German football reopens its door to private equity

Germany’s Bundesliga has revived talks with buyout groups over a multibillion-euro investment, as the need to close the gap to wealthier football leagues forces clubs to review their resistance to the private equity industry.

Over the past three weeks, executives from Deutsche Fussball Liga, which runs 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 under discussion is to create an entity that would control the Bundesliga’s media and commercial rights, valuing them at up to €18bn, and then raise as much as €4.5bn by selling a 25 per cent stake to external investors, the people said. Any agreement would then be presented to the clubs, which include Bayern Munich, Borussia Dortmund and Bayer Leverkusen, for a vote, likely early next year.

The talks come a year after Spain’s La Liga and France’s Ligue 1 sealed media rights deals with private equity group CVC. At the time, the Bundesliga also explored bringing in €300mn through the partial sale of the league’s international television rights, but its 36 member clubs chose not to pursue it.

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

In 2005, a senior German politician from the Social Democrats likened private equity to a “plague of locusts”, though the hostility to buyout groups has eased since then. Two years ago, a consortium of PE firms acquired ThyssenKrupp’s lift business for €17bn.

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

However, one person close to the current discussions said the talks were now “coming from a different angle”. While last year clubs were seeking funds to repair the financial damage from the pandemic, now many in German football see new investment as key to growing the game long-term.

“If this was seen as just a boost to clubs’ financial health then 100 per cent this would not work”, the person said.

The DFL said in a statement: “There are various considerations regarding the future of German professional football. Among others, these include the option of a partnership that would provide growth capital and expertise for long-term strategic development.”

The buyout firms declined to comment.

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

The value of US broadcast rights for the pan-European Champions League and English Premier League have climbed in the most recently struck deals, while PE funds have snapped up stakes in the media businesses of both leagues and clubs.

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

German football clubs typically have newer stadiums than many of their European counterparts, cutting the need for expensive upgrades. The country’s model of limiting the influence of outside investors has also helped keep club finances on an even keel.

But while the Premier League, La Liga and Champions League have all increased their international appeal, German football has struggled to gain traction. The Bundesliga generates just €270mn a year from international TV rights, according to Enders Analysis, a figure dwarfed by the €2bn for the Premier League and €900mn for La Liga.

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

At the same time, income from domestic rights sales has seen little growth, with the low penetration of pay TV in Germany reducing the competition among potential broadcasters, added Godard.

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

However, there are divisions on how best to achieve it. Fresh funds from the buyout industry could, for example, be used to pay for clubs’ pre-season tours overseas as well as for offices in new markets the Bundesliga is targeting.

Another option under consideration is building a direct-to-consumer streaming platform, echoing 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 live Spanish games on Amazon Prime Video.

Some clubs and investors in the talks think the cash should be used to help narrow the gap between the top teams and the rest to help make the league more competitive. Bayern Munich have won the past 10 league titles.

“We could find ways of making the competition more exciting”, said another investor involved in the talks. “But this is a long-term project. There’s no way this is a short-term fix.”

According to people familiar with the matter, the talks remain wide in scope, leaving room for a variety of potential investments and there is confidence that a deal will be struck.

“It’s now being discussed with a much more positive view than before”, said one person with knowledge of the process. “But there’s no guarantee it will happen. German football is much more traditional, much more ideological and much more socialist than the English league.” 

“In the end, it all depends on the price and how you distribute the money,” they added.

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