CVC hovers as financial crisis looms for European soccer
CVC Capital Partners, the private equity group with a history of sporting involvement, is said to be mulling over a range of soccer investments across the top leagues of Germany, France and Italy.
Citing people familiar with the matter, Bloomberg has reported that CVC, which is becoming a major player in top-tier European rugby and also held a controlling stake in motor racing’s Formula 1 between 2006 and 2016, is now turning its attentions to top-tier European soccer, as the ongoing coronavirus pandemic leaves leagues and clubs struggling financially.
CVC has now reportedly offered financial support to the DFL, the German professional soccer league, and has expressed interest in either buying a stake in the DFL’s commercial division, or providing debt financing.
The DFL is looking at these potential financing options as a backup solution, with both the top-tier Bundesliga and the second-tier 2. Bundesliga set to lose substantial amounts of broadcast money if the current 2019-20 season cannot be completed due to the virus.
While the league and Sky Deutschland, the Bundesliga’s main domestic broadcaster, have apparently now reached an agreement over payments should the league restart as planned on 16 May, if the restart cannot take place then the DFL could well need alternative emergency funding measures.
Even if the league does restart (it has been on pause since mid-March) and the broadcast payments are received, teams will lose out on revenue from ticketing, hospitality and other matchday spending.
A Bundesliga spokesperson has now said, however: “We’ve received many proposals in the last (few) weeks that sound good in theory but that do not reflect the reality of the football business… Therefore, none of these deals will happen with the Bundesliga.”
Bloomberg’s sources also said that CVC is looking at buying a stake in AS Monaco, the French top-tier soccer club currently controlled by Dmitry Rybolovlev, who bought a majority stake in the club in 2011.
Despite the club having been one of Europe’s highest spenders at points in the last nine years, Monaco will miss out on Europe’s prestigious pan-continental Champions League competition next season.
In early 2019, a report from Uefa found that Monaco had a net debt of €147 million ($158 million).
In Italy, meanwhile, multiple reports have said that CVC is now looking to take a 20-per-cent stake in the country’s top-tier Serie A, for around €2 billion.
In return for that investment, CVC would be granted a role in selling broadcast rights to Serie A for 10 years, from 2021.
That role is currently occupied by the Infront sports agency, but that firm’s deal to be Serie A’s domestic and international media rights advisor ends next year.
Serie A, according to financial consultancy firm KPMG, would lose between €550 million and €650 million in total if no further matches were played this year, with lost revenue from broadcasting, sponsorship and match day income.
At a meeting earlier this month, the league’s clubs reaffirmed their unanimous commitment to finishing the current 2019-20 league season, which was stopped in early March, if at all possible.
However, they have not yet received their last instalment of broadcast rights fees for the season from either Sky Italia or DAZN, the league’s domestic rights-holders.
The two networks were scheduled to pay the €230 million they owe to the clubs by 1 May, but have so far failed to do so.
DAZN has already said it will not be making any payments across its nine international markets for content not yet delivered, while Sky has now written to Serie A to inform the league it will not be making its final instalment.
However, that is understood to be a bargaining tool, with Sky willing to make its payment should it get a reduction in next season's bill.
With soccer leagues and clubs across Europe expected to struggle financially over the coming months, investment from groups such as CVC could well become much more common.
Earlier this month, Fausto Zanetton, the chief executive of sports capital advisory firm Tifosy, told Sportcal that private equity firms now have an opportunity to take their involvement with, and investment in, European soccer to the next level.
Zanetton, who spent over 15 years as an investment banker at Goldman Sachs and Morgan Stanley, said: “Potential investors will probably be able to pick and choose all over Europe and make some good investments, given that owners who would have previously wanted crazy money will now be a lot more reasonable.”
Zanetton said he expected the valuation of top-tier teams across Europe to go down “between 20 and 30 per cent”.
He added: “The sellers will have potentially undergone significant economic damage because of the crisis, or they will have looked at the risks involved with owning a club and baulked at that… Owners will end up wondering how much more capital they want to deploy after having seen the risks attached.
“Short-term, it will definitely be a buyers’ market, and they will be able to exploit the financial weakness that will be there."
Click here to read the entire interview, which also includes Zanetton’s assessment of how soccer clubs across the continent will fare if the shutdown continues.