The Sport Investment Studio is an investment and advisory platform dedicated to transactions a the intersection of Sport, Media and Entertainment based in Paris. Visit us for more information www.sportinvestmentstudio.com
Welcome to another edition of our weekly newsletter on sports investment.
This week, the centre of our attention is a potential revolution that’s brewing in French football. The custodians of French football are looking to replace the LFP with a Premier League style company that clubs would own themselves, along with other investors. Could this save the national game from bankruptcy and stagnation? Who else could become a shareholder? We bring you our analysis and ideas.
I hope this newsletter gives you some useful background, insights and ideas on sports investments trends that we identify and focus on.
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A revolution beckons in Ligue 1, will it finally save French football?
Philippe Diallo, President of the French Football Federation has unveiled a new plan to overhaul the organizational structure of the Ligue 1 and 2; the change, if ratified, will have major consequences for how the league’s commercial future, and could save it from impending ruin.
Here are the proposed changes:
The LFP, which serves as the administrative body responsible for the top two tiers of French football, would be abolished alongside its commercial/media arm, LFP Media. It would be replaced by a new, club owned entity like the English Premier League; CVC Capital Partners would retain a stake in the body.
The new body would not be helmed by an elected leader, but by a board appointed CEO, again akin to the Premier League. This would soothe rising tensions within and among the boardrooms of the league.
The FFF would maintain oversight and the rights to overrule the new body on the DNCG, which oversees club finances, and disciplinary matters.
Yet-to-be-finalised reforms on multi-club ownership and Financial Fair Play.
Introduction of a four-team playoff system to determine the champion.
The set of reforms will now be presented before French senators on the 10th of June, with hopes that it may be passed through Parliament before the end of the year. It would be part of a broader package to stabilise and revive French football, and could be implemented as early as 2026.
Our opinion and ideas:
While discussing Ligue 1 and 2 clubs with US investors, we have heard many complaints about the perceived standard of governance within the LFP. Investors are often turned away by the possible conflicts of interest in French football; the distribution of media rights revenues is often imbalanced, and recent leaks from league board meetings have shed light on the lack of alignment between key stakeholders. There is also a lack of entertaining content that is being packaged and distributed, which in turn brings down the value of the league’s media rights. Finally, the lack of oversight on how the money injected by CVC Capital Partner has meant that most capital has been invested in transfers and agent fees, and not on meaningful infrastructure to grow the league.
Despite these issues, foreign investors still value the league as a sporting product, particularly due to France’s pedigree to scout, train and export some of the finest talent in world football. Other streams of revenue aside, the access to these talent-producing capacities is valuable in and of itself, given that Ligue 1 clubs have cumulatively made over 250 million euros in transfer market over the past decade. That figure rises to above a billion when you remove PSG’s net spend, which is a gross outlier. Ligue 1 is the only top 5 league with a positive transfer balance over the period, and even Ligue 2 clubs have made good profit. Being 658m euros in the green, Ligue 2 is the seventh most profitable league in the world over the past decade in terms of transfer profits. Of course, transfer profits don’t always end up boosting the bottom line, but they represent the potential French football has.
These proposed reforms stop short of former Olympique de Marseille President Jacques-Henri Eyraud, who advocated for the creation of a closed 16-team league with playoffs at the end of a regular season. To us, they represent genuine hope and could revive Ligue 1, but on their own, they are perhaps not enough to solve French football’s governance troubles.
Our proposition would be to have another major private investor alongside CVC, one that would acquire a stake in the newly formed company. Together with the FFF, CVC and this new company could help in leveraging the new organisational structure to improve governance, bring greater accountability, and iron out perceived conflicts of interest within the league.
Ideally, this partner would be one that has extensive pedigree in media, with someone like Canal+, Vivendi, or a French telecom operator being ideal. Not only would these partners balance out the relationships that exist between CVC, PSG, beIN and the rest of the league’s stakeholders, they would bring much needed knowhow in media that would help elevate Ligue 1’s content offerings to a new level. The prospect of a long term partnership with an ownership stake would also lengthen the horizon of planning, and take things beyond the present media rights cycle. Short-term planning and a lack of vision have brought the league to the crisis that it faces today, and thus a real, long term solution is what it needs at the minute.
📰 Read more:
All you need to know about the Ligue 1’s impending revolution. (L’Equipe)
Other pieces of news that interested us:
Lenore Sports Partners, a conglomerate of private equity veterans, has acquired a 5% stake in Portuguese giants SL Benfica. The deal marks the first time American private capital has entered Portuguese football. (Bloomberg)
Mandatum Asset Management’s Growth Equity II fund has invested EUR 20 million in Finnish golf equipment manufacturer Takomo. The company has seen 10x revenue growth in two years, primarily due to a strong focus on influencer marketing and due to their pricing strategy, which is more affordable than traditional equipment providers. (Mandatum)
Reddit co-founder Alexis Ohanian has acquired a 10% stake in Chelsea’s women’s team for around GBP 20 million in a marquee deal for women’s football. Ohanian has a strong track record in women’s football, and was previously a founding owner of Angel City FC. Over the past few months and years, valuations in women’s teams have been soaring, but returns are still elusive. Ohanian’s investment is a strong vote of confidence in women’s football, and comes weeks after Chelsea sold their women’s team to their holding company for an eyebrow raising 200 million pounds. The Athletic’s piece, which we have linked, sheds some light on where these valuations are coming from. (BBC / The Athletic)
AS Monaco and luxury furniture brand Roche Bobois have extended their partnership until 2027, signalling strong prospects for sport’s integration with luxury. Monaco are uniquely well-placed to make the most of this, given their location. (AS Monaco)
Mark Cuban, Rashaun Williams and Cannon Stephen have launched a $750 million fund aimed at taking minority stakes in major league teams in the USA. (PE Insights)
That’s all for this week! For more content, follow us on LinkedIn, and if you’re interested in learning more about us, please visit www.sportinvestmentstudio.com