owners have held the clubs for a long time and both assets have grown significantly as their leagues and brands and their global fan bases have developed. Whether it’s a good time to buy is pretty much questionable situation-specific, but in general these are assets that should be quite resilient over the medium to long term,” he told CNBC.

revenue opportunities

Media rights are of growing importance to leagues, particularly internationally, and investors will have noticed the significant growth in global audiences for the English Premier League, Bishop said.

There is also potential for further monetization of international fan bases through experiences, merchandise and matches abroad – as seen conversely in the UK which attracts large audiences for American football and basketball matches.

Angus Buchanan, chief executive of The Sports Consultancy, also cited US private equity and institutional interest in football clubs as a key reason Glazers and Fenway Sports Group may believe it’s a good time to sell.

“Both have been successful in ‘phase one’ in converting club brand equity and international fan bases into revenue but have seen flattening growth in recent years,” he said.

LONDON, ENGLAND – OCTOBER 30: Jerry Jeudy #10 of the Denver Broncos runs for the touchdown against the Jacksonville Jaguars during the second quarter of the NFL game between Denver Broncos and Jacksonville Jaguars at Wembley Stadium on October 30, 2022 in London, England . (Photo by Dan Mullan/Getty Images)

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Manchester United in particular has set a new paradigm in terms of broadcast rights sales and global partnerships, from Japanese noodle maker Nissin to banks in the Middle East.

In 2022, Premier League broadcast revenues were higher internationally than domestic for the first time.

A new owner would seek to develop “phase two,” Harraghy ​​said: taking highly intrigued, engaged, cross-generational fan bases and developing “more digital and sophisticated” revenue strategies, leveraging database information, and going direct to fans with more offerings.

“You would be projecting some aggressive growth numbers to any potential investor,” Harraghy ​​said.

Chelsea snap sale

Premier League club owners will have been watching closely the rapid sale of Chelsea in May, which was enforced in the wake of a British crackdown on Russian oligarchs’ assets following Russia’s invasion of Ukraine in February. A consortium led by US investor Todd Boehly paid £4.25bn for the club (with £1.75bn earmarked for future investment) after the government confirmed the proceeds would not go to previous owner Roman Abramovich would go.

The sum raised, which Harraghy ​​described as unprecedented for a Premier League club, and the media reports from up to 200 interested parties may have been of particular interest.

Analyst Angus Buchanan said the sale was likely “something of a catalyst” for November’s action.

“Perhaps club owners have seen a bit more activity in the market and now there is a firm reference point in terms of valuation and interest,” he said.