3️⃣ Three of the most Innovative Private Equity Deals in European Football

Happy Monday and welcome to the new members to the TLP community.

I get questions and comments about ownership of football clubs at a frequent pace.

Ownership of sporting assets has evolved to the point where 15 of the 98 clubs across the Top 5 European Leagues now have Private Equity ownership at the cap table.

This is a topic I’ve wanted to do for some time so today we dive deep into some of the deals that these private equity houses have struck and what level of return they can expect from them.

The best place to start is one of the few private equity exits we’ve seen.

That came, in Milan…

1. Elliot Management Sell AC Milan to Redbird Capital for €1.2bn

There have not been many Private Equity exits in European football.

Not many at all!

However, Elliot Management secured one with the investment and the subsequent sale of AC Milan in 2021.

In 2017, Elliott Management lent circa €303 million to Chinese businessman Yonghong Li, who was struggling to meet his financial obligations.

In 2018, after Li defaulted on the loan, Elliott took control of AC Milan, essentially acquiring the club for the outstanding debt!

After taking control, Elliott invested an estimated €600 million over four years into the club. This investment covered various costs, including

• Debt restructuring

• Player acquisitions

• Infrastructure improvements

In August 2022, Elliott sold AC Milan to RedBird Capital Partners for approximately €1.2 billion.

By selling the club for €1.2 billion, Elliott made a profit of around €300 million. However, some estimates suggest that after including debt and fees related to the deal, Elliott’s total return may have been higher.

2. CVC invests €2.1bn in La Liga

This deal is a fascinating one as it’s a much bigger bet from CVC Partners.

CVC invested €2.1 billion in La Liga in 2021. The deal known as LaLiga Impulso, saw CVC receive an 8.2% share of La Liga’s future commercial income for the next 50 years.

This includes revenue from:

• Advertising

• Sponsorships

• Licensing and Merchandising

• Digital and Social Media Ventures:

This does NOT affect ticket sales or income directly generated by clubs.

In typical TLP manner I tried to learn how much this has made them since their acquisition.

During the 2022-2023 season, La Liga recorded its highest-ever commercial revenue, surpassing €1 billion for the first time. This was a 28.6% growth in the commercial income sector compared to the previous season.

Assuming the number was €1bn flat, this equates to a €82m cume in Year 1 for CVC.

If they target €100m takings every season for the next five decades this deal will look very lucrative for the investment company.

3. Sixth Street invests €360m in Real Madrid

We close with another deal born out of Spain.

In 2022, Sixth Street and Legends, a premium experiences company co-owned by Sixth Street, signed a €360 million agreement with Real Madrid.

In return, Sixth Street received a 20% share of revenues generated from the commercial use of the revamped Santiago Bernabéu stadium for the next 20 years.

This includes revenues from concerts, events, and other non-football-related activities at the stadium.

The new stadium is projected to generate up to €400 million annually, significantly more than the €150 million increase estimated pre-renovation.

It's too early to estimate exact returns, given the stadium is only beginning to host events and tap into its expanded potential. However, if the revenue projections hold, Sixth Street could earn a significant portion of that expected billion over the next two decades, retuning a healthy sum to Sixth Street.

I love all of these partnerships and I am excited to see their progress as the years progress.

The private equity sweep on European football has increased in its intensity post-pandemic so now interest rates are much higher than they were back then I wonder if the pace of new deals will continue to happen.

I discussed quite a few more new examples in my latest YouTube video:

If you haven’t seen that piece yet please watch in your own time.

See you next week.