When Behdad Eghbali’s jet landed in Turkey at the start of this year, the billionaire financier was about to strike a deal unlike any other in his career.
Eghbali, whose private equity firm Clearlake Capital has amassed a vast portfolio that ranges from cyber security to beef jerky, had arrived in Antalya to buy – personally – one of Europe’s most coveted young football players.
Just hours earlier, the footballer – a 22-year-old Shakhtar Donetsk winger called Mykhailo Mudryk – was set to move to north London club Arsenal FC.
But as the new co-owner of Chelsea Football Club, Eghbali wanted to buy the prized player for his own West London team. Well-versed in the art of bidding wars, Eghbali had come himself to Turkey to scupper Arsenal’s deal, making an 11th-hour £88.5m offer for Mudryk.
The private equity veteran won the auction, leaving Turkey for London that night with his new trophy football asset.
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His trip shows how the traditional world of big-league football ownership, previously the playground of Russian oligarchs and Arab princes who accepted huge losses for the kudos and prestige of owning a club, is being upended by a new cohort of uber-rich, media-shy and commercially savvy Wall Street investors – of which Eghbali’s Clearlake is one.
This new breed of financiers are now snapping up teams across Europe with a very different purpose: to make a profit.
They believe that they can apply the private equity model to football, acquiring clubs – often with debt – and using their financial know-how to make a vast fortune.
In 2022, private equity firms inked 24 deals worth $5.2bn on acquiring football clubs, up from 21 deals worth £4.1bn in the previous year, according to Pitchbook data.
But their unorthodox tactics, including headline-grabbing transfers and new plans to reform the way in which the game is run, have caused a stir among fans.
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Watching quietly from the sidelines, some senior private equity figures are now starting to question whether the push into football will pay off. “You’re not necessarily dealing with easy assets. You’re dealing with soccer players and media aspects of the business that are hard to control, and when you make projections, they are very hard to corroborate,” says Mattia Caprioli, co-head of European private equity at KKR, one of the world’s largest buyout shops.
KKR has held discussions with some of Europe’s biggest leagues, including Germany’s Bundesliga, about making an investment in broadcasting rights.
But Caprioli is among those who is sceptical about investments in single clubs, and he is not the only one.
The question is whether the private equity industry can turn a profit in such an unpredictable industry, where soaring player salaries, relegation battles and the economic downturn could all derail the football strategies being drawn up in boardrooms on Wall Street.
“The team values have got so big that even the billionaires can hardly afford them,” says Matt Gibbons, a managing director of private equity at Manhattan West, a lower-mid market US PE fund investing in sports, media and entertainment.
Gibbons recently invested in a Formula 1 exhibition tour and says he is looking to deploy up to $100m in sports-related deals, but when it comes to football clubs, he is wary of the prices being paid.
“We’re cognisant of some of the more frothy areas of sports. The capital that’s pursuing a slice of some big franchise team, owning a piece of the New York Yankees or Chelsea, is harder for us, because it’s really reliant on the exit value.”
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In 2022, it was the frenzied bidding process for Chelsea FC that underlined the white-hot investor appetite for European football clubs. “We had 250 people call us in the first week when Chelsea was for sale, including strategics, corporates [and] countries,” said Colin Neville, a partner at The Raine Group, the bank running the club’s auction, on a panel late last year.
A consortium led by private equity firm Clearlake Capital and business tycoon Todd Boehly emerged victorious, buying Chelsea for £4.25bn, comprising £2.5bn for the club itself and £1.75bn “in further investment for the benefit of the club”.
One private equity investor competing in the early stages of the Chelsea auction, who wished to remain anonymous, says: “The interesting part about the Chelsea process was that everyone thought at first it would be a distress sale. That’s what got so many people excited. But if you look at where it traded, there was really nothing distressed about it. You could argue it was almost the opposite, where it traded at a premium. It was one of the highest prices ever paid for a professional sports asset.”
The club’s new owners nonetheless feel confident in their football investment. Eghbali’s business partner, Clearlake co-founder Jose E Feliciano, has publicly said that he believes the club can almost double its current annual revenues to hit $1bn.
Monetising Chelsea’s intellectual property rights – from shirt sales to sponsorship deals – is a key priority.
The new owners are mulling ways to expand the club’s international presence by pursuing a multi-club ownership model pioneered by the likes of Red Bull and City Group, acquiring several football clubs across the world to share young football talent across a network and to expand the global fan base.
Eghbali has said the consortium is looking to create more “premium content”, suggesting a “Premier League vs Serie A ‘All-Star’ match” and more pre-season games. Boehly has floated the idea of a Premier League North versus South ‘All-Star’ match.
They are hoping to see rising value in broadcasting rights too: despite the value of domestic media rights remaining flat, the total value of the English Premier League’s media rights rose last year amid rising demand from international broadcasters, according to Deloitte.
Under manager Graham Potter and new co-sporting directors Laurence Stewart and Paul Winstanley, they are hoping a re-invention of the firm’s data strategy will help in player recruitment too. Real estate redevelopment is also in the offing, with plans to revamp and expand the club’s West London stadium, Stamford Bridge.
Yet even if Chelsea’s owners can grow these revenue streams, there are challenges on the horizon.
Chelsea’s mixed performance on the pitch – they are currently sitting in mid-table – means they could miss out on a spot in next year’s lucrative Champions League competition.
And to add to the pressure, the new owners have been spending big on players: with signings such as the £88.5m Mudryk, they have smashed transfer records, splashing out more than £600m on players since taking charge.
Chelsea’s new transfer strategy has involved offering longer contracts to new signings – a strategy known as amortisation that allows the owners to spread out the cost of the player over a greater time frame.
“If the player works out, then this will prove to be an astute piece of business. However, this strategy also carries significant risk, as Chelsea could be saddled with an under-performing player on high wages, who might prove difficult to move on,” noted football business blogger Swiss Ramble in February.
Chelsea is one of the most high-profile cases of private equity’s push into football, but other clubs are being snapped up too.
Buyout tycoons including Bain’s Steve Pagliuca, Blackstone’s David Blitzer and Apollo’s Josh Harris have all taken ownership stakes in football clubs.
Burnley FC, sitting at the top of the second tier of English football, was acquired by private equity firm ALK Capital in late 2020.
Italian football is seeing a flurry of corporate takeover activity, with PE firm RedBird most recently buying AC Milan.
Miami-based private equity house 777 Partners is building a portfolio of football clubs across Europe, with stakes in Genoa in Italy and Sevilla in Spain. Last week the firm also became the majority shareholder in German side Hertha Berlin.
As the football frenzy continues, this new breed of owners is betting on the constantly rising valuation of clubs.
As shown by the speculation of interest in other Premier League clubs such as Manchester United and Tottenham in recent weeks, there appears to be no shortage of interested buyers, from American tycoons to sovereign wealth funds.
PE bosses are hoping that such appetite means they will be able to sell their clubs for a major profit in several years’ time.
But as the fans know all too well, hope is a dangerous word in football.
This article was published by Private Equity News, part of Dow Jones
To contact the author of this story with feedback or news, email Sebastian McCarthy
