Private Equity involvement in sport?
How do we feel about greater PE involvement across sport? Though this site is probably much more supportive of PE than the average public, I feel sport is where there is more nuanced. It's no longer 'niche' for PE involvement in sporting franchises, the last 5 years offer plenty of case studies in giving a fair judgement of the investment track records. Now the likes of Real Madrid, Man United etc are currently touting PE (or the Qataris for Man Utd) investment.
I think it's a very interesting field. There is a distinction between the business and the game. The business is just a bunch of cash inflows and outflows from buying players, tickets sold, clothes, real estate, etc. and the game is relevant insofar as it helps increase the business side, which means that PEs are also fully aligned in doing whatever will "improve" the quality of the game (buy new players, sell older ones, etc.). It's a win-win situation because the game isn't generally touched unless it's for the better, and the football club is just a business like any other which might welcome new ideas/innovation/address inefficiences. Surprised it became "trendy" now an not decades before (probably a consequence of more competition in traditional assets in the last years).
but how do you really create value when so much of the business is exogenous and out of your hands. You can only control so much on the field which is the main driver of commercial success. Investing more doesn't mean better results.
I think Chelsea (or CFCLDN) is an interesting case study: huge investment, lack of on the pitch success, seem to be commercialising the business well (but they still lack sponsorson the front shirt???)
The conservative case in all those investments is that football clubs are scarce and hence the multiple just goes up with the passage of time or someone comes and offers a highe price just to own the club (buying a trophy asset) + fanbase is loyal to the team so revenues are stable.
Beyond this probably a combination of addressing inefficiencies, entering into new markets, funding new players if the club gets often outbid, etc.
If the club is already well-capitalized I would do a minority stake and then push for a dividend distribution. Most probably you're buying the stake of someone that is exiting.
Not in sports PE, so if someone has better views feel free to share, interested as well
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