Multi-Club Ownership: Revolutionizing the Global Sports Landscape
The rapid rise of multi-club ownership (MCO) is reshaping the terrain of global sports, with soccer at the forefront of this transformation. Investors, particularly from private equity groups, are increasingly acquiring stakes in multiple teams simultaneously, fostering both opportunities and controversies in the process.
Private equity investors often approach MCO with an exit strategy in mind, rather than aiming for long-term operational involvement. "Most private equity groups buying up the ‘low-hanging fruit’ will have an exit in mind before they buy their stake," reveals an industry insider. This has led to significant changes, especially in the commercial and financial dynamics of affiliated clubs.
Surge in European Soccer
The surge in MCO is particularly pronounced in European soccer, drawing mixed reactions from the community. While clubs within MCO networks experience notable benefits, such as a 20-30% increase in commercial revenues due to shared sponsorship deals and global branding efforts, traditional soccer supporters remain largely opposed to these structures. This sentiment is shared widely across the European soccer landscape, where the passion for local clubs often clashes with the commercial interests driving MCOs.
Furthermore, the average market value of MCO-affiliated clubs is estimated to be 15-25% higher than independently owned clubs in comparable leagues. This financial edge is complemented by technological advancements, with artificial intelligence and data analytics playing significant roles in refining the MCO model. "There is a synergy operationally and investment-wise with best practices that you can do across all of the IPs that you touch," notes RedBird Capital.
Despite substantial opposition from traditional sports communities, a large-scale legislative rollback of MCOs seems improbable. "Rollback is out of the equation unless governments do it through legislation forcing owners to divest their interests (highly unlikely)," an industry expert asserts.
Challenges and Opportunities
The rise of MCO does not come without risks. Financial institutions' unwillingness to meet profit targets could result in "fire sales," where clubs underperforming financially are forced to sell off players and may face relegation. This high-stakes environment underscores the delicate balance that MCO investors must maintain to safeguard both financial returns and sporting success.
Interestingly, the influence of MCO is not limited to men's soccer. Michele Kang, a prominent figure in the sports world, emphasizes its necessity in women’s soccer. "Multi-club ownership is ‘a necessity’ for women’s soccer to continue growing," she states. This growing trend demonstrates MCO's potential to foster development across different facets of the sport, contributing to the broader goal of sports globalization.
Emerging Players and Expansion
The number of teams under MCO structures has surged from 117 in 2021 to a projected 336 by 2024. Prominent examples include Red Bull, which owns multiple clubs worldwide, including RB Leipzig, NY Red Bulls, Red Bull Brasil, Red Bull Salzburg, and Red Bull Bragantino. Meanwhile, Diamond Baseball Holdings (DBH) owns 35 of the 120 affiliated minor league franchises in baseball and has contracts with MLB to negotiate national sponsorships for all 120 minor league teams.
Profluence Capital is also looking to create a multi-club ownership ecosystem, adding to the competitive and dynamic nature of this evolving model. In the United Soccer League (USL), Westchester SC has made significant strides by inking the second-largest jersey sponsorship deal in the league and signing a former Premier League player for his final career stage. Notably, Westchester SC set records by transitioning from an expansion agreement to public announcement within just four months, one of the fastest in USL history.
Conclusion
The transformation brought by multi-club ownership is undeniable. It represents a significant shift in the way sports teams operate, merging financial acumen with sporting ambition. As this model continues to evolve, it brings with it a mix of opportunities and challenges, promising to redefine the dynamics of global sports for years to come.
"Permanent capital is an appropriate type of capital for sports — and while the public markets aim to serve that, they’re not ready yet," concludes a representative from RedBird Capital, encapsulating the essence of the MCO phenomenon.