Kicking it Across the Pond: Venture Capital in the European Soccer Market
By Sam Croteau ’25 Associate
The best feature of iOS16 isn’t the new ability to edit text messages or the ability to delete them. It’s that I’m now able to have eight rotating backgrounds — all of which are of my favorite soccer team. I’m a fervent supporter of Arsenal, a red-adorned and cannon-crested team based in north London. My brother cheers for Liverpool, a team from the port city of the same name. To further fragment the family loyalties, my father chose Chelsea, another London-based team, and one of Arsenal’s biggest rivals.
While all three teams are some of the most prestigious in the nation, with each being considered part of the ‘Big Six’ teams in the league, they all have another aspect in common: they’re all owned by Americans. They’re not alone — eight of the twenty teams in the league are owned by Americans. Americans own another eight teams in Italy’s top division, as well as teams from the Netherlands to Spain. This prompts the question: with so many potential investment opportunities at home, why are American firms and families choosing to invest in soccer leagues an ocean away?
To answer this question, we have to first stay on the North American continent, and in the realm of the biggest American sports leagues. Private equity ownership in the NFL and MLB is practically non-existent. Only individuals can own NFL teams, and firms are only allowed a minority stake in MLB teams. In contrast, private equity firms are an essential part of ownership in England’s top division, the Premier League. The best example may be of Southampton, which is 80% owned by the London-based investment firm, Sports Republic. American firm Silver Lake owns a percentage of Manchester City, Clearlake Capital helped lead the American takeover of Chelsea, and Redbird Capital invested in Fenway Sports Group: the company that owns Liverpool. And while not in the realm of private equity, Manchester United shares are publicly traded on the NYSE. In comparison to the loose regulations of England, the regulations governing the NFL and MLB make the landscape more hostile for investment, causing investors to look across the Atlantic.
These European leagues also offer comparable revenue growth to American leagues. To bombard you with statistics, MLB revenues increased by 30% between 2015 and 2019, for an annual growth rate of 7.5%. Per a Deloitte report, revenues in the European soccer market increased by 10% over the 2020–2021 season, with the Premier League growing at an 8% rate. This growth is also represented in the television deals, with the newest deal representing an 18% increase on the prior. Interestingly, the majority of this increase is due to overseas broadcast revenue, which increased by 30%. This goes to show the opportunity associated with an investment in the Premier League as it grows on the world stage.
Back in America, the NFL, NBA, and MLB garner the most revenues of any sports leagues in the world. Going hand in hand with these tremendous revenues are the valuations associated with the teams, with the average valuation for NFL teams being $3.5 billion, $2.4 billion for NBA teams, and $2.2 billion for MLB teams. These figures prove to be prohibitive to all but the richest buyers. Chris Anderson, an economist at the London School of Economics compares the two, saying, “Soccer teams [in Europe] are extraordinarily undervalued compared to sports properties in the United States.” The average valuation for a team in the aforementioned Premier League, is just under $1 billion. The richest team in Italy’s top division is worth a ‘mere’ $640 million. Add in the fact that a club like Newcastle United, currently sixth in the Premier League, can be bought for less than what the average Major League Soccer (MLS) club is worth, and you have a situation ripe for investment. For context, MLS clubs, based on future projections, are valued at almost twelve times their revenue. Investors thus face a choice, take the risk on a potentially overvalued asset in America, or turn to the undervalued assets of European clubs.
Currently, Arsenal sits atop the Premier League. With the youngest team in the league, the future looks good. With a team of young, skillful, and charismatic players, I’m doing the best I can to not buy a dozen jerseys. I’ve fallen in love with the English game, as have hundreds of thousands of other Americans. While Arsenal’s league position may be short-lived, especially given the might behind state-funded Manchester City, the potential for investments in European soccer clubs seems to be one that has growth opportunities for years to come.
Sam is a sophomore from Bolton, MA pursuing a degree in Business Administration with a minor in Economics. On campus, Sam is the Business Manager of the Student Senate and a Writing Assistant at the Connors Writing Center. His interest in business and entrepreneurship started with the video game FIFA, where he would trade cards on the in-game market rather than playing the game. He joined the fund to learn the principles of venture capital, and sees the Fund as one of the most unique opportunities offered at UNH.