Ryan Reynolds' Wrexham aren't alone in football purchases

Ryan Reynolds’ Wrexham aren’t alone in football purchases

The recent sale of English Premier League club Chelsea FC set the EPL record for the most money ever paid for a team at $5.24 billion for the club and its stadium. But according to recent analysis, the best values ​​for teams could lie in little-known towns like Arbroath, Cheltenham and Grimsby.

“From a private equity or US ownership perspective, many clubs outside of the Premier League can be snapped up for relatively little cost,” said Josh Davy, who led research with the finance expert. Sheffield Hallam University sportswoman Rob Wilson on UK potential. sports recovery targets. “A whole bunch of clubs, especially those in Ligue 1 and 2 or [in] Scotland have fewer modern assets, but still demonstrate a dedicated fan base and a piece of history.

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The study, commissioned by BetVictor, a European bookmaker, wasn’t just looking to identify the most valuable football teams – there are six clubs worth at least $3.5 billion and they’ve all finished in the top six of the EPL table last season. The authors primarily wanted to see which clubs had the greatest potential for financial return based on a range of traditional and less tangible financial factors. These factors include the club’s digital footprint; fan base and enthusiasm; the state of the team’s infrastructure and its use; the ability to increase capacity and generate more revenue from sporting and other events; and generally good financial health – figures known given the annual financial information provided by private companies in the UK

The study looked at 114 clubs in Britain and narrowed them down to a top 10 well outside the Premier League, including names only diehard football fans would know. The club with the best value for money according to the analysis? Arbroath in Scotland. According to the authors, it finished second in the Scottish Second Division, but ranks top in terms of value by earning the highest score for the potential its aging and underused stadium could offer to a well-financed new owner.

“My academic mind was warped when clubs like Arbroath came out on top, but the data backs that up,” Professor Wilson said in an email. “Blending typical financial valuation methods with additional variables such as digital footprint, state of infrastructure and audience size allows us to generate a more holistic conclusion about the most attractive clubs for investment.”

Second in the study’s top 10 is Ayr United, also in the second-tier Scottish league. Although they haven’t been in the Premier League since the 1970s, the club has a strong fan base. Other top performers include seven teams in English League 1 and League 2, the third and fourth tier of English football. Only one Premier League team, Livingston FC, who finished in the middle of the Scottish Premier League table, made it into the top 10. In Livingston’s case, Wilson and Davy say it would be beneficial for a team owner to invest in financing transfer window purchases, compared to the cut-rate approach of current owners.

Buying a club based on less tangible factors such as fan base is not unheard of; it was one of the factors that made Leeds United a draw for Italian Andrea Radrizzani and the 49ers’ York family. And buying a lower-tier football team is probably more on the cards as actors Ryan Reynolds and Rob McEIhenney have bought Welsh fifth-tier club Wrexham on a promise to invest more than $2.6 million in the clubs in 2020.

On top of that, interest in owning sports teams is probably at an all time high, at least based on the growing valuations of teams in top leagues. There has been an influx of capital looking to buy into the sports industry, and it’s not out of the question that money can seek value games.

For example, there are approximately 15 active special purpose acquisition companies that have declared themselves open to purchasing a sports team. One problem: most SPACs have too much capital. The smallest active talking team SPAC – the Sports and Sports Counterpress – raised $86 million in its IPO, which means around $69 million would need to be spent on a rules-based club. SPAC. That’s probably way too much for the best values ​​in the study. For example, Grimsby Town FC, at No. 5 on the list, generated $3.4 million in revenue in the year ended May 2021, but without spectators due to the pandemic. Grimsby Town is one of 57 clubs in the analysis likely to be worth less than $12m, with just 24 clubs in the UK likely to be worth $120m or more, based on standard financial metrics.

“It’s just taking money out of the mix and I love everything about it,” said Steve Horowitz, partner at Inner Circle Sports, who has worked on a number of football team deals. “If you go into this thinking, ‘I’m going to buy a lower tier club and get a return on my capital’, you’re setting yourself up for disappointment. In other words, unless you have some sort of superpower or an alternative revenue opportunity away from normal football operations”.

Yet the promotion and relegation model of British football offers the allure of taking on a dark horse and earning a place in the Premier League. Indeed, Manchester City was a Third Division club as recently as 1999, and it fetched nearly $800 million in return for seemingly unlimited spending by the owners. “In the near future, we expect many clubs to try to emerge from the lower divisions with advanced data, wise acquisition and moderate spending on players and team facilities,” Davy said. “With the promise of wealth and broadcast revenue at the top of the pyramid being so enticing, a buyout ranging from $5 million, $10 million or even $25 million could be awarded by a fund with little oversight.”

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