Picking winners and losers amongst EPL owners

As the English Premier League kicks off today Simon Goodley and Mark Kleinman of The Telegraph examined the new club owners and why they have invested in the rash of takepvers that sees 11 of the current 20 EPL clubs with foreign ownership or major shareholdings. "It is true that it's structurally easier to buy an English club than one in any other of the major European leagues. In Germany there are rules restricting individuals from snapping up teams, and it is much the same in France," they wrote. "Meanwhile, Italy has had issues of corruption and poor facilities to contend with and there are fewer major clubs in Spain to attract investors, with last season's La Liga runners-up Barcelona being controlled by its members. So the Premiership is where it's at and American investors in particular reckon now is the time to attack."

According to Paul Rawnsley, a director of accountant Deloitte's sports business group, "there are probably four reasons for all this takeover activity. The first is the increase in television money. The second is that of all the big five European leagues, the English Premier League has most global appeal. Third, English clubs have a tradition of changing hands fairly regularly and fourth there is momentum, or what you might call a bandwagon." Steve Norton, a senior consultant on sport for HSBC Private Bank noted that "the Americans run the business of sport very well and they have recognised that there is an opportunity. In the US they have a huge market but it's not global. They know all about brands; football is the world's most popular game and they are keen on globalisation."

The type of opportunity that the Americans see is demonstrated by studying sporting revenues. Gridiron's National Football League is the richest game by that measure with sales of about £3.3 billion in 2006, according to Deloitte. Major League Baseball is the runner up with £2.7 billion, the National Basketball Association third on £1.8 billion and then the Premier League is fourth at £1.3 billionn. The price each team commands, naturally reflects those figures. "Even with the dollar to pound exchange rate, Premiership clubs are still pretty cheap compared with the franchises in the States," said Norton. "There will be more takeovers and there should be plenty of opportunities. There are a lot of clubs that are ripe for acquisition."

But there are others that don't believe the US pitch. "Anyone who thinks you can apply American marketing methods to English football is mistaken," said Keith Harris, chairman of Seymour Pierce who advised on the sale of Chelsea to Roman Abramovich. "American sports do make money, but not a huge amount. What they don't do is lose it. The likes of NFL operate in a bubble where the structure is designed so that each participant makes money." And, as for English football which operates without a safety net for owners? "Clubs' turnover is growing substantially," Harris said, "but the players and their agents know this. What I can see happening is clubs growing quieter revenues: internet, mobile, sponsorship - things which are less public."

Meanwhile, Philip Long, head of corporate recovery at PKF and a football specialist, told Goodley and Kleinman, "there are clear warning signs that the football economy is overheating. The fact that about two thirds of Premier League clubs have increased their overdraft will be ringing alarm bells at the banks. Meanwhile, Philip Long, head of corporate recovery at PKF and a football specialist, told Goodley and Kleinman, "there are clear warning signs that the football economy is overheating. The fact that about two thirds of Premier League clubs have increased their overdraft will be ringing alarm bells at the banks. Television money has increased but the banks will be worried that the money is effectively bypassing the clubs to be spent on buying and paying increasingly expensive players."

Comments