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Most businesses are evaluated on their profit generating potential, but football clubs are not like most businesses. Few turn a significant profit due to the unpredictability of results, which drive revenues, and the imperative to reinvest in the team to chase success. United, Chelsea and other top sides belong to an asset class with its own rules.
There are models and formulae of varying sophistication for crunching the numbers. United, to use the most topical example, are listed on the
Buyers may use a multiple of income -
It could pay to think of leading football clubs like luxury brands, putting United and Chelsea in the same bracket as Hermes and LVMH, says
"The current profitability - or lack of - doesn't tell the full story of the 'poput tential' value in the business," says Barlow. "There are parallels here to successful sports teams."
MULTI-CLUB OWNERSHIP There is more common ground in the way that football clubs and luxury brands interact with consumers. "Ultimately, both types of business understand that their 'customers' have a deep emotional connection to the 'product' and brand," Barlow adds. "Investors know that this gives them significant opportunities to create value."
Increasingly, it is not enough simply to assess at the club in isolation. Multiclub ownership models, like those popularised by
Moreover, as the biggest teams become affordable only to the super rich, sovereign wealth funds and private equity, valuation estimates must also consider whether the asset will be part of a wider business portfolio.
Some empires - such as Ratcliffe's
"We are increasingly seeing sports investment groups buying multiple assets across the sports ecosystem - for example
"When investors look at sports properties they are now considering how value can be unlocked through acquisition of complementary assets.
"Therefore when valuing a sports asset we must keep in mind that value could be created beyond the single asset itself."
Valuations continue to rise as the market for teams enjoys a post-pandemic boom. Just weeks after the Chelsea sale recalibrated expectations in football boardrooms, the
It seems certain that, should it go through, United's sale will smash that record, even if debate about the price tag - and how best to calculate it - is destined to rage on.
Investors are now considering how to unlock value by acquiring complementary assets Both football clubs and luxury brands understand their 'customers' have a deep emotional connection
(c) 2023 City A.M., source