In the wake of Liverpool’s chastening Premier League defeat to Brighton & Hove Albion on Saturday the Twitter rumour mill went into overdrive.
With Fenway Sports Group open regarding their exploration of a potential sale of the club there have been many potential bidders and interested parties mentioned, from American private equity firms to Middle Eastern sovereign wealth funds. The latter became a hot topic and the source of much social media discourse in recent days with the suggestion that there was serious interest from Qatar and that a deal could be close.
The stance from those the ECHO have spoken to in the US with intimate knowledge of where FSG are currently at with the process maintain that there has, to this point, been no bid for Liverpool Football Club or indeed any real expressions of serious interest that has warranted high level discussion. The narrative around Qatari interest has been driven from social media accounts from Qatar, whose sovereign wealth fund, the Qatar Investment Authority, will be making a sports investment play in 2023 as they look to build on the success of the 2022 World Cup that was held in the Gulf nation.
FSG have a valuation that they would want to be met, and that is $4bn or above to even have a conversation. But the consistent line has been, ever since the press release back in November that explained their ownership stance, that both a full sale and minority investment from a third party to inject fresh capital into the club would be sought, with Morgan Stanley and Goldman Sachs having been engaged since early last year to facilitate the search, which is being led by Jurgen Klopp’s most trusted FSG ally, Mike Gordon.
The same sources have told the ECHO have previously revealed that, notwithstanding an offer that would be too good to refuse, the preference of FSG principal John W. Henry and some key FSG partners, including those whose investment in FSG represents the investments of other people, would be a partial sale that would allow them to retain control while bringing on board a “strategic partner” that can bring both scalable capital and some expertise that would allow them to realise some of the latent value that investors believe exists for major Premier League assets.
The idea of minority investment has led to some to question why anyone would spend hundreds of millions of pounds to acquire a stake in a football club where they had no decisive influence or control. But that is the very nature of investment, there are passive investors and there are active investors. Some simply seek a return further down the line while others play a role in aiding the building of businesses and their revenue streams. Expect the latter to be what FSG will be seeking when it comes to any partners that may come on board.
It is important to note that in the US there is the widely held view among investors and financial circles that there are few sports ownership groups that are held in higher esteem than FSG. Henry has built an empire where they have acquired teams well at good prices and delivered success through a more focused and analytical approach, their comparative lack of spend when it comes to their rivals having been a major bone of contention for some fans. While the lack of investment in the playing side is a real concern in recent times that warrants the understandable ire, the view point in the US is that there are few people in the industry who better Henry and FSG’s record for return on investment and delivering sustained and sustainable success through that.
There is a glut of money in the US ready to be deployed in sport through sports-specific funds worth billions in play and private equity funds and institutional investors having realised that European football is now a viable asset class that has shown remarkable resilience at the top level during the pandemic. Football, especially Premier League football, sits at the very top of the tree and where the NFL, whose teams are valued at multiple of revenues of 10, 11 and 12 as opposed to five, six and seven in the Premier League, have largely domestic fan bases, football has touch points across the globe and it clubs such as Liverpool and Manchester United that boast the biggest fan bases in emerging markets where there is far greater monetisation on the horizon through the prevalence of new technologies, new broadcast deals and more ways to reach fans on an individual level.
Investors won’t care if their money is used to make a play for Jude Bellingham or Moises Caicedo. They trust in those they are partnering with to make the decisions that will, ultimately, allow for the revenue growth of the club and the growth of the valuation of the asset to occur over time, enough for them to realise a significant return on that investment. It is how investment works, the idea of trophy assets is disappearing and there is either a financial return to be had behind investment, as is seen with US investment into football over the past two years, or their is an investment made to bring about the improvement of nations through the diversification of revenue streams and improving their geopolitical position.
The narrative around valuations can also be flawed. There is the idea that unless FSG sell now then they will only see the value of the club diminish, but valuations are based on far more than qualification for the Champions League in one or two seasons, they are based on an element of LIFO (last in, first out) where the valuation of the previous deal sets the tone for the rest of the market. Valuations have not yet peaked and, as has been seen in North American sport through the MLB, NBA and, most notably, the NFL, there is plenty of runway left to travel down.
The argument against that happening in football is that US sports is a closed eco-system, one where promotion and relegation don’t exist and where such things as salary caps are in place. There is also no ‘Wild West’ market like the transfer market, where the price of players is constantly bumped up for the same reason valuations of teams climb; the last deal sets the tone.
Liverpool are, like Manchester United, one of the few football teams with real asset resilience. United have endured a decade of decay and decline under the Glazer family, and while there share price and market cap may have fluctuated the value of the club has not, with the Glazers seeking as much as £6bn for a team that hasn’t won the Premier League since 2013, has smaller revenues than Liverpool, has large debt and hasn’t be…