The Impact of Multi-Club Ownership in Global Sports

Multi-club ownership (MCO) is rapidly changing the landscape of global sports, particularly soccer. This concept, involving investors acquiring stakes in multiple teams simultaneously, has surged in recent years, revealing both opportunities and controversies.

The Rise of Multi-Club Ownership

The appeal of MCO to private equity groups primarily lies in commercial and financial synergies. As RedBird Capital puts it, “There is a synergy operationally and investment-wise with best practices that you can do across all of the IPs that you touch.” Private equity groups often aim for an eventual exit strategy rather than long-term operational involvement. This approach is succinctly encapsulated in the observation that "most private equity groups buying up the ‘low-hanging fruit’ will have an exit in mind before they buy their stake."

Technological advancements are refining the MCO model, with artificial intelligence and data analytics playing significant roles. This progress is enhancing the operational efficiency and decision-making capabilities of these ownership networks.

Commercial Success and Market Value

MCO networks are showing substantial financial benefits. Clubs within these networks frequently experience a 20-30% increase in commercial revenues due to shared sponsorship deals and global branding efforts. Furthermore, the average market value of MCO-affiliated clubs is estimated to be 15-25% higher than independently owned clubs in comparable leagues.

Red Bull is a prime example of successful MCO implementation, owning multiple clubs worldwide, including RB Leipzig, NY Red Bulls, Red Bull Brasil, Red Bull Salzburg, and Red Bull Bragantino. Another notable entity, Diamond Baseball Holdings (DBH), owns 35 of the 120 affiliated minor league franchises in baseball and has contracts with MLB to negotiate national sponsorships for all 120 minor league teams.

Challenges and Opposition

Despite these financial successes, MCO faces significant opposition, particularly from traditional sports communities. Soccer supporters in Europe are predominantly opposed to MCOs. Many fear that these structures prioritize financial returns over sporting integrity and community values. Yet, a large-scale legislative intervention to roll back MCOs seems improbable. As one source notes, "Rollback is out of the equation unless governments do it through legislation forcing owners to divest their interests (highly unlikely)."

The economic pressures inherent in MCOs pose additional risks. Financial institutions' unwillingness to meet profit targets could result in "fire sales," where players are sold off, and clubs are potentially relegated. This financial volatility is a significant concern for fans and stakeholders alike.

Impact on Women's Soccer

The influence of MCOs is not confined to men's soccer. It extends to women's soccer as well, where it is seen as vital for growth. As Michele Kang asserts, "Multi-club ownership is ‘a necessity’ for women’s soccer to continue growing." The structured support and investment that MCOs can offer are viewed as crucial for the development and visibility of women's soccer at both professional and grassroots levels.

An Expanding Landscape

The number of soccer teams under MCO structures has surged from 117 in 2021 to a projected 336 by 2024, illustrating the rapid expansion and acceptance of this ownership model. Profluence Capital is also looking to create a multi-club ownership ecosystem, further indicating the broad appeal and future potential of these structures.

The USL saw Westchester SC inking the second-largest jersey sponsorship deal in its history and signing a former Premier League player for his final career stage. Moreover, 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.

In a market where permanent capital is seen as appropriate for sports, RedBird Capital emphasizes that "while the public markets aim to serve that, they’re not ready yet." This sentiment underscores the current reliance on private investment and the growing influence of MCOs in shaping the future of sports.

In conclusion, while multi-club ownership presents clear commercial benefits and growth opportunities, it also raises valid concerns about the traditional values and integrity of sports. The ongoing debate will likely continue as MCOs further entrench themselves in the global sports ecosystem.