U.S. investors seek edge in European soccer

For U.S. investors looking to score an investment in a European soccer club, some of the focus is shifting toward the clubs with lower valuations and typically not in the marquee tier of the sport overseas.

Some investors, particularly in the U.S., are shifting toward a so-called multi-club model, or investing in smaller clubs with lower valuations, as they try to take a piece of the international sports market at smaller deal valuations.

This comes as deep-pocketed investors — from top U.S. private equity and venture capital firms to global rivals like sovereign wealth funds — have intensified competition.

“In terms of private equity and high net worth individuals, soccer is more of a global sport than almost any U.S. sport,” said Charles Baker, co-chair of law firm Sidley’s entertainment, sports and media group. “There are huge populations that can be accessed — in both the regions they play in and the world.”

That global nature of soccer fans — and the growing popularity in the U.S. — often translates into higher revenue opportunities from broadcast media rights deals to merchandising.

The owners behind clubs including Manchester United, Chelsea FC and Newcastle have seen revenue multiples step up, and in many cases valuations have doubled, PitchBook noted in a report that concluded most clubs would sell at a premium.

Deal valuations across the top five European soccer leagues have exploded from more than $70 million in 2018 to roughly $5.2 billion in 2022, according PitchBook. Meanwhile, more than one-third of the clubs in the so-called “Big Five” leagues in Europe are backed by U.S. investors, including private equity and venture capital firms.

The spike in 2022 came from a consortium led by U.S. investor Todd Boehly and private equity firm Clearlake Capital acquiring the English Premier League’s Chelsea for more than $5 billion, as well as Redbird Capital Partners and Elliott Management’s takeover of Italy’s AC Milan for nearly $1.3 billion.

“These recent transactions have set a precedent in terms of club valuation but also prompted many owners to consider selling to [private equity],” according to an analyst report from PitchBook.

Some firms, like Sixth Street Partners, have found different outlets into taking a stake in European soccer, particularly in Spain’s LaLiga. The firm acquired a stake in the Spanish broadcast rights of FC Barcelona, the former longtime home of superstar Lionel Messi, and also paid about $380 million for a stake in Real Madrid’s stadium operations.

The shift is happening as soccer clubs have been looking for fresh capital following the distress stemming from the earlier days of the Covid pandemic. Revenue decreased as coronavirus restrictions kept fans out of the stands and costs rose, which…