FT’s Business of Football Summit - takeaways

I was invited to speak at 5th Financial Time’s “Business of Football” summit which took place in London on March 1st & 2nd. The theme this year was “New Money and the Battle for Growth”.  New Money, because there is so much cash looking to be invested in football (especially from financial institutions on the other side of the Atlantic); and Battle for Growth, because given the current clubs’ valuations, one cannot help but wonder: how far can these go?

My panel was precisely on clubs’ valuations. I focused on the smaller clubs, and how to create value. There is the “traditional” way (= focus 100% on recruitment, starting with a very aligned trio of CEO/Director of Football/Head Coach, à la RC Lens, Union St Gilloise, etc) or go more “off-piste” (= focus on unique positioning, à la Forest Green Rovers aka the greenest club on Earth or Wrexham FC aka the social media phenomenon, etc).

Here are a few takeaways from the summit; my personal opinion in italics:

US institutional investors remain extremely active in the European football M&A space: compared to the average valuation of an MLS club ($579 mln in 2023, according to Forbes), most European clubs look cheap indeed. The perception is that there is still a lot of value to be created by optimising the clubs’ infrastructure (stadium/ youth academy/training centres); that monetising fan engagement can go much further in the new digital era; that broadcasting rights will continue to grow for a sport that is increasingly global thanks to the streaming and social media. However, at a panel discussing precisely how to make money out of football, all the speakers (investment banks, private equity) acknowledged that the industry needed better financial regulation (in the form of salary caps or maximum wage to revenue ratios); otherwise, one could bid farewell to the free cashflows.  

In my opinion, a well-run club should rather finish the fiscal year at flat/small positive; making profits, yes, but re-investing them in infrastructure/players/community.

Multi-club ownership (MCO)

NB: For background: according to the CIIES Sport Intelligence, 254 clubs around the world are part of an MCO structure, 85% being located in Europe. There are 103 MCOs globally, out of which 69 consist solely of two clubs, while 20 have 4 clubs or more.

While investors love the concept (on the grounds of diversification, synergies, economies of scale when it comes to back-office structures, better career opportunities for players and coaches, etc), the speakers on the clubs’ managers panel were less enthusiastic: no one wanted to be the smaller (“feeder”) club, or be subject of decisions made at group level, with little real autonomy.

A fans’ representative was also not keen, saying that in most cases, MCOs were “bad news”. On the grounds that a club’s identity often got lost on the way, that the smaller clubs would never be more than a transit area for the talented youngsters, and that belonging to a European MCO basically forbade the smaller clubs to dream about Champions League.

Very recent headlines suggest that UEFA is currently re-considering its stance on MCOs & CL participation.
Building a successful MCO is incredibly difficult. For now, I can only think of the Red Bull family as such an example. We need more time before jumping to conclusions, though.

Data, data, data

Recruiting these days is all about data and its quality. I think it’s important to add, its location too: given the current transfer fees in the Big Five leagues, smaller clubs are practically priced out of that market. They need to look elsewhere, and that means the Turkish 1.Lig, the Egyptian Premier League, Norway’s Eliteserien etc.

If I were a data provider, I’d set up shop in the “frontier” markets of football.

The fans

“Digital monetisation”, “fan engagement”, the buzzwords. Everything could be done better, was the conclusion. A club like Manchester United, with 1.1bn fans, already having its own YouTube channel, an app, and a plethora of club-branded merchandise, only generates £0.55 per follower per year (according to “The Price of Football” author Kieran Maguire); surely there is room for improvement.

What fans want though is less NFTs and more (frequent) dialogue with the clubs. They want a relationship of trust. They want the identity of their club to remain unchanged even as it aims to “go global”.  Ultimately, the most valuable fans are the “local” ones: those who go to the stadium.

Women’s football

Great comment about how to look at it: just treat it like a start-up instead of modelling everything on men’s football; start with a blank sheet, bring in experts who know how to drive the business (and what a great ROI this can be: Arsenal’s so far is 5: 1 for every £ spent). Stadia & TV audiences are on a remarkable upwards trajectory; next year’s World Cup in Australia should help sustain this momentum.

Putting money in a women’s club is a highly leveraged investment, one of the best out there, on the condition to hire the right people and pay them accordingly.

“Big 6” valuations

While Chelsea’s sale offered a true “market” level, the *theoretical* valuations of Manchester United and Liverpool were heavily debated. FT themselves had a go at it (“Lex-in-depth: How much is Manchester United really worth?” -Link here), coming up with a valuation of $1.6bn. As for Liverpool, @Swiss Ramble’s masterclass (on Twitter, Feb 21st) shows why football club valuations are more of an art than a science: depending on the method used (DCF, MMM, profit multiple, revenue multiple, etc), Liverpool FC is worth anywhere between £2bn and £4.6bn….

Personally, I am partial to the MMM (Markham Multivariate Model), which I find most accurate for the medium-sized clubs.

What has not been discussed

Sustainability (one of my favourite topics). “Going green” has a positive impact on a club’s financial situation (through savings, increased sponsoring revenues, higher fan engagement, etc).