Investment funds in control of football clubs as varied as AC Milan, Burnley, Toulouse and Caen. What is their interest and how has financing football changed over the years?
“Investment funds are only there for business. They have no business [being involved] in football!” Last April, these comments from Christophe Dugarry, part of the French team that won the World Cup in 1998 and the European Championship two years, made the pages of sports daily L’Équipe. And they sparked a lot of debate. The former striker, who has become one of the most vociferous voices in French sports media (even if he has taken a step back in recent months), hardly appreciated seeing American investment fund King Street withdraw its financings of Girondins Bordeaux a few days earlier–Bordeaux is the club where Dugarry started his professional career, returning for three seasons in 1999. The King Street shenanigans placed the club in a precarious financial situation.
But the thoughts of the former of Canal+ and RMC start consultant was not only emotional. His criticism is certainly not isolated. One might even say that it reflects a trend shared by a many in the football world–the “it was better in the good old days” brigade–who sometimes has a little trouble accepting some modernisation of a sport steeped in 150 years of tradition. They are especially critical when it comes to financing and recent roll-out of investment funds involved in football clubs all over Europe.
From local businessmen to billionaires
“Historically, there have always been people willing to invest in football clubs. But they were not investment funds. Simply because these clubs were not considered economic investments,” explains Dan Jones, leading partner of the sports business group at Deloitte UK. This refers to an increasingly distant time when clubs were owned by “local” businessmen, often fans of the team in question or people who enjoyed using the sport to make business connections.
“It was a time when clubs spent all the profits they had made over a season. But the owner knew that after 5, 10 or 15 years at the head of a club, he would always find someone to succeed him. And that he would get his money back on the (re)sale,” says the Deloitte specialist. “It is a phenomenon that has not diminished over the past 20 years, with the increase in football revenues. And especially the TV rights phenomenon. Before the emergence of covid, there was never more money in football than there is today.”
In a market that has continued to grow, clubs have constantly been looking for resources to increase their capital. We have gone from local owners to millionaires, and on to billionaire investors that are no longer private individuals.
And the investment funds started to get passionate about football. “By nature, they are not interested in operations where they lose money each year. This was historically the case for football. Except that, in recent years, the arrival of these funds has been favoured by several elements. First of all, there’s never been so much money at stake, as I said before.
In addition, the management of the clubs has also progressed and is now much more professional. And then, there is another important fact that has entered the fray: the arrival of ‘financial fair play’ imposed by the European federation [UEFA]. It has put in place financial controls that we have never seen before in this sport.”
So, all of this has created an ideal breeding ground for attracting investment funds.
What is more, they have also taken a keen interest in one particular way to make their investments in football profitable: the policy of transfers, or player trading. They buy (or train) young talent with huge potential, letting them develop and then explode, before selling them at a nice surplus value. It’s one way make a lot of money. The ultimate example is certainly French international Kylian Mbappé, who arrived at Monaco at the age of 14 and was resold in 2017 by the Monegasque club to PSG for a sum estimated at €180 million .
That is a sum that may seem small when you look at the billions of dollars that some investment funds are making. But it still constitutes a nice added value given the investment generally required to become a major shareholder in a professional club. As an example, a few weeks ago, L’Équipe, which is generally a reliable source, explained that the owners of Saint-Étienne would be willing to sell the club for €20 million. A price that is particularly low for a French Ligue 1 team. Two years ago, OGC Nice fell into the hands of Monaco-based British billionaire Jim Ratcliffe, chairman and CEO of the Ineos chemicals group, for an amount estimated to be over €100 million. This was the largest amount ever invested in a football club in France.
Outside of France, the numbers can be a little more alarming. In 2017, for example, a sum of €740 million was mentioned for the purchase of Italian giants AC Milan (previously owned by Silvio Berlusconi) by Chinese investors. And in some other cases, clubs can change hands for in excess of a billion euros.
“On the European market, clubs are available at all sorts of prices,” says Jones. “If you want to take control of a [so-called] ‘Super League’ club, the crème de la crème, you are, indeed [talking about] billions of dollars. But many [investors] are interested in lower-level clubs.”
And the analyst evokes three different possible strategies for a fund engaging in a football club. “The level you want to invest has an influence on the price you will have to pay to acquire the club. Just as it also induces different risks and rewards in terms of future expectations. Buying a ‘Super League’ club is very expensive, as I was saying, but with it comes the assurance of maintaining a strong position in European football, and thus of getting the revenues that this implies. You can also decide to invest in a lower-level club in one of the major European championships. This involves the idea of growth and development so that the club will eventually get a place in European competitions, and the significant revenues that flow from them. Let’s take an example: if you buy a team that is 12th in England and you manage to break into the top 4, you will then have the return you dream of! Finally, we also saw quite a lot of funds take the reins of clubs playing in D2, especially in France. This may come as a surprise, but their goal is simply to gain access to the national elite.” Where they will then be entitled to much higher TV rights.
So, there are very different situations depending on the level you want to invest in. But the conclusion is always pretty much the same: to succeed financially, you must shine on the pitch! This is the best way to increase the value of the club you have acquired. Athletic success is often pitted against financial success, when in reality the two move forward together.”
A way of looking at things not really in line with that stated a few weeks ago by Christophe Dugarry. He, like many others, may well have to see reason: investment funds are certainly in the place for the short term, at least. Buying low to sell high is one of the philosophies of these funds. And given the current general economic situation of football, opportunities to take control of clubs at a good price are likely to increase. With the hope of seeing enrichment materialise later…