roger mitchell
17 April 2021

Soccer’s Siren Song

roger mitchell
17 April 2021

Never before have we seen big finance and PE work so hard to invest in sport, which in Europe is dominated by soccer. Everything else just makes up the summer months every second year. 😉

The reasons are many, but let’s just list a few:

  • Arbitrage in the valuations of our biggest clubs, to those of sports franchises in North America
  • The opportunities to capture better unit economics from improved governance
  • The professionalisation of the commercial operations
  • The improvements to be had in football operations, from a more data-drive approach to player recruitment; and better injury prevention processes around AI
  • The idea that the intense customer loyalty of fans can generate the kind of Silicon Valley lifetime valuations. We can see this in many platform business unicorns with much lesser brand loyalty
  • The recognition that football clubs can really be the ultimate vertically integrated media IP companies

Putting good theory into practice doesn’t always work.

In theory, all this makes total sense. Especially to a US-mentality financial investor. It’s Dick Whittington and roads paved with gold right?

And yet, it doesn’t really work, does it?
Ask Pallotta, Kroenke etc.

Pallotta & Roma FC

                                  Jim Pallotta


In Europe, very differently from across the pond, football clubs are considered to NOT be owned by the cap table, but by the fans!

More specifically, the current owner of a club is seen by fans as merely a transient financier of the tribe. Someone who gets to leave their credit card behind the bar, in exchange for the privilege of calling themselves Chairman and hanging out with the Kool kids. Owning the shares, in fact, is considered by fans as nothing more than a VIP pass to the Boardroom and the fancy seats in the stand.

The club remains the property of the fans.

They say never get into a business transaction where both sides have a completely different concept of the deal. Well, that is exactly what happens here. New owners, with new strategies, full of hopes and ideas for their new toy, with their 5-year plans: they somehow miss that their customers don’t see that as even close to their agenda.



Indeed, these people don’t consider themselves customers in the first place. They are the soul of the club. They have no choice in their fandom and, hence, they are not customers, but apostles.

So any deal is built on these shaky foundations. To put it mildly.

How do you manage a cult?

But that’s just the starter for ten.

It’s then that the really bad news starts……

There is no business like football which includes such a diverse and explosive mixture of stakeholders. Who need to be “managed”.

Indeed, the whole idea can be summarised like this:

Private equity thinks they, as shareholders, have the control necessary to maximise shareholders value. On the contrary, the real control resides with other stakeholders.

What does that mean?

It means that any winning team will imbue, by proxy, real power onto a coach and/or players.

One example

When Inter Milan win their first scudetto in 11 years, it will matter little the structures of power envisaged by Suning and LionRock PE.

Antonio Conte will control the piazza, like a modern day Marc Anthony, exerting that power to influence his own agenda
(normally more players needed to win the Champions League).

Any owner risks life and limb trying to hold firm on respecting that 5 year plan?

Similarly, try and sell Barella when you get the kind of offer that is more that acceptable to ownership.

Check the times of the last flight out of Malpena.

In football, the bottom line is that
legal ownership does not equal control.

Ownership, instead, offers you the kind of lopsided deal you’d run away from 99 times out of 100.

The owner only gets the focus of the fanbase when things are going badly, and the demand for fresh capital comes his/her way. When it’s going well, the kudos and power goes to coaches and players.

That’s a really bad deal. Am I discouraging anyone yet?

Another operational example?

The business of football is about signing the best talent for the lowest cost, on multiyear contracts.

Let’s say you incredibly even manage to do that
(unlikely, in a world of Mino Raiola and player power.)

Any player performing well in year 1 of a contract wants the remuneration clauses adjusted northwards.

Nevertheless, any player stinking out the place, say Hazard at Madrid, will never ever offer a discount.

You get the idea. It’s not symmetrical.

And your credit card takes the strain.

How possibly does this reconcile with
the modi operandi of a private equity firm?

Frankly, it doesn’t. And most PE deals focus on the leagues or rights holders to the events. Smart.

The management of football, for successful financial return, is exceptionally difficult.

  • Yes, bring in process and plans…
  • try and remove the “show me your medals” crowd…
  • use as much hard data as possible to contradict the old bootroom gut instincts…
  • … define a 5 year project and roster management plan…
  • find the right football strategy organigram that lives beyond current coaching staff…
  • know your fans and play ARPU and first party data…
  • … build bridges and communication with the fans in as many ways as possible.

Ultimately, however, your success will depend on AQ.
Your adaptability quotient.

President John F. Kennedy with British Prime Minister Harold Macmillan in Bermuda (by Cecil William Stoughton)

To quote Harold Macmillan, when asked what was difficult about politics, he replied:

events, dear boy, events

Do PE firms get that? Asssess the ability of a club and its management to PIVOT.

But that’s more the Venture Capitalist game. An article for another day.

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