New Delhi: Both have a distinct history. Both are defined in red. Both are highly coveted sporting properties. But that is where the similarities to the current fishing operations by the owners of Manchester United and Liverpool end. Both marquee English football clubs are available in whole or in part for the right price and the right investor. If Liverpool is the story of a football operation on the rise, then Manchester United today is the story of a club that has been trying to find a new direction for far too long. If Liverpool is a tale of popular owners trying to take advantage of a kind of zenith, Manchester United is a sordid saga of unpopular owners bemoaning their failure to check their stagnation.
Both narratives show how the underlying value of each club has changed since 2016. Of the 11 super-clubs in European football, Liverpool have more than doubled their enterprise value (EV), the third-best jump behind Tottenham Hotspur and Paris-Saint Germain (PSG). ), according to Football Benchmark, a business intelligence tool. Unlike the other two, this is done without piling up debt. In contrast, Manchester United is one of the two clubs whose EV has declined.
Barring the global COVID-19 shock, Liverpool’s EV advantage is significant and consistent, reflecting on-field success and fan-drawing narratives. Other clubs have also shown similar jumps in EV, but some are linked to the high risk, high return strategy of signing big players (for example, PSG signing Neymar and Lionel Messi) or the burden of debt from a new Huh. Stadium (Tottenham).
premium asset
EV is the basis of how much money a club will get if it is sold. However, prized possessions usually command a mark-up, especially in sports. Earlier this year, another marquee English club was sold to Chelsea for $3.2 billion—a nearly 30% premium to its 2021 EV. In a 2022 report, Football Benchmark explained this markup: “…the paucity of clubs of such stature for sale, combined with the ego-driven desires of investors to possess such ‘trophy assets’ are probably the biggest drivers for such expensive quotes.”
In that sense, despite their current troubles, Manchester United are likely to command a handsome premium. Similar is the case with Liverpool, one of whose interested buyers is reportedly Mukesh Ambani. What makes Liverpool attractive is that, despite having the second highest revenue among English clubs in 2019-20, they had relatively low levels of debt. A valuation of $4-6 billion is being reported for both the clubs.
asset play
Liverpool have also fared better on revenue in recent years, bridging the gap with Manchester United. During this period, it brought in a new manager, German Jürgen Klopp, who crafted a style of play with flair, assembled a team in that spirit, and wrapped it with spirit and values. The team has won a lot and has been smartest in trading for players. Its owner since 2010, Fenway Sports Group, also the owner of the Boston Red Sox baseball team, is set to make the roughly $500 million purchase price a wealthy multiple.
But for a football club, even the most marketable one, there are limits to revenue growth. Unlike companies in the traditional corporate sectors, they cannot double the revenue in three to five years. Also, they are depending on the big jump in TV rights money. Therefore, like the teams in cricket’s Indian Premier League, more than revenue and growth plays, football clubs are asset plays.
minority loss
Being an asset play rather than a growth play reduces the investment case for football clubs for minority investors. Many of the top clubs are listed on exchanges. Apart from Manchester United, Italy’s Juventus, Germany’s Borussia Dortmund and Netherlands’ Ajax Amsterdam are the others. Barring short blips involving an increase in performance (Dortmund) or the arrival of a superstar (Cristiano Ronaldo at Juventus), his stock performance has been underwhelming.
When the Glazer family acquired United in 2005 for approximately $950 million, it stripped stock from minority shareholders and delisted the company. He listed it again in 2012. Over the past 10 years, the club has returned just 4.7% in compounded annual returns. If they complete the sale, they’ll get a nice pay day and minority shareholders could get a temporary bump.
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