What is the appeal of owning a Premier League football club like Liverpool? To those with the funds and ambition to even contemplate a deal that is likely to cost at least £4 billion, the answer is incredibly simple.
Who wouldn't want to invest in a global sporting brand that is regarded as recession-proof and with the potential to offer low risk, high reward, and an unfailingly loyal customer base? Oh, and the prospect of some fun along the way while trying to win Premier Leagues and Champions Leagues.
Fenway Sports Group, or FSG, the Boston-based sports investment company that also owns the Boston Red Sox baseball team and Pittsburgh Penguins NHL franchise, has done all of the above since buying Liverpool from American businessmen George Gillett and Tom Hicks for £300 million in October 2010. They transformed Liverpool from a sleeping giant into a team that has reached three Champions League finals in five years -- winning the tournament in 2019 -- and won a first Premier League title for 30 years in 2020. But with the club now regarded as being worth more than 10 times what FSG paid 12 years ago, figurative "FOR SALE" signs are now hanging above Anfield. And there is no shortage of prospective new owners.
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"I can't really speak to FSG's motivations to sell, but what I would say is that for every American owner that wants to exit football club ownership, there's another 10 queuing up to come in," Chris Mann, head of mergers and acquisitions for New York and London-based global sports advisory group Sportsology, told ESPN.
"Over the past few years we've seen a really significant ramp up in U.S. investment in European football. In 2021, there were 15 investments in clubs in the big five leagues and two-thirds of those were by U.S. investors, either individuals or private equity groups.
"American interest in European football is part of a generational shift in that we've moved away from the previous kind of vanity investments by high net-worth individuals towards more hard-headed purchases by people and organisations that are looking for clubs that are going to give them big returns."
Liverpool earned £151.9 million in Premier League prize money during the 2021-22 season and a further £102 million in earnings from UEFA after reaching the Champions League final against Real Madrid in Paris. In its Financial Forecast 2022 report published in September, the football finance website Off The Pitch predicted that in 2023 Liverpool will overtake Manchester United for the first time in revenue, with Liverpool projected to announce turnover of £602 million and a pre-tax profit of £76 million.
That figure would fall short of the £613 million turnover announced by Manchester City earlier this month, but the vast majority of the Abu Dhabi-owned club's commercial revenue is generated by partnership deals with Abu Dhabi-based companies such as Etihad Airways, Etisalat, Emirates Palace and Masdar. For that reason, Man United continue to be regarded as the benchmark in English football due to their ability to attract sponsors from all corners of the globe -- therefore, eclipsing the Old Trafford club off the pitch would be a significant milestone for Liverpool.
It is such commercial power, and Liverpool's on-field success and history, that makes them such a compelling acquisition for potential new owners, particularly for American private equity funds who want success and financial growth.
"What football investors are seeking are clubs that match the fundamentals of teams in U.S. sports leagues," Mann said. "They're looking for big global brands with very low risk on performance -- teams with almost zero chance of relegation and a very high chance of either winning the league or qualifying for Champions League and getting on that kind of recurring broadcast revenue train.
"We've now had 20 years of pretty much uninterrupted year-on-year growth in sports media rights values, so if you take those criteria as a package -- the global brand, the low downside risk and the broadcast upside -- there's maybe only 20 clubs in Europe that meet all those criteria.
There is significant scarcity value and that scarcity value is driving valuations up very quickly. Given the criteria laid out, Liverpool are quite near the top of that very select group. With the dollar being stronger than the pound and Euro right now, there's obviously an opportunity to buy these big teams at a much more reasonable price than the majority of U.S. sports franchises, should the latter become available.
"Earlier this year, Chelsea were sold to Todd Boehly's consortium for £2.5 billion ($2.94b) -- quite a lot less than the Denver Broncos NFL franchise which was sold for $4.65 billion (£3.95b). If you think about the reality of the football market, it is very small if you are looking to invest in a team of the calibre of Liverpool. There's maybe ten of those that you can realistically go and get. And how many of them are on the market at any given time? One or two maybe."
The sale of Chelsea earlier this year, prompted by UK government sanctions on the club's previous owner, the Russian billionaire Roman Abramovich, resulted in huge interest in the two-time Champions League winners. Sources have told ESPN that over 200 expressions of interest were made by groups or individuals keen to take over at Stamford Bridge.
FSG have enlisted the investment banks Goldman Sachs and Morgan Stanley to find a buyer for Liverpool and the six-time Champions League winners and 19-time English champions are expected to attract even greater interest than Chelsea due to the club's global fan base and status as one of football's most historic teams. According to Mann, Liverpool's pedigree on the pitch is only part of the attraction. "We are probably heading into a two-three year recession, but in the past, the revenues of big clubs have proven to be fairly recession-proof if you compare them to other asset classes and other industries.
"If you look at the 2008 global financial crash and the 2007-2009 revenues of the teams in the big five leagues, they went up 13%, year-on-year over that period. The S&P 500 (which tracks the performance of 500 leading U.S. companies on the stock market) lost 43% of its value over the same period. You can see similar numbers in the dotcom recession in the early 2000s.
"So if we're heading into what might be the third major recession of the century, football teams with low downside risk on the performance side are a relatively safe bet in an uncertain market."
Fan loyalty is another big appeal and Liverpool's global support is perhaps only surpassed by United, Real Madrid and Barcelona. In the past, that support has actively protested against owners, helping to force out Hicks and Gillett in 2010, while United fans have been engaged in a lengthy campaign to drive out the Glazer family, who have owned the club since 2005. But while supporter discontent can lead to a negative image of a club, it is unlikely to dissuade potential owners from buying a team like Liverpool.
"Even if a team has a year or two years where it's maybe not quite at the level that it should be or would be expected to be, football is not like a consumer business," Mann said. "If Apple's products went wrong for two years, everyone would go and buy a Samsung, right? It's not quite the same in football.
"It's probably the only form of entertainment that appeals to people all across the spectrum in every part of the globe, so it's delivering a really wide support base, but also an incredibly loyal one.
"People irrationally support a team from birth to death. We do it almost regardless of the quality of the on-field product, so clubs can kind of guarantee a level of commercial revenue knowing that they're unlikely to lose significant numbers of fans, even if the performance of the team isn't at the level that it's expected to be all the time.
"So that's a very privileged position for industry to be in. If you look at wider society, it's really only things like religion and healthcare that share similar dynamics."