State-backed football investments: a viable route for clubs?

INVEST IN SPORT explores the controversial topic of sovereign wealth funds in football – and asks whether clubs are alive to the potential opportunities.

For a variety of reasons, not least the geopolitical complexities of the regimes with which they are associated, sovereign wealth funds have a mixed reputation in football.

Early examples of such transactions, including the acquisition some two decades ago of a minority stake in Juventus by Libya’s foreign investment fund, reportedly under the direct orders of the country’s notorious dictator Muammar Gaddafi, did not help.

However, since then, there have been multiple examples of sovereign wealth fund investments that have been beneficial or even transformative for the clubs involved, both in the UK and across Europe.

Whilst there are understandable worries about takeovers by mega-wealthy entities leading to a competitive imbalance on the field, this is not a concern that is exclusive to state-backed vehicles.

In any case, in the wake of Saudi Arabia’s Public Investment Fund (PIF) snapping up a controlling stake in Newcastle United last year, EFL chair Rick Parry correctly underlined that the “horse has bolted” on sovereign wealth funds investing in football.

And although opposition to state-backed deals can be passionate, many fans of the chosen clubs are willing to express their support for the financial backers in equally vociferous style.

Sourcing finance

With relative stagnation in the sports media-rights market, brands in key sectors operating with tighter marketing budgets, and the cloud of COVID-19 still hanging over matchday attendance – with fans also grappling with cost-of-living constraints – clubs are facing increasing challenges in their efforts to secure finance.

Over the past two years, several have started to turn to US-based private equity funds. Since the pandemic emerged in the early months of 2020, such financial vehicles have acquired controlling stakes in clubs like Burnley in England, Toulouse in France and AS Roma, Parma Calcio and Venezia in Italy.

It remains to be seen how the long-term impacts of these deals will be judged, and it is also unclear what the trajectory for such investments will be over the coming months as inflation continues to surge in the western world. For instance, in the second quarter of this year, investment banking revenues at America’s six largest banks plunged by 41%, excluding trading.

However, against this backdrop of squeezed options on the finance front, nation-backed coffers may be increasingly attractive in football circles, and not only in terms of club takeovers and shareholding acquisitions, but also with sponsorships and media-rights agreements.

State-backed investments

On the latter, the acquisition of French Ligue 1 media rights by Qatari state-owned beIN Media Group’s beIN Sports division in 2011 introduced a major new player onto the domestic media-rights scene and provided a major financial lift for its clubs.

Since then, the funds from the broadcaster’s ongoing commitment to French football have contributed towards major stadium and training ground projects at several clubs, as well as being used to fund the acquisition and retention of footballers.

Indeed, infrastructure developments are continuing to sprout up across the country, with Stade Rennais’ Piverdière 2 training ground upgrade and a new 15,000-seat stadium for Stade Brestois 29 on the horizon.

Furthermore, on the same point, it was hardly a surprise that one of the first pledges by Newcastle’s new owners was to underline ambitions to improve the club’s training ground and stadium facilities. A number of small, but effective changes have already taken place to freshen up the fan experience at St James’ Park.

In football sponsorship, Middle East-based airlines that are effectively controlled by states, such as Emirates and Qatar Airways, have a high-profile presence spanning France, Greece, Italy, Spain and Portugal, as well as the UK. Qatar Airways is also the official partner and airline of FIFA in a deal that dates back to 2017 and will cover the 2022 FIFA World Cup in Qatar.

Indeed, the role of state financing in supporting the hosting of major events like the World Cup and the UEFA European Championship has helped to accelerate football infrastructure upgrades that have left a positive legacy in various countries and benefited the wider public, according to advocates.

Mitigating risk

When it comes to club ownerships, of course, there are risks. But there are with any investment.

After all, this is an industry in which countless takeovers featuring private enterprises have ended up in spectacular failure. As fans of numerous clubs will testify, club identities are just as likely to be trampled over by ownership groups from the private sector as they would by a state.

With this in mind, due diligence with all investments – including those involving financial vehicles with close associations to a nation’s ruling regime – has never been so important. Regardless of the source of the funds, major investments should require months of background checks by the buyers and sellers – and not just a two- or three-week skim through the books, as is commonly the case.

UEFA president Aleksander Čeferin is one leading figure in the game who has no issue with state-linked funds being pumped into football, as long as financial regulations are respected.

“You have to know that without UEFA distributing the funds, out of 55 national associations, close to 50 would be bankrupt and then children couldn’t play in those countries,” he said a couple of years ago.

Therefore, as clubs explore new investment channels in the current climate, it is clear they should not be swift to dismiss viable opportunities that could drive positive change within their organisation and provide benefits for generations to come.

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