German football is once again opening its doors to private equity

Germany’s Bundesliga has resumed talks with buyout groups for a multi-billion euro investment as the need to bridge the gap with wealthier football leagues is forcing clubs to review their opposition to the private equity industry.

Over the past three weeks, executives at the German Football League, which operates the Bundesliga, have held preliminary talks with buyout firms including Advent, Blackstone, Bridgepoint, CVC and KKR, according to two people familiar with the matter.

One option being discussed is the creation of an entity to control the media and commercial rights of the Bundesliga, paying them up to 18 billion. Any agreement would then likely be put to the vote of the clubs, which include Bayern Munich, Borussia Dortmund and Bayer Leverkusen, early next year.

The talks come a year after Spain’s La Liga and France’s Ligue 1 signed media rights deals with private equity group CVC. At the time, the Bundesliga was also considering raising €300m by selling part of the league’s international television rights, but its 36 member clubs decided against it.

The revival of the plan will test the appetite for private equity investing in a country where it has historically proved unpopular and where football clubs were run as not-for-profit associations until the late 1990s.

In 2005, a senior German Social Democrat politician compared private equity to a “plague of locusts,” though hostility toward buyout groups has since waned. Two years ago, a consortium of PE houses acquired ThyssenKrupp’s elevator business for 17 billion euros.

Germany’s top football clubs, most of which are controlled by their members under the country’s ownership rules and have less debt than their European rivals, felt last year they were in a strong enough position to attract the interest of Reject PE firms.

However, one person close to the current discussions said the talks are now “coming from a different angle”. While clubs searched for funds last year to repair the financial damage caused by the pandemic, many in German football now see new investments as key to football’s long-term growth.

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

The DFL said in a statement: “There are various considerations regarding the future of German professional football. This includes, among other things, the option of a partnership that provides growth capital and expertise for long-term strategic development.”

The buyout firms declined to comment.

The Bundesliga’s renewed push to raise money from its broadcasting rights comes as the sports industry has managed to largely weather the slowdown in the global economy.

The value of US broadcasting rights to the pan-European Champions League and English Premier League has risen in recent deals, while PE funds have acquired stakes in the media businesses of both leagues and clubs.

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

German football clubs tend to have newer stadiums than many 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 the club’s finances in balance.

But while the Premier League, La Liga and Champions League have all increased their international appeal, German football is struggling to gain a foothold. According to Enders Analysis, the Bundesliga generates just €270m a year from international TV rights, a figure dwarfed by the €2bn for the Premier League and €900m for La Liga.

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

At the same time, revenues from sales of domestic rights have barely grown as the low penetration of pay-TV in Germany reduces competition among potential broadcasters, Godard added.

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

However, there is disagreement as to how best to achieve this. Fresh money from the buyout industry could, for example, be used to finance clubs’ pre-season tours abroad and offices in new markets targeted by the Bundesliga.

Another option being considered is building a direct-to-consumer streaming platform, mirroring 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 narrow the gap between the top teams and the rest and make the league more competitive. Bayern Munich has won the last 10 league titles.

“We could find ways to make the competition more exciting,” said another investor involved in the talks. “But this is a long-term project. This is by no means a short-term solution.”

According to people familiar with the matter, the talks remain wide-ranging, leaving room for a variety of potential investments, and there is confidence that an agreement will be reached.

“It is now discussed much more positively than before,” said a process expert. “But there is no guarantee that it will happen. German football is much more traditional, much more ideological and much more social than the English league.”

“In the end, it all comes down to price and how you distribute the money,” they added.

https://www.ft.com/content/1a31cd50-1abe-4e3b-b5b7-a576d0639edc German football is once again opening its doors to private equity

Adam Bradshaw

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