How would a private equity firm invest in the English Football League?
Private equity firm, CVC Capital Partners (CVC), has had a relatively long affiliation with sport including Moto GP and Formula One. Now the buyout firm is developing an investment model that takes minority stakes in other sporting competitions, exemplified by their acquisition of a 27% stake in Premiership Rugby in December 2018, 28% of Guinness Pro14 in May 2020 and their current negotiations to buy into the Six Nations. An area CVC are increasingly interested in is football and in particular the European football market which saw revenues totalling €28.9 billion in the 2018/19 season. At the time of writing, CVC and Advent International have joined forces to take a minority stake in Serie A (the top-tier of the Italian football league), having also previously been in discussions with FIFA about a revamped Club World Cup and with Real Madrid regarding a breakaway global league.
This article examines whether a CVC-style private equity (PE) investment model can be replicated in the English Football League (the EFL), being the lower (below Premier League) levels of English football. Specifically, it looks at:
- why PE funds are interested in sports leagues
- examples of PE investments into sport
- characteristics of the PE investment model for sport
- some of the key negotiation points for a hypothetical PE investment into EFL
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- Tags: Broadcasting | Commercial | Corporate | English Football League | Football | Formula One | Governance | Italy | Private Equity | Regulation | Rugby Union | Seria A | UK
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Sam joined Harbottle and Lewis as a trainee solicitor in August 2019 and is currently sitting in the Commercial Litigation department, having previously spent time in the Corporate department. He has experience in dealing with commercial agreements for clients within the sports industry.
Thank you for taking the take the time to write such a thought-provoking article.
I think one of the main concerns for PE firms (at least in the short to medium term), is the minimal attendance figures. Whilst this may not be such an issue for teams in Serie A, I believe that teams in Premiership Rugby and the EFL are likely to feel the force of this due to the smaller broadcasting fees that the leagues and the respective clubs, benefit from.
Significant PE firms will have the funds to not be too reliant on the income in the short to medium term. However, income will be a key element for the smaller PE funds with a more limited warchest.
It will be interesting to see how certain governments (particularly the UK) intend to encourage fans to return to live matches. The COVID-19 awareness campaign has been very thorough, but my concern would be that some attendees would still be discouraged from returning, more worryingly those fans who are vulnerable or disabled.
On another point, I think that if acquiring smaller stakes in clubs becomes an increasing phenomena, then there will be concerns (at a regulatory level) that the 25% stake could become a conflict of interest (for example, a PE acquires a 25% share in each club in Serie A). It will be interesting to see whether there will, in time, be an expansion of the fit-and-proper person test by lowering the percentage of shares that must be owned by an entity. Hopefully not!