Nearly seven years ago, Silver Lake, a technology-focused investor, committed primary equity amounting to an approximate 10 per cent interest in City Football Group, the owner of Manchester City and other clubs worldwide. This involved partnering as a minority investor with Sheikh Mansour bin Zayed al-Nahyan of Abu Dhabi as the majority owner, investing in growth and backing a world-class manager and executive team.
Over time, Silver Lake increased its stake to approximately
18 per cent. Substantial investment in top players has been central to the
strategy. But cash alone is not sufficient to win prestigious trophies every
year, let alone build an enduring culture or clear team identity. Manager Pep
Guardiola, who left City in May after 10 successful years at the helm,
repeatedly praised the stability, expertise and trust of the ownership as vital
elements of the magic formula.
A Financial Times contributor argues that we should consider
the private equity investment in Chelsea in this context. Four years ago, a
consortium majority-financed by Clearlake Capital acquired control as part of a
multi-club investment thesis. Using a mix of equity and debt capital, the
consortium has since invested heavily in young talent, with the aim of using
Moneyball-style data analysis to professionalise the club’s operations.
How well is it working out? Chelsea have won two
international trophies, including the 2025 Club World Cup. The club’s academy
in Cobham is a consistent global leader and regularly produces elite players,
many of whom transition to the first team. But against the key metric for a
“Big Six” club — arriving in the final competitive stages of the Premier League
and Champions League with a real chance of winning — consistent progress
remains elusive.
Meanwhile, discontent among supporters has grown. Some have
concluded that the Chelsea project is foundering, but this view could yet prove
wrong. Certainly, managerial and player mis-steps have led to underperformance
on the pitch. But the same people in charge have also made some excellent squad
additions coveted by rivals. And they recently recruited an accomplished
manager, Xabi Alonso, who, if given enough say in a stable working partnership,
is more likely to succeed than fail given his credentials.
It is possible that a new stadium will have to wait a few
years for feasible economic and planning proposals. And it will be crucial to
manage the capital structure carefully. But although running a club might be
much harder than it looks, calibrating covenants and maintaining liquidity
should be routine.
The same is true of
shirt sponsorship: if a lucrative longer-term deal is not forthcoming, a series
of shorter-term wins could make sense. The approach of buying emerging players
in the belief that the downside case is recovering capital spent, and the
upside selling for profit or performing well in the first team, now needs
enhancing with proved talent. But there should definitely be enough time to get
it right.
One of the provisions of the takeover in 2022 was a
commitment not to sell for 10 years. And there are reasons to believe that a
season out of European competition could be a blessing in disguise. Chelsea
represents a more substantial bet by private equity than Manchester City. Yet
the premise of the deal — that the best football clubs are undervalued relative
to top US sports franchises — remains a wager that has merit. Watch out for a
few more control investments of this kind in the Premier League and in Europe.
If I was a Chelsea fan I would be sceptical, but it's refreshing to read a more positive perspective on private equity in football than is usual. Like many fans, I dislike it even if it is effective. It seems to me that it increases the distance between fans and owners.
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