It happens now because the balance sheets are at a loss and there is a liquidity crisis, but behind it there is the now consolidated attractiveness of the sector.
Investments in Professional Sports
Large investment funds had already begun to take an interest in professional sport over the last decade, attracted by the growing opportunities offered by a rapidly growing sector with particularly attractive characteristics. The effects of the pandemic on the budgets of leagues, teams and federations have accelerated this process to such an extent that investments of funds at the highest levels of the sport can be considered the first major long-term impact that the pandemic has had on the sector.
In the last month alone, the British fund CVC Capital Partners has bought 14 per cent of the shares of the Six Nations rugby tournament for a sum between 350 and 425 million euros, while RedBird Capital Partners has bought the 10 per center of Fenway Sports Group, a company valued at over 6 billion dollars which among other things controls the Boston Red Sox in baseball and the Liverpool football team (LeBron James is also among the investors gathered in RedBird Capital Partners).
The same fund that bought the minority stakes in the Six Nations has for some time been negotiating its entry as a partner in the management of the media company that should deal with the marketing of the Serie A championship. Together with two other funds, CVC has offered 1 billion and 700 million euros for 10 percent of the shares.
In New Zealand, on the other hand, the national association of players and female players recently opposed the ongoing negotiations between New Zealand Rugby, the governing body of New Zealand professional rugby, and the US fund Silver Lake, which offers 276 million euros. to acquire 15 percent in the form of commercial rights. (Hannah Peters Getty Images)
Club Investments
The investments are not only for tournaments and federal agencies, but also for clubs. The list of investment fund controlled teams is getting longer and longer. AC Milan has been owned by the US fund Elliott since 2018, which controls the club at 95.73 percent. Elliott also has interests in another European club, Lille which was seized for insolvency from the old property last December and entrusted to a new management. In Milan, Inter is also looking for a minority shareholder, with a good chance that it will be a fund.
Professional sport was already considered a safe investment before the pandemic began. It is in fact a “sector” that has over a century of history and that from the very beginning has never stopped growing on a global scale. Companies, that is, clubs, have an extremely loyal consumer base, more than any other brand on the market. Over the years, the individual businesses have also become economically more solid and reliable, just think of the Italian Serie A. Ten years ago the owners of the twenty teams in the championship were all Italians: often families and just as often erratic and unpredictable in the management of their businesses. Today 35 per cent of clubs are foreign-owned, and the share looks set to rise again.
Financial Rules
The stringent financial rules introduced by UEFA the so-called financial fair play have served to reduce debts and make European football more economically stable, which has therefore become more attractive. However, what continues to drive growth, as well as investments, are merchandising (in the case of the best-known teams) and television rights. Between 2007 and 2010 the foreign broadcasting rights of the English Premier League, the most famous football league in the world, were sold for 650 million pounds; ten years later, those valid for the 2016-19 three-year period yielded 3 billion pounds.
However, sport also presents risks, mainly consisting of its exposure in times of crisis. In fact, it has been established that the demand for sports entertainment depends on the economic climate of the place in which it is located: in economic difficulties, first of all, fans and enthusiasts tend to cut the costs incurred for everything related to sport.
But while this is indeed a period of economic crisis caused by the pandemic, the pandemic itself has in a sense paved the way for funds to enter sports. Even the largest and least depreciated companies such as the All Blacks in rugby are recording loss-making budgets and facing major liquidity crises. The restrictions have in fact deprived the sport of one of its greatest strengths: the large and punctual injections of liquidity during the events hosted, or during the sales periods of season tickets. Leagues and clubs whose average value in this period is stable are therefore looking for liquidity in other ways: mainly from investment funds, which have it in abundance. In return they give up part of their shares.
The ways in which funds plan to make their investments pay off may be different, but they all aim for the same goal. Rugby, for example, is still considered a “young” sport: professionalism has existed for about twenty years, many competitions have yet to find a suitable format and international calendars, consequently, are quite confusing and subject to change. From this point of view, the television usability of rugby offers a great yet unexpressed potential, especially in the Commonwealth countries. A reorganization of the calendars could therefore substantially increase the value of the movement, hence the profits of the funds that have invested in it.
A different example is Inter, which, after a decade-long corporate restructuring, with two different properties, has recently returned to the top of football and unless surprises will return to winning the Scudetto. For the club, therefore, significant increases in revenue are expected, both from the sporting and commercial side also driven by the prospect of a new stadium which make it attractive to investors. At the beginning of the year, the British fund BC Partners, interested in a minority stake, had valued Inter between 750 and 800 million euros, an estimate however considered low by the current owner.