Several trends have ushered in a new era of institutional involvement in sports across North America and Europe. Pandemic-induced financial strains, liquidity needs, and demand for growth capital have led to a robust private equity dealmaking landscape over the past five years. Deal value across Europe’s “Big Five” football leagues skyrocketed from €66.7 million in 2018 to €4.9 billion in 2022, and in the US, relaxed ownership restrictions across the major leagues have led a wave of institutional capital to seek out minority stakes across the NBA, NHL, MLB, and more. However, as private equity investors funnel capital into sports entities across North America and Europe, several important differences between the two markets are worth examining.
2003: Roman Abramovich, a Russian oligarch, purchases Chelsea FC for roughly £140 million, marking one of the first high-profile foreign investments in European football.
2005: During a player lockout, Bain Capital offered to buy the entire NHL for $4 billion, pitching to combine all 30 teams into one entity to streamline operations, boost revenue, and negotiate down salaries. At the time, the league’s financial mismanagement had led to losses of $500 million in the two seasons leading up to the player lockout. While the bid ultimately wasn’t accepted, it marked one of PE’s first attempts to break into sports in the US.
2006: CVC Capital Partners acquires a majority stake in Formula 1 for $1.7 billion, marking one of the first major private equity investments in sports.
2019: Major League Baseball (MLB) becomes the first major U.S. sports league to allow private equity and institutional investment.
2020-2021: The NBA, NHL, and MLS follow the MLB, opening their ownership standards to allow for private equity minority investments.
2022: A consortium led by Todd Boehly and Clearlake Capital Group bought Chelsea FC from Roman Abramovich for £4.25 billion (about $5.23 billion).
2023: Over two-thirds of NBA teams have a private equity connection or investment. In Europe, 35% of football clubs are funded via capital from private equity, venture capital, or other private consortiums.
2024: The average value of an NBA team is $4 billion. MLB teams are worth an average of $2.64 billion, and NHL teams are worth about $1.31 billion a pop — a third of what Bain tried to pay for all 30 clubs.
The European and North American sports markets present distinct differences, offering varied investment opportunities. Closed league systems and equal, predictable revenue-sharing structures have coalesced to create a reputation for North American sports entities as durable, blue-chip, and reliable assets. Conversely, performance-based revenue distribution, relegation, and promotion systems, and looser ownership structures in Europe create more upside and downside potential.
Many sports investors have also noted that Europe lags behind the US regarding the professionalization and sophistication of how sports assets (and the industry more broadly) are managed. Take European football. In a recent panel, Behdad Eghbali, co-founder of Clearlake, noted the disparities between fan bases and market caps across European and North American sports markets. The NFL, for example, has roughly 200 million fans with an approximate market cap of $150 billion. With a cumulative market cap of around $30 billion despite boasting 4 billion fans, European soccer leagues show significant potential for investment growth and valuation increases through operational improvements.
In Europe, professional sports leagues employ a promotion and relegation system where the weakest teams in top leagues are demoted, and the strongest teams in lower leagues are promoted each season. This dynamic contrasts sharply with North American leagues, which predominantly operate as closed systems.
From an investment standpoint, relegation and promotion systems can pose notable risks for PE investors on several fronts. For one, this meritocratic approach can incentivize riskier financial strategies. Since on-field performance directly impacts league standings, talent can become a more material and challenging cost to navigate than in the North American landscape. For example, relegated clubs often face pressure to invest substantially in top-tier players to regain promotion. Yet, concurrently, they often experience sharp revenue declines from reduced broadcasting rights and sponsorships.
This said, the relegation and promotion framework equally allows investors to access meaningful upside if a team does gain promotion. Scooping up teams priced after relegation and successfully moving them up in a league provides access to rapid valuation growth from boosted broadcasting revenues, new sponsorships, and fan acquisition.
For example, Redbird reportedly acquired an 85% stake in Toulouse following their 2020 relegation. Through investment, the team was promoted back to Ligue 1. A similar scenario unfolded with Newcastle. When Saudi Arabia’s public investment fund, PCP Capital Partners, and Reuben Brothers bought the team, they immediately funneled capital into the midseason transfer window to buy new players to help the team avoid relegation. As a result, Newcastle went on to qualify for the Champions League.
These dynamics act as an additional value creation lever but ultimately lead to more volatile revenue streams and challenge investors’ ability to forecast long-term financial performance. In contrast, closed league systems provide more predictable franchise values and greater revenue stability.
This said, an intriguing trend to watch in European football, the largest market for sports private equity investing in Europe, will be the impact of the Union of European Football Associations’ (UEFA) recent financial sustainability regulations to improve cost controls across the ecosystem. The Squad Cost Rule, a key aspect of this initiative, limits spending on wages, transfers, and agent fees to 70% of revenue. Enacted in 2022, clubs have a three-year compliance period.
However, research from Arctos shows that teams are already adopting more conservative spending behaviors. For instance, wage growth across the Big 5 European leagues saw a compound annual growth rate (CAGR) of 7.4% from 2014 to 2024, outpacing revenue growth at 5.5% CAGR. In 2024, revenue growth is projected to surpass wage growth for the first time in ten years. Additionally, spending in the January transfer window halved across the Big 5 leagues.
Broadcasting earnings, which account for a significant portion of revenue for teams in the Big Five European leagues, are partially distributed based on performance. While there’s often a base amount that all teams receive, roughly 50% (in most leagues), a significant portion is allocated according to league position and viewership.
For investors, this model can lead to unpredictable revenue streams. This said, it also presents opportunities for meaningful upside. There is certainly an appeal to obtaining stakes in a top-performing team and capitalizing on performance-based revenue distribution. For example, in La Liga, Barcelona and Real Madrid have historically received much higher shares of broadcasting revenue than other clubs due to their consistent outperformance and larger fan bases.
In contrast, North American teams primarily use equitable revenue-sharing models. Teams get paid the same amount from their league, regardless of whether they’re in first or last place. Earlier this year, the Chiefs celebrated their third NFL trophy in five years. Yet, all 31 NFL owners benefited equally from the league’s revenue-sharing structure, each receiving a $400 million check.
European leagues generally have more liberal ownership structure rules than U.S. leagues, allowing for more diverse investment approaches and greater flexibility for PE firms. Unlike US leagues, which often limit PE investment to minority positions, many European leagues don’t cap private equity ownership. For example, in France’s Ligue 1 and Italy’s Serie A, private equity firms can own teams outright. Obtaining majority positions can be appealing from an investment perspective, as investors can mitigate the governance limitations that can be associated with US-based minority sports investments.
Europe also has fewer restrictions surrounding multi-club ownership (MCO) structures than the US, where the major leagues have strict rules around owning multiple teams within the same league. The MCO structure closely resembles a typical buy-and-build PE strategy. Centered around a “stand-out club,” add-on investments are typically made in smaller clubs with less prestige.
Clubs can then capitalize on synergies across the platform by sharing injury prevention data and training techniques, accessing greater brand reach, conducting performance analysis on a larger scale, etc. Additionally, while controversial, MCO provides greater control over the transfer market, enabling the development and movement of players between clubs, which can generate transfer fees.
Specifically, the MCO structure has become a hallmark of PE investing in European football. In the 2023/2024 season, 41.7% of the “Big Five” European clubs are part of an MCO structure, compared to 36.7% from the previous season. More broadly, MCOs have more than quadrupled from 40 clubs in 2012 to more than 180 in 2023 over the past decade. However, a notable limitation with MCO structures lies in UEFA regulations, which forbids two clubs from competing in the same competition if they are majority-owned by the same investor.
For example, last year, the UEFA examined conflicts of interest arising from Toulouse and AC Milan’s (both owned by RedBird Capital) participation in the same European competition. The clubs had to commit to operating separately, and RedBird founder Gerry Cardinale had to step down from his position on Toulouse’s board for the clubs to be cleared to compete.
Ultimately, private equity firms are increasingly targeting sports teams and related assets across North America and Europe, attracted by rising valuations, lucrative value creation opportunities, and sports’ enduring cultural power. However, sports investing isn’t void of challenges. Investors must navigate evolving consumer dynamics, long holding periods for returns, and exit uncertainty.
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