Why did Chelsea go for the price it did when football finance guru Kieran Maguire calculates its real worth at £2.3 billion? (Although this is based on a comparison with Manchester United which would some would argue is invalid given their recent poor performance).
One answer is scarcity. Chelsea ranked eighth in revenue in
last year’s Deloitte Money League. None of the rest of the clubs in the top 10
have changed ownership or even been publicly for sale in the last 10 years (the
most recent is seventh-ranked Paris Saint-Germain, acquired by Qatar Sports
Investments in 2011).
The top three ranked clubs — Barcelona, Real
Madrid and Bayern Munich — are all governed by fan or member models that
prevent a private takeover. Opportunities to buy European football clubs of
Chelsea’s size, with a huge international profile and a recent track record of
success at the elite level, are extremely rare.
European football
clubs are cheap
In comparison to US sports franchises, European football
clubs are relatively cheap to buy. That even goes for Chelsea who, at £2.5
billion, sold for approximately five times their revenue; in recent years it
has been common for NFL or NBA franchises to command prices
of between seven and 10 times their revenues in order to change hands.
In the specific case of Clearlake — who The Athletic understands
will own approximately 62 per cent of Chelsea and joint-control rights with
Boehly’s group — it also helps that European football is a significantly less
regulated environment. Private equity firms are not allowed to own majority
stakes in NBA, MLB or NHL teams, and the NFL does not allow
private equity investment at all.
But the primary reason why a sale price of £2.5bn was
considered reasonable by all of the most serious Chelsea bidders is because
they believe football’s financial pie is going to get a lot bigger.
The Athletic has been told that Chelsea’s new
owners believe this growth can be achieved by smart investments in the club’s
infrastructure — namely, modernising and expanding Stamford Bridge — as well as
placing greater emphasis on the academy to help ensure the men and women’s
first teams continue to succeed. This continued success is expected to power
increases in commercial revenue, while positioning the club to earn a greater
share of the benefits from more lucrative broadcast and digital streaming
agreements.
Virtual reality
attendance?
Maguire says, “What they’re hoping is that someone is going
to shell out for a virtual reality headset and that they’ll be willing to pay
extra to have the matchday experience of effectively sitting in a seat at
Stamford Bridge. They are convinced there are lots of people out there willing
to do that, and the technology is almost there. That could be one of the
additional revenue streams.
In the short term, there is some low-hanging financial fruit
for Boehly and Clearlake to get their teeth into. Chelsea’s bloated wage bill —
£333 million according to the accounts published in December — contains plenty
of fat to trim, while the £120 million that Abramovich paid out to compensate
sacked managers and their various backroom staffs over 19 years of ownership is
a powerful reminder to the new regime of the financial benefit of stability.
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