Where to invest? Reflections and lessons from a sports club owner’s acquisition journey

American sports executive Jordan Gardner is Chairman of the Board, Managing Partner and Co-Owner at FC Helsingør. Three years after his group acquired the Danish soccer club, he outlines to Invest in Sport the key financial decisions that were taken, and what he would have done differently.

Before he led an American investment group in acquiring Danish football club FC Helsingør in early 2019, Jordan Gardner tested the waters of sports club ownership by snapping up minority stakes in Swansea City AFC in Wales and Dundalk FC in the Republic of Ireland.

However, little could have prepared him and his fellow investors for the scale of the challenge when they took the reins at a club that required wholesale changes.

While Gardner was well aware that Helsingør’s form at the time of the takeover meant a second successive relegation was inevitable, other unforeseen issues were lurking beneath the surface at the club.

With Helsingør now on an upward trajectory and knocking on the door of the top-tier Superliga, Gardner can reflect on those tumultuous early stages that left his ownership group facing various challenges – before Covid-19 added a further curveball.

Here, Gardner offers Invest in Sport his thoughts on the investment decisions that were taken, what he and his colleagues did well, what they would have done differently, and the lessons learned from a rollercoaster journey of investing in a European soccer club.

 
Invest in the team

Whatever preparations have gone on beforehand, the first 90 days after the deal has closed are decisive in terms of analysing the club’s assets on and off the pitch, according to Gardner.

“Like the vast majority of new owners in European soccer, our immediate priority was investing in first-team infrastructure,” he says.

“The club was dropping into a lower division, where it would be hemorrhaging money, so we had to invest to improve performances and get out of that division as quickly as possible.

“When I say ‘first-team infrastructure, it is not only about signing players. There are also health and wellness provisions for the squad, training facilities, training camps… lots of things that go on behind the scenes that are vital.

“Only after focusing on that could we turn our attention to other areas, like developing the academy. The local commune was opening a new stadium, so fortunately we didn’t have to worry about stadium infrastructure.”

Invest in people

As referenced, the all-important performance of the first team does not solely rely on the 11 players who step onto the field – and Gardner is well aware that proactively investing in people off the pitch can accelerate results.

“You need to ensure the right individuals are in place to enhance the organisational structure and accountability,” Gardner says.

“People ask me how we’ve had success at Helsingør, and I will always point towards having a good coach, good sporting director, good CEO, good finance director and good connectivity with the board, as well as good players.

“It was clear from our conversations with everyone at the club in those early days that there was a poor working environment. So, that needed to be addressed quickly and decisively by bringing in the right personnel.

“A lot of investors fall into the trap of bringing in an executive from one of their other businesses to run a club, almost as an afterthought. However, you need to make sure the people who have responsibility actually understand the club and the market.”

Understand your market

Getting to grips with the nuances of the club’s host market is vital from the very outset of identifying a viable investment opportunity.

According to Gardner, a common mistake by investors – especially from North America – is that they do not appreciate the key differences between various European football markets.

“I spent a lot of time on the ground visiting clubs across Europe to explore potential upsides in different markets,” he says.

“Denmark felt like the right place for various reasons. Everyone speaks English, it is not an oversaturated market and there is a really good pool of domestic talent. It is also a good place to experiment with things – and it was always our goal to find a club where we could develop talented American players.

“There were other markets we liked, including Germany, although the 50+1 rule made us think twice.

“Given that most of the European clubs I have seen are so poorly run as businesses, I feel very strongly that it is important to have a majority stake so you can set your own agenda.”

Be realistic with your ambitions and exit plan

Aware of the potential pitfalls, Gardner’s group deliberately avoided exploring opportunities to acquire a big club. Instead, it is hoped that the experience gained at Helsingør can one day be replicated by the group at a club in a top-five European league.

“You’re in the wrong business if you just want to make money,” Gardner says. “If you don’t know exactly what you are doing with a big club, then you can lose a lot of money very quickly.

“I had made some strategic small investments in clubs previously to get a feel of the landscape, but I did not want to be a co-owner of a big club straight away.

“There are limitations with the ceiling of a market like Denmark, because it is not a top-five European league. However, if we can run the club well, get it into the Superliga and identify good talent, there’s no reason why we can’t do that at a bigger club in the future.”

Be patient…

The broad strategy at Helsingør – to win promotion and develop players who can ultimately be sold at a handsome profit – is replicated at many medium-sized clubs. However, Gardner underlines how a long-term outlook is required.

He says: “Do investors have the patience to wait for four, five or six years to develop players that can be sold at a profit?

“In this business, you need a time horizon of at least three years, and no-one should be thinking about exiting in less than that. However, you will need to constantly evolve your business model given the variables, such as promotion and relegation.

“The hope is that we will ultimately see a return on investment, but you have to look at the realistic prospect of losing money for the first two or three years – and plan accordingly.”

Due diligence

Detailed planning, of course, should begin with due diligence ahead of the transaction. However, it is a process that Gardner believes is broadly taken for granted by prospective buyers.

“From my experience, very few investors take due diligence seriously,” he says. “The point of diligence is to understand the risk factor – and it should not be rushed. Our process for purchasing Helsingør took about six months, but some club owners have gone on record as saying they spent as little as two weeks carrying out due diligence.

“Due diligence in itself can be a challenge if the club wasn’t run properly before. For example, we were receiving unexpected invoices months after the takeover.

“We carried detailed due diligence – including looking at league governance and external factors – and even then there were surprises. We thought the club was in a much better financial state than it actually was.”

Have a financial buffer

The assumption that Helsingør had previously been a well-run club came back to bite Gardner and his fellow investors, and the group had to pump in more money than originally anticipated in the year following the takeover.

According to Gardner, this outlines the limitations of traditional due diligence, and underlines the importance of factoring in unexpected expenses.

“When you are carrying out due diligence, you are looking at a snapshot of the past,” Gardner said.

“If I did it again, I would try to extrapolate more data to come up with more future projections. You have to remember that most clubs that are up for sale or transacted are distressed assets, and it is a common mistake from investors to assume things have been run okay in the past.

“We didn’t have a buffer for unforeseen costs, and that was a mistake as we weren’t prepared for the wholesale changes that were required.

“Luckily, we were able to raise some more capital within the ownership group and get past the challenging first six to 12 months. If you can get past that hump as a club owner, then you will probably be okay.”