Buyers keen on clubs with a global brand

This week we learnt that Liverpool FC is in talks over a potential stake sale with a consortium backed by money from the Mittal family, but likely to include some US investors. A valuation of more than $6 bn would suggest the bullish thesis — that football clubs remain a good asset appreciation play — is still intact.

Meanwhile Leicester City’s Thai owners also see now as a good time to attempt a sale. The club, which won the Premier League a decade ago, dropped into English football’s third tier last season.

There are other clubs, including Crystal Palace, looking for investors — or potentially new owners. Is this a sign that the market is heating up again? Does the World Cup alter the equation?

To some extent, nothing much has changed. Lots of clubs have been quietly open to offers for some time, but the bids haven’t come. Liverpool itself was in the market not so long ago, and ended up selling a very small stake to a fund with close ties to the existing owners. If any investor wanted to buy a mid-sized English football club, there would likely be a wealth of options available.

Over the longer term, the impact of this summer’s World Cup could potentially shake things up, at least a bit. If it really does feed through to more lasting US interest, that’s positive for clubs in the Premier League and the Champions League. Broadcasters are likely to focus on the premium products, so other leagues are unlikely to feel much uplift.

There’s also the question of what Fifa does next. An emboldened Gianni Infantino (despite all the criticisms made of him) will surely push to expand the Club World Cup to 48 teams, and maybe even stage it every two years instead of four.  The CWC could become a new guaranteed revenue source to a dozen or so big European clubs, not unlike the model espoused by the European Super League.

In that context, a bumper valuation for Liverpool makes a bit more sense, as big clubs with a global brand will be in demand. But smaller or lower leagues clubs will remain much harder sells. A punt on taking a team up the football pyramid also looks less appealing if the elite clubs are increasingly pulling away.  Nevertheless, some investors are willing to splash the cash on non-league clubs.

But the Financial Times warns, ‘We shouldn’t forget the fundamental fact that football clubs remain money pits. Premier League clubs made a combined pre-tax loss of almost £1bn last year. World Cup fever may be a good time to start a conversation about investing in football, but the underlying numbers have yet to improve.'   Investors, however, hope for capital appreciation.