The “World Cup⚽” is about to begin and there is no way to stay out of this subject; after all, football is the most popular sport in the world, with an estimated 4 billion fans.
The championship emerged in 1928, created by Jules Rimet, FIFA president from 1921 to 1954, with the aim of uniting nations.
Over the years and with the popularization of the sport, the World Cup has become a grand event and mobilizes an abundance of resources and investments.
As we know, the World Cup is held every 4 years. And what happens in the meantime in the world of football?
Drawing an analogy to business, football clubs have become market giants with investments from private entities and marketing companies that promote the club’s image, exalting its players and selling this euphoria, consumed by the fans.
Between one World Cup and another, clubs create growth and visibility strategies. One of these strategies is club mergers and acquisitions, although quite controversial in football. While for some they are just commercial operations intended to improve the clubs’ sporting and financial performance, for many it is unproductive and prone to failure.
M&A processes in sports bring some difficulties along the way, because even when consolidation is the only way for a club to survive, team members and fans may consider these transactions a loss of the club’s identity and symbols. Especially if we consider that the decision-making process in many sports clubs is quite complicated due to multiple stakeholders. Even if management opts for consolidation, the club’s members can refuse it and block the operation.
The buying and selling of clubs has become an important part of football’s narrative, and very common in Europe and North America. However, the scenario in Brazil is a bit different; football clubs do not buy each other, so acquisitions are limited to people: the manager, the players, and the team in general. In 2021, transactions involving clubs and athletes reached R$ 2.2 billion, according to a report by the Brazilian Football Confederation (CBF).
Business models in football are associated with how clubs operate and how they generate value for their shareholders.
In the world where clubs have shareholders, we have two clear divisions: clubs with football investors, in which shareholders put capital at risk, which needs to be remunerated and returned; and clubs with owners. For these, the remuneration of capital is irrelevant, because the clubs are means of doing politics and building relationships, when not just a passion.
To understand a bit about the application of M&A in the world of football, let’s look at some impressive numbers from this market:
⚽ BRAZIL
- 2022: The Futbraz group bought 90% of the shares of Athletic Club, from São João del Rei.
- 2021: Ronaldo Nazário (former player) bought 90% of the shares of Cruzeiro’s SAF, with an investment of about R$ 400 million.
- 2021: John Textor – American businessman – acquired Botafogo for R$ 400 million and took on the club’s debt, totaling R$ 1.4 billion in the transaction.
- 2019: Red Bull entered into a partnership with Bragantino, taking over the club’s football operations.
⚽ WORLD
- 2022: CAA acquires ICM Partners in a US$ 750 million deal (In 2019, CAA acquired Base Soccer, one of the largest sports agencies in Great Britain, with more than 300 clients. A year later, ICM closed a deal to buy the even larger Stellar Group, in what was considered the most expensive acquisition in the company’s history.)
- The largest ownership group in terms of number of clubs is the City Football Group (CFG), with football clubs in 10 different countries around the world. Today it is the owner or main shareholder of 11 clubs worldwide, notably Manchester City (England), New York City (United States), and Palermo (Italy).
- 2021: ALK Capital, an investment company specialized in sports and media, bought 84% of Burnley’s shares through its sports investment arm, Velocity Sports Partners, and took control. Among the main highlights for the teams are: Arsenal, Chelsea, Liverpool, Manchester City, Manchester United, and Tottenham.
- Over the past 15 years, Red Bull has established itself as a major force in world football, starting with the acquisition and rebranding of FC Red Bull Salzburg in Austria’s domestic Bundesliga market in 2005 before adding the New York Red Bulls (USA), RB Leipzig (Germany), FC Liefering, and FC Bragantino of Brazil.
- Over the past 4 years, 63% of transactions took place at clubs in England or Italy.
What do clubs gain and lose in the World Cup?
A group of players from Brazilian clubs have already reported to their national teams for the World Cup Qualifiers.
Despite the absences in national tournaments during the FIFA window, for the clubs, the championship is seen as good business because the call-ups give visibility to the players and increase their future sale potential.
This year, FIFA will compensate clubs for each player called up for the Qatar World Cup. The organization estimates that it will disburse more than 200 million dollars (more than R$ 1 billion at the current exchange rate) with payments to the respective clubs of each athlete.
The organization will pay about 10 thousand dollars (R$ 52.1 thousand at the current exchange rate) per day, including the official preparation period, for each player called up.
The Brazilian national team reported for the official preparation period on November 14, in Turin, Italy. Tite’s entire team debuts in the competition on November 24, against Serbia.
ON THE M&A FIELD
The latest acquisitions and transactions demonstrate a good example of how large corporations are investing in the football market.
With the visibility of a World Cup, not only the players but also the teams will be watched. Major sporting events increase the demand for future initiatives.
The outlook is positive and the M&A market welcomes the sporting changes.
It’s time to put the team on the field, heading for new victories!
Source: Wall Street Journal / Dow Jones & Company / Goal / CNN Brasil Business / Infomoney