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Spanish Private Equity Fund Smiles On CVC's Play For La Liga

Tom Burroughes

5 August 2021

European sports teams - soccer for example - have big financial potential on a par with their US counterparts, a Madrid-based fund manager argued after Spain’s La Liga football clubs said they had sold a 10 per cent stake to , the private equity fund.

La Liga agreed in principle a "multi-pronged" deal with CVC including the €2.7 billion ($3.2 billion) infusion in return for 10 per cent of its revenue. It will also create a new company housing a range of commercial activities in which CVC would also take a 10 per cent stake. La Liga said: "The partnership is designed to promote the global growth of The partnership is designed to promote the global growth of LaLiga and the clubs as part of its strategy to become a leading global player in the digital entertainment market."

Luis Garcia Alvarez manager of the Madrid based MAPFRE AM Behavioural Fund, which has a 10 per cent exposure to European football clubs, said of the deal: “As we have said several times in the past, in our view, Spain is the most attractive country for sophisticated investors with an interest in European football. The reason is that La Liga has done, by far, the better job among all European leagues in terms of financial control. But, surprisingly, while there are listed clubs in Italy, Germany, France and the UK, there is not such a case in Spain. Will this newly-announced agreement with CVC turn the eyes of other sophisticated investors into Spanish football?”
“The transaction will be done through a newly-created subsidiary, with a total valuation of €2.7 billion. This means that if La Liga was a listed company, it would be ranked among top-10 by market cap in the Ibex-35 index. This deal marks a really important step in the growing interest of investors into sports, and particularly into European football,” Alvarez said. 

With a period of rapid TV rights growth coming to an end, coupled with the devastating impact of the pandemic, European soccer clubs and leagues are eager for alternative cash sources. Closed stadiums and repayments to broadcasters resulted in La Liga's revenues falling by 8 per cent to €3.1 billion in the 2019/2020 season, according to Deloitte’s latest annual review of the sport (source: Bloomberg), with lockdowns having extended into the more recent campaign.

Alvarez said his MAPFRE fund has held a “significant position” in listed football clubs for almost two years already and includes minority stakes in Borussia Dortmund (6 per cent of the total assets), Ajax (2 per cent) and Olympique Lyonnaise (2 per cent). “As the CVC deal probably points out, the football industry has changed completely (for the better) in the last few years in terms of corporate and financial governance, and football, as a media or content business, has a lot to gain from operating leverage. Hence, we think that we can see in European football a similar story to that of US sports franchises in the last two decades… but at really much more attractive entry prices,” he said.
The sport has had a mix of highs and lows this year. Earlier in 2021, the soccer business – and even the political world – was rocked by a bid by 12 of Europe’s largest teams to build a breakaway Super League, although clubs later abandoned the move amidst a wave of protests. In July, such worries were temporarily put aside during the European Championships, won at Wembley by Italy against England. 

The “beautiful game” is no stranger to leveraged buyout-style investors playing the space, as with the case of the US-based Glazer family who bought Manchester United in the early Noughties.