The wave of multi-club ownership (MCO) is reshaping the landscape of global sports, with soccer at the forefront of this transformative trend. Investors are increasingly purchasing stakes in multiple teams simultaneously, creating networks that span continents and leagues.
The MCO Phenomenon
Multi-club ownership is an alluring proposition for private equity groups seeking lucrative opportunities in the sports arena. These groups often acquire lower-tier or financially struggling clubs with the aim of enhancing their market value before executing an exit strategy. "Most private equity groups buying up the ‘low-hanging fruit’ will have an exit in mind before they buy their stake," highlights an unnamed source.
The appeal of MCOs lies in operational and investment synergies. RedBird Capital underscores this point by emphasizing, "There is a synergy operationally and investment-wise with best practices that you can do across all of the IPs that you touch."
European Soccer Faces Mixed Reactions
The surge in multi-club ownership, particularly in European soccer, brings both opportunities and controversies. Clubs within these networks often enjoy a 20-30% increase in commercial revenues, thanks to shared sponsorship deals and extensive global branding efforts. This surge in revenues translates to an estimated 15-25% higher market value for MCO-affiliated clubs compared to independently owned counterparts in similar leagues.
Despite the financial advantages, multi-club ownership is facing staunch opposition from traditional sports communities. The concept has not resonated well with European soccer supporters, who are predominantly opposed to the idea. Yet, the prospect of legislative intervention to roll back MCOs seems slim. "Rollback is out of the equation unless governments do it through legislation forcing owners to divest their interests (highly unlikely),” as pointed out by another source.
Technological Advancements and Financial Risks
Technology is playing a pivotal role in refining the multi-club ownership model. Artificial intelligence and data analytics are revolutionizing how clubs operate and maximize their potential within these networks. However, the model is not without its pitfalls. Financial institutions' reluctance to meet profit targets could trigger "fire sales," where players are swiftly sold off, and clubs could face the threat of relegation.
Extending Influence to Women's Soccer
The influence of multi-club ownership networks extends beyond men's soccer, making significant inroads into women's soccer as well. Michele Kang articulates the necessity of this model, stating, "Multi-club ownership is ‘a necessity’ for women’s soccer to continue growing." This trend promises to bring in more investments, better facilities, and enhanced visibility for women's teams.
Growth and Expansion
The scale of multi-club ownership is rapidly expanding. Soccer teams under these structures have skyrocketed from 117 in 2021 to a projected 336 by 2024. Noteworthy examples include Red Bull's extensive portfolio, which spans the globe with clubs like RB Leipzig, NY Red Bulls, Red Bull Brasil, Red Bull Salzburg, and Red Bull Bragantino. Meanwhile, in baseball, Diamond Baseball Holdings (DBH) owns 35 of the 120 affiliated minor league franchises, securing contracts with Major League Baseball (MLB) to negotiate national sponsorships for all minor league teams.
Case Study: Westchester SC
A testament to the rapid growth facilitated by MCO structures comes from Westchester SC. The club has inked the second-largest jersey sponsorship deal in the United Soccer League (USL) and signed a former Premier League player for his final career stage. Remarkably, Westchester SC set records as one of the fastest teams to go from an expansion agreement to public announcement in USL history, achieving this feat in just four months.
With the number of teams under MCO structures on the rise, advocates argue that "permanent capital is an appropriate type of capital for sports — and while the public markets aim to serve that, they’re not ready yet," as RedBird Capital affirms. As this model continues to evolve, it brings with it a complex mix of financial benefits, technological advancements, and cultural pushbacks, firmly establishing multi-club ownership as a defining force in modern sports.