The Rapid Evolution of Multi-Club Ownership in Global Sports
Multi-club ownership (MCO) is transforming the landscape of global sports, particularly soccer. This investment model, where stakeholders acquire stakes in multiple teams simultaneously, is seeing a surge, and nowhere is this more evident than in European soccer. However, this trend is not without its controversies and challenges.
For investors, MCO offers a unique set of opportunities. Clubs within these networks frequently experience a 20-30% increase in commercial revenues due to shared sponsorship deals and global branding efforts. As a result, the average market value of MCO-affiliated clubs is estimated to be 15-25% higher than independently owned teams in comparable leagues.
Private equity groups are significant players in this arena. Often, their strategies revolve around an eventual exit from their investments. As one source succinctly noted, "Most private equity groups buying up the ‘low-hanging fruit’ will have an exit in mind before they buy their stake." This approach is driven by the potential for substantial financial returns, rather than long-term operational involvement.
Technological advancements are also refining the MCO model. Innovations such as artificial intelligence and data analytics play crucial roles in optimizing the management and performance of these clubs. Investors and operators are keen on leveraging these technologies to maximize the return on their investments.
However, the rise of MCOs has not been universally welcomed. Traditional sports communities, particularly soccer supporters in Europe, are predominantly opposed to the concept. The resistance stems from concerns about the dilution of local identities and traditional club values. Despite this opposition, significant legislative rollbacks of MCOs appear unlikely. As one observer pointed out, "Rollback is out of the equation unless governments do it through legislation forcing owners to divest their interests (highly unlikely)."
The rapid growth in the number of teams under MCO structures underscores this trend. The number of soccer teams within these networks surged from 117 in 2021 to a projected 336 by 2024. High-profile 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. Similarly, 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 teams.
The influence of MCOs also extends to women's soccer. Proponents argue that multi-club ownership is crucial for the continued growth of the women's game. Michele Kang, a notable figure in the sector, emphasized this point, stating, "Multi-club ownership is ‘a necessity’ for women’s soccer to continue growing."
Profluence Capital, another key player, is actively looking to create a multi-club ownership ecosystem, further expanding the reach and impact of MCOs across various sports. The financial stakes are high, and the success stories continue to mount, providing powerful incentives for continued investment.
Westchester SC is a prime example of a club flourishing under the MCO model. They inked the second-largest jersey sponsorship deal in the USL and even signed a former Premier League player for his final career stage. Moreover, the club set records as one of the fastest teams to transition from an expansion agreement to a public announcement in USL history, achieving this feat in just four months.
Yet, there are cautionary tales within this expanding universe. Financial institutions' unwillingness to meet profit targets could lead to "fire sales" where players are offloaded, and clubs face the threat of relegation. The stakes in the game of MCO are as high as the rewards, and the dynamic nature of sports investments means that both triumphs and failures are part of the landscape.
RedBird Capital, a major player in the MCO arena, noted the broader implications of this investment model: "Permanent capital is an appropriate type of capital for sports — and while the public markets aim to serve that, they’re not ready yet." This outlook underscores the belief that MCOs are not just a passing trend but a fundamental shift in the sports investment paradigm.
As multi-club ownership continues to expand, it will undoubtedly shape the future of global sports. Whether through increased revenue, technological innovation, or the ability to navigate the complexities of modern sports management, MCOs are here to stay, driving both opportunities and challenges for investors, clubs, and supporters alike.