Multi-club ownership (MCO) is rapidly reshaping the global sports landscape, especially in soccer, creating a blend of opportunities and controversies. The trend sees investors acquiring stakes in multiple teams, often elevating commercial revenues and market values, but not without significant opposition from traditional sports communities.
A Transformative Trend
The concept of multi-club ownership is simple: investors buy stakes in several teams simultaneously, leveraging shared sponsorship deals and global branding to their advantage. Clubs within these networks frequently experience a commercial revenue boost of 20-30%, thanks to unified sponsorship arrangements. Additionally, MCO-affiliated clubs typically enjoy a 15-25% higher market value compared to independently owned clubs in similar leagues.
Technological advancements are also playing a crucial part in refining the MCO model. Artificial intelligence and data analytics have become essential tools, helping investors optimize operations and enhance investments. "There is a synergy operationally and investment-wise with best practices that you can do across all of the IPs that you touch," according to RedBird Capital, reflecting the broad-reaching impact of these technologies.
Controversies and Opposition
Despite the financial benefits, MCOs face considerable opposition. European soccer supporters are predominantly against the idea, fearing it may undermine the traditional values of the sport. The resistance from the traditional sports communities is palpable, yet large-scale legislative intervention to roll back MCOs appears unlikely. "Rollback is out of the equation unless governments do it through legislation forcing owners to divest their interests (highly unlikely)," says one source.
The influence of MCOs isn't limited to men's soccer. Michele Kang notes that "multi-club ownership is ‘a necessity’ for women’s soccer to continue growing," indicating the model's importance in expanding women's sports.
Economic Realities
Many private equity groups involved in MCOs have a clear strategy: they focus on acquiring ‘low-hanging fruit,’ with a predefined exit strategy in mind. "Most private equity groups buying up the ‘low-hanging fruit’ will have an exit in mind before they buy their stake," a source mentions. This approach means that long-term operational involvement isn't always the goal, and the financial intricacies behind MCOs can lead to substantial shifts within the clubs involved.
The potential for economic downturns also plays a role. Financial institutions' reluctance to meet profit targets could trigger "fire sales," where clubs are forced to sell players and face possible relegation.
A Growing Phenomenon
The numbers speak for themselves: MCO structures soared from 117 soccer teams in 2021 to a projected 336 by 2024. Red Bull exemplifies this growth, owning multiple clubs worldwide, including RB Leipzig, NY Red Bulls, Red Bull Brasil, Red Bull Salzburg, and Red Bull Bragantino.
Diamond Baseball Holdings (DBH) provides a similar example in baseball, owning 35 of the 120 affiliated minor league franchises and holding contracts with MLB to negotiate national sponsorships for all 120 minor league teams.
A Look at Profluence Capital and Westchester SC
Profluence Capital is making strides to develop a comprehensive MCO ecosystem, seeking new opportunities within this expanding market segment. Meanwhile, Westchester SC has been breaking records and signing notable players, including a former Premier League star concluding his career. The club also inked the second-largest jersey sponsorship deal in the USL and set a record as one of the fastest teams to move from an expansion agreement to public announcement within four months.
As MCOs continue to proliferate, their impact on the sports world will undoubtedly grow. While they offer significant commercial and financial advantages, balancing these benefits with the cultural and traditional aspects of sports will remain a challenge. "Permanent capital is an appropriate type of capital for sports — and while the public markets aim to serve that, they’re not ready yet," says RedBird Capital, hinting at a future where MCOs might be a cornerstone of sports financial structures.