With Liverpool owners Fenway Sports Group willing to listen to offers for both a minority and majority stake a change of some degree in the background looks to be coming down the tracks for the Reds.
While the position of FSG remains that it is a case of "business as usual", well-placed sources in the US told the ECHO that the Reds owners are "testing the waters" but that if the right offer came in, around the $4bn mark, then a conversation with an agreeable party could take place.
On Thursday the Boston Globe, a newspaper privately owned by FSG principal John Henry, reported that the Reds owners were now leaning towards the sale of a minority stake in the club, with capital raised identified for "player acquisition and capital improvements." Sources told the Globe that FSG while still open to listening to offers for the club, were engaged with a number of parties over investment and that investor would have to be "philosophically aligned with FSG’s fiscal tenets and team-building philosophies."
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A variety of potential investors, owners and ownership groups have been discussed, from sovereign wealth funds, to family offices, to private equity funds. And it is the latter that are likely to make a major play for assets like Liverpool and Manchester United, themselves now on the market after the Glazer family opened themselves up to offers. Even taking up a smaller slice.
Private equity has become increasingly involved in sport, particularly in the USA. While the NFL still forbids private equity in ownership stakes, something that is expected to change in the not too distant future, heavy private equity investment has been made into leagues such as the NBA, NHL and MLB, with Arctos Sports Partners, the US fund that owns a stake in FSG and, ergo, Liverpool, having stakes in more than 20 teams, most of them in North American sports.
Arctos' play so far has been through minority investment, taking small stakes in teams including the Golden State Warriors (NBA), Los Angeles Dodgers (MLB) and Minnesota Wild (NHL) among them. Arctos also took a £29.5m minority stake in Italian side Atalanta earlier this year as they expanded their reach into Europe.
Some investors are passive, others active, meaning that where some investors would be happy to provide capital and wait on growth to occur to achieve returns, others would be involved in the process of business building, providing not only expertise but also capital to help grow revenues and yield greater returns. RedBird, who clinched an 11 per cent stake in FSG for $750m back in March 2021, fall into the latter, with simpatico link-ups arriving through greater synergy with the likes of Nike and LeBron James' SpringHill Company in the wake of the deal.
As has been demonstrated by the impact of the pandemic and how sport managed to fight through it, sports has shown itself to be a remarkably resilient asset class, one which is seen by investors to be under monetised in some areas, such as European football, and having seen valuations of teams grow exponentially over the last decade.
Speaking at the Sportico Invest in Sports conference in New York in October, where the ECHO were present, Arctos co-founder and managing partner Ian Charles said: "When we invest internationally we are looking for assets that kind of have the profile of a North American sports franchise, and that is harder to find internationally. When you find it, we are interested."
Sources in the US finance sector have told the ECHO that private equity has interest in both Liverpool and Manchester United, both as individual funds and as part of larger consortia, with much of the discussion having so far focused on an equity share sale.
There are reasons why private equity are interested in major Premier League clubs. There is seen to be tremendous scarcity value in clubs part of the so-called 'big six', whose revenues and valuations far outstrip that of the rest of the league.
The big six are seen as having models more in line with North American sport by virtue of them being near enough relegation proof and benefiting from considerable revenues generated from their likelihood of achieving lucrative European qualification.
Behdad Eghbali, co-founder of US investment fund Clearlake Capital along with José E. Feliciano, was part of the consortium that acquired Chelsea earlier this year in a £2.5bn deal, the new owners, in a joint enterprise with US entrepreneur Todd Boehly, buying the Blues from Roman Abramovich.
"For is it was about looking at the macro," said Eghbali, speaking at the same Sportico event as Charles.
"Look at the NFL, it has a $20bn revenue and 150m to 200m fan base, media rights and all intellectual property (IP) is really shared where in soccer you have the English Premier League which has a massive global audience. You share broadcast revenue but you have a big disparity otherwise in terms of your IP.
"Sports is religion. These are institutions that have a wide generational following that thanks to digital technology and streaming are in the early innings of global audiences. They are public/private partnerships but your asset is the play, and the opportunity to make it a platform is very much there but some of these are not optimised and not well managed. Aside from Fenway at Liverpool and Abu Dhabi at Manchester City these things are not optimised."
The potential for returns through valuation growth, which are expected to continue growing in the coming seasons, albeit at a slower rate than had been seen over the past decade, as well as the opportunity that is seen in addressing the viewed under monetisation of the Premier League and the fan bases into the hundreds of millions globally that the biggest sides boast.
Liverpool ticks a lot of boxes for those with deep pockets looking at acquiring a football club, but for groups that want to take a slice of the action on a smaller basis but still aid the pursuit of success and achieve returns on their investment, a minority stake in a club like Liverpool is appealing.
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