Global investors chase smaller European teams to cash in on soccer boom
Sitting mid-table in Spanish football’s second tier, Sporting Gijón play in a different financial league to Chelsea FC and AC Milan, elite sides that fetched record prices earlier this year .
Yet clubs like Sporting in the northern coastal city of Gijón are now at the forefront of a wave of international investment chasing teams outside Europe’s top five leagues. In June, the club was bought by Grupo Orlegi, a Mexican investment fund seeking to build a global network of sports teams, for around 40 million euros.
“It’s not a question of size,” says Alejandro Irarragorri, a former metals trader who founded Orlegi. “We looked at the first division teams, but none of them gave us the potential for the future of Gijón.”
He plans to turn the team’s youth academy into one of the best in Europe, a popular strategy among investors. “I’m sure in the weeks and months to come you will hear about Sporting in a very different way,” he says.
The Sporting Gijón takeover is just one of many recent deals involving clubs from smaller leagues, with the stakes changing hands at teams in Portugal, Belgium and the Netherlands, and in the lower divisions of Spain, France and England.
Each country offers something slightly different. Portugal is a hotbed to develop players and sell them for profit, Spain’s strict spending limits have kept costs down, while in England some are chasing the dream of reaching the Premier League.
But the target clubs often share certain characteristics such as up-to-date infrastructure, the possibility of rapid promotion, an established youth development system – and proximity to a place where foreign investors might like to spend a lot of time. For example, Venezia in Italy’s Serie B is controlled by former NYSE chief executive Duncan Niederauer.
“American investors have a fundamental thesis that European football is commercially undervalued,” said Tim Bridge, senior partner in the sports business group at Deloitte, adding that little league teams come at a price that many find “ quite convincing.”
Last month Mark Attanasio, owner of the Milwaukee Brewers baseball team, bought a minority stake in Norwich City, a second-tier English club, while Vitesse Arnhem in the Dutch league was taken over by Common Group, a New York-based investment group.
Club Deportivo Leganés, a second-tier Spanish team, was bought in June by Blue Crow, a Texas-based investment fund led by Jeff Luhnow – the former general manager of Major League Baseball’s Houston Astros, who left the sport following a cheating scandal. Local press claim the takeover valued the club at just under €40m.
“The cost of buying into a big five team is quite high – we knew that was not the aisle where we would be shopping,” says Luhnow, whose investment fund also owns the Mexican team of the Cancún FC.
French Ligue 2 club FC Girondins de Bordeaux, once home to Zinedine Zidane but recently struggling financially, are among the teams now targeted by investors, according to people familiar with the matter.
US investors are the most active, but others are also looking to buy. This week, Qatar Sports Investments, owners of French champions Paris Saint-Germain, paid 19 million euros for a 22% stake in SC Braga, a top Portuguese side.
Much of the interest comes from the range of opportunities available, unlike in the United States where sports franchises are rarely sold and fetch very high prices when they do. The Denver Broncos NFL team sold earlier this year for more than $4.6 billion, a record for a sports team anywhere in the world.
As the value of top-flight football clubs also rises – Chelsea FC was sold for £2.5billion earlier this year – many buyers have been lured into lower leagues by the price, often in the low tens of millions of euros, for clubs they consider to have high prices. growth potential if on-field performance improves.
The newcomers join a growing group of international investors, mostly from the United States, with foreign shareholders now present in more than two dozen teams playing in Europe’s minor leagues.
US billionaire David Blitzer’s list of football investments includes Alcorcón in Spain, ADO Den Haag in the Netherlands and Waasland-Beveren in Belgium. Former Disney chief executive Michael Eisner owns Portsmouth in the third tier of English football.
Others should join them, thanks in part to the surge of the dollar against the euro and the pound sterling.
“We represent potential investors. . . pursue second and third division clubs in attractive cities with dedicated fanbases as well as potential stadium or real estate development opportunities,” said Charles Baker, a partner at US law firm Sidley who represented the owner of Chelsea, Todd Boehly.
Although majority-owned by Kyril Louis-Dreyfus, Sunderland could be the next big target, according to Neil Barlow, a private equity partner at Clifford Chance, who recently advised US investment firm Sixth Street on its deal. to acquire a slice of Barcelona’s television rights. .
At CD Leganés, on the outskirts of Madrid, Luhnow hopes to deploy data analytics techniques widely used to improve scouting and on-field performance in baseball to help the club push for promotion to the Spanish top flight. .
“We are very focused on finding and developing talent – and using those players to win games and competitions, and ultimately generate resources to reinvest in the club,” he said.
However, Bridge at Deloitte warns that investing in the lower leagues comes with its own risks. Finances further down the English football pyramid are increasingly precarious as owners spend big in the race for promotion to the Premier League. According to Deloitte, the average wage-earnings ratio in the league reached 125% last season.
“Bringing a football club to the top leagues requires a very big investment, no one should ignore that,” he says. “Many investors come in with their eyes firmly closed to the realities of the football industry.”