Football from the inside (iv): Multi-club ownership and the future of football. A strategic and financial revolution

In the last decade, the landscape of European football has undergone an unprecedented transformation. Beyond on-field tactics and star signings, a strategic trend has emerged with force: "multi-club ownership" or MCOs. This modality, which involves ownership or decisive influence over several clubs by a single entity or individual, is not only redefining the rules of the game in terms of management and finance but is also attracting financial giants such as Goldman Sachs (https://www.2playbook.com/mas-deporte/goldman-sachs-crea-nueva-division-global-invertir-en-franquicias-deportivas_13232_102.html) to the field. In this article, we will explore the evolution, opportunities, and challenges of the MCO in European football.

History and Evolution of MCOs

Cross-ownership of clubs has been a practice that has gained traction in recent decades. As football has globalised, investors and conglomerates have seen MCOs as a strategic opportunity. MCOs allow owners to diversify risks, share resources and expand their influence in different markets.

Groups such as Red Bull and City Football Group have led this trend, with transfers and collaborations between their affiliated clubs. As an example, Red Bull has made more than 15 transfers between two of its clubs, Red Bull Salzburg and RB Leipzig (some of which are well-known and have significant financial and accounting backgrounds), harnessing talent and generating profits.

However, not all MCO projects have been equally successful. While some have managed to consolidate and generate synergies, others, such as 777 Partners, continue to generate controversy due to the poor results of their clubs after the group's entry (several of them being relegated).

MCOs have gone from being a marginal strategy to a dominant trend in the European football landscape, with major players driving their growth and evolution.

Strategic and Investment Benefits of MCOs

MCOs offer several benefits from both a strategic and investment perspective. These include:

• Risk diversification: By owning multiple clubs in different leagues and regions, owners can diversify their risk exposure. If one club faces difficulties, other clubs in the group can offset those losses.
• Internal transfers: As we have seen with groups such as Red Bull, the ability to transfer players within the group is a significant advantage. It allows clubs to develop talent in one environment and then transfer it to another club in the group when it is ready for a bigger challenge, often at reduced costs.
• Operational synergies: Clubs within an MCO can share resources, knowledge, and best practices. This can include everything from training tactics to marketing strategies.
• Brand expansion: An MCO group can promote a unified brand in multiple markets, increasing its global reach and recognition.
• Revenue optimisation: With multiple clubs generating revenue, there are opportunities to optimise revenue streams, from broadcasting rights to sponsorship and merchandising.

Influence of investment funds, investment banks and business consultancies on the development of MCOs

The ongoing professionalisation in football and the emergence of MCOs is increasingly encouraging support from investment funds and consultancy firms. The impact of these players may be particularly relevant in certain areas:

• Capital and financing: Investment banks and investment funds, such as Goldman Sachs, can provide the capital needed to acquire clubs, finance infrastructure and make strategic signings. This capital injection can accelerate the growth and success of a club or MCO.
• Strategy and management: Business consulting firms, with their expertise in strategy and operations, can help clubs optimise their operations, from revenue management to supply chain optimisation and talent management.
• Revenue diversification: With financial and strategic expertise, these players can help clubs diversify their revenue streams, exploring opportunities in areas such as broadcasting rights, licensing, sponsorship and technology.
• Global expansion: With a global network and experience in international markets, these players can advise and facilitate the expansion of clubs into new markets, maximising their global reach and relevance.
• Networking: These entities often have a vast network of contacts in various industries, which can be beneficial for the creation of strategic alliances, sponsorships and other commercial opportunities.

In short, the entry of investment funds, investment banks and business consultancies into the world of football has elevated the game to a new strategic and financial level. These players bring a combination of capital, expertise and tools that can enhance the success and sustainability of clubs.

Regulation of MCOs

The growing trend of MCOs in European football has led regulatory bodies such as UEFA and national federations to pay particular attention to MCOs. Cross-ownership of clubs can lead to conflicts of interest, especially if two clubs under the same ownership compete or may compete in the same competition (e.g. UEFA).

• UEFA regulations: UEFA has established regulations to ensure integrity and fair competition.
• National regulations: Some national leagues have implemented their own regulations to address MCOs. These can range from restrictions on cross-ownership to regulations on transfers between clubs in the same group.

Some relevant cases

MCOs have produced several success stories (and some not so successful so far) that have redefined the football landscape:

• City Football Group: with Manchester City as its flagship, this group has acquired clubs all over the world, from New York to Melbourne. They have achieved operational synergies, talent development and brand expansion.
• Red Bull: With clubs in Austria, Germany and elsewhere, Red Bull has used the MCO to transfer talent, share resources and expand its brand globally.
• 777 Partners: With a different profile, it has partner teams such as Everton (recently acquired), Sevilla FC, Genoa FC, Standard Liege, Red Star FC, CR Vasco da Gama, Melbourne Victory FC and Hertha Berlin.
• PIF of the Kingdom of Saudi Arabia: With 75% direct ownership in clubs in the same league (Al Ittihad, Al Hilal, Al Ahli and Al Nassr) or Newcastle FC and after this summer's pharaonic investment, it marks the biggest legal, economic and strategic difference with the rest, attracting attention within the State Vision 2030 Plan.
• Pacific Media Group: Although less well known than the above, this group has invested in clubs at different levels of football, seeking opportunities for growth and development.

These groups have demonstrated that, with a clear strategy and effective management, the MCO can be a powerful tool for success in modern football.

Conclusion

MCOs have emerged as one of the most influential trends in contemporary European football. MCOs present clear opportunities but also present challenges in terms of regulation, governance and integrity of the sport. Currently, most groups include top clubs and some satellite clubs from lower categories or from talented countries. Will we see in the short term the inclusion in these groups of high potential clubs such as those in the Spanish Primera RFEF that can take advantage of synergies with the rest of the affiliates? In any case, as MCOs continue to evolve, it will be essential to balance commercial ambitions with the passion and tradition that make football the world's most loved sport.

About the author

Alberto González Andrades has counseled several professional clubs in Spain on a range of strategic and management issues including cost transformation, fan engagement, digital transformation, branding and international go-to-market strategies. Now, he works as Head of Legal & Compliance at C.D. Castellón.