German football reopens its door to private equity

Germany’s Bundesliga has reignited talks with buyout groups over a multibillion-euro investment as the need to close the gap with wealthier football leagues forces clubs to rethink their resistance to the private equity industry .

Over the past three weeks, executives from the Deutsche Fussball Liga, which rules the Bundesliga, have held preliminary talks with takeover companies including Advent, Blackstone, Bridgepoint, CVC and KKR, according to two people familiar with the matter.

One option being discussed is to create an entity that would control the media and commercial rights of the Bundesliga, valuing them up to €18 billion, and then raising up to €4.5 billion by selling a 25% stake from outside investors, the people said. . Any deal would then be presented to clubs, including Bayern Munich, Borussia Dortmund and Bayer Leverkusen, for a vote, likely early next year.

The talks come a year after Spain’s La Liga and France’s Ligue 1 reached media rights deals with private equity group CVC. At the time, the Bundesliga was also considering raising €300 million from the partial sale of the league’s international television rights, but its 36 member clubs opted not to pursue it.

The plan’s relaunch will be a test of the appetite for private equity investment in a country where it has proven unpopular in the past and where football clubs were run as non-profits until the late 1990s.

In 2005, a senior German Social Democrat politician compared private equity to a “plague of grasshoppers”, although hostility towards buyout groups has since waned. Two years ago, a consortium of private equity firms acquired the elevator business of ThyssenKrupp for 17 billion euros.

Germany’s top football clubs, most of which are member-controlled under the country’s ownership rules and have less debt than their European rivals, judged last year they were in a strong enough position to reject the interest of private equity firms.

However, a person familiar with the ongoing talks said the talks are now coming from “a different angle”. While last year clubs were looking for funds to repair the financial damage caused by the pandemic, many German footballers now see new investment as key to the game’s long-term growth.

“If this was seen as just a boost to the financial health of clubs, it wouldn’t work 100 per cent,” the person said.

The DFL said in a statement: “There are various considerations regarding the future of German professional football. These include, among others, the option of a partnership which would provide growth capital and expertise for further development. long-term strategy.

The buyout companies declined to comment.

The new push from the Bundesliga to raise funds for its broadcast rights comes as the sports industry has largely succeeded in defying the slowing global economy.

The value of US broadcast rights for the Pan-European Champions League and English Premier League has soared in the most recent deals, while PE funds have taken stakes in league and club media businesses.

“Sports rights are a long-term growth market. The Bundesliga is [a] top football property with a solid history and a record of growth over time,” said an investor involved in the process. “The league needs a partner to renew the approach.”

German football clubs generally have newer stadiums than most of their European counterparts, reducing the need for expensive upgrades. The country’s model of limiting the influence of outside investors has also helped keep club finances in balance.

But while the Premier League, La Liga and the Champions League have all increased their international appeal, German football has struggled to gain traction. The Bundesliga generates just €270m a year from international television rights, according to Enders Analysis, a figure dwarfed by the €2bn for the Premier League and €900m for La Liga.

“The Bundesliga is an inward looking league,” said Francois Godard, media analyst at Enders. “They didn’t seek international opportunities like the Premier League and La Liga did. Their clubs have been less active in building up a global fan base than Manchester United or Real Madrid.

At the same time, revenue from domestic rights sales grew little, as Germany’s low pay-TV penetration reduced competition among potential broadcasters, Godard added.

A senior manager at a top German club said there was now a “clear vision” of what needed to be done, with international expansion the top priority.

However, there are divisions on how best to achieve this. New funds from the buyout industry could, for example, be used to pay for clubs’ pre-season tours abroad as well as office space in new markets targeted by the Bundesliga.

Another option under consideration is to create a direct-to-consumer streaming platform, echoing a move by La Liga, which recently launched its own streaming service in China, Thailand and Indonesia. UK-based fans can also pay to watch Spanish matches live on Amazon Prime Video.

Some clubs and investors in the talks believe the money should be used to help bridge the gap between top teams and others to make the league more competitive. Bayern Munich have won the last 10 league titles.

“We could find ways to make the competition more exciting,” said another investor involved in the talks. “But it’s a long-term project. There’s no way this is a short-term fix.

According to people familiar with the matter, the talks remain wide-ranging, giving way to a variety of potential investments and it is certain that a deal will be reached.

“It’s being discussed now with a much more positive outlook than before,” said a person with knowledge of the process. “But there is no guarantee that will happen. German football is much more traditional, much more ideological and much more socialist than the English league.”

“Ultimately it all depends on the price and how you distribute the money,” they added.

James R. Rhodes