Buying a sports team is getting harder. There are fewer opportunities, and they cost more. The competition to acquire premium properties has forced investors to look at a previously untapped market—second-tier European soccer leagues.
“I think you have a lot of investors in places like the U.S. that are getting priced out of domestic markets,” said Jordan Gardner, who bought F.C. Helsingor, a club in Denmark’s second tier, three years ago. “They think, What would it take to get a second-, maybe not even a second-tier club [in Europe]? One-hundred, perhaps 300 million Euros? I think for those kinds of second-tier clubs, there will be a lot more activity.”
While such clubs can be had at an attractive price point, mid-tier soccer clubs in Europe do not have robust revenue streams—unless they have large talent pools and sophisticated development programs that train players who can then be shipped off to big-money clubs for high transfer fees. “When you’re buying probably any football club in the world, let alone in Europe, it’s just very difficult. There’s not enough revenue to go around,” Gardner said. “Three years later, after a lot of hard work from a lot of our staff and time and patience, [our players] are now sellable assets that we can actually monetize and sell for a real profit.”
Early movers have proven the concept. Chien Lee, the CEO of NewCity Capital, a private equity firm focused on hospitality and sports, started buying second-tier clubs a decade ago. Today he is the biggest shareholder of Barnsley F.C. of the EFL Championship, co-owner of F.C. Thun of Switzerland, K.V. Oostende of Belgium, A.S. Nancy of France, Esbjerg fB of Denmark, and FC Den Bosh of the Netherlands. In 2018 Lee told Forbes that as a long-term investor in soccer, he relies on a data-driven approach to scout talent, focusing on young players to balance the budget.
Elsewhere, billionaire PE investors David Blitzer and Josh Harris bought a controlling stake in Crystal Palace F.C. in 2015. Last year, investment firm RedBird Capital Partners completed its takeover of French soccer team Toulouse F.C.
Also in 2021, billionaire John Textor announced he was buying a significant stake in Portugal’s S.L. Benfica, although the deal fell through. Textor did not respond to Sportico’s requests for comment, but according to the Portuguese press, the deal is back on the table.
In terms of preparing talent and building youth academies, few countries can equal Portugal. Despite its modest population, roughly 10 million, Portugal has produced 4,200 transfer players that brought in a whopping $4.3 billion in revenue in the last decade, according to a recent study by Sports Value, an independent sports research and marketing firm. Brazil, with a population of 220 million, sent out 7,300 transfers that brought in $2.8 billion over the same time period.
“Portugal is a small country but exports more players per capita than any country in the world,” Amir Somoggi, the managing director of Sports Value, said in a phone interview. “Not only do they have talented and driven players and superb training facilities, but they are also the first stop for Brazilian and South American players.”
Portugal may be a player-development hotbed, but it is not the most business-friendly. “Portuguese culture is very insular, and a lot of those bigger clubs in Portugal, they are owned by members,” Gardner said. “There are a lot of kinds of barriers to entry for any foreign investment, let alone American investment, to come into those clubs. Ultimately, it takes two to tango at the end of the day, right? You can have investors who want to put all this money into Benfica or Sporting, but if the other side doesn’t want to sell the club, it is never going to get sold.”
In August, Textor bought an 18% stake in Crystal Palace, and in December he bought Brazilian club Botafogo de Futebol e Regatas. Most recently, The Athletic reported that Textor was in talks to buy the Belgian second-tier club RWD Molenbeek. The billionaire told the Brazilian press that his goal in purchasing multiple teams was to “use [this] global identity to discover and attract talent.”
It’s possible to foresee a world in which the teams associated with Textor advance a player from Brazil to Portugal to Belgium to Crystal Place, where he could fetch a nine-figure transfer fee. “Primeira Liga is the sixth league in Europe, but they send players to all major leagues,” said Rafaelle Poli, the head of CIES Football Observatory, an independent research group based in Switzerland. “Like The Netherlands, Portugal is a small country, with a small broadcasting market. The size of the national market obliges them to stick with this training and trading policy.”
“A distinctive stage in our pathway is our professional development phase,” said Pedro Marques, technical director of Benfica’s training facility and a former associate of Pep Guardiola in Manchester City. The team made 65.7 million Euros from broadcast revenues this season. In comparison, their player transfer revenue came up to 100 million Euros. “We can provide our young players the possibility of competing in the Portuguese Liga 2 (second tier), in the UEFA Youth League, in a U23 League, in the National Under-19 Championship and at many international tournaments we participate throughout the year.”
If Textor succeeds in buying a piece of Benfica, he will be the first foreign investor to own a stake in a Portuguese side, possibly opening the door to further outside investment. Since winning last year’s championship, Benfica has seen its total market value of player transfers top $150 million, and the club is still in the race to qualify for the Champions League playoffs.
“What we have here in Portugal, it’s not only talented players but also the quality of the coaching,” said Diogo Gama, the director of sports projects of Sporting CP, a Benfica rival. “Football is a business. Some clubs can spend more money and buy the players. And then, some countries and leagues can train players to adapt to the European model and sell them to these richer clubs. That’s what we do best in Portugal, train talent.”
People will pay for talent.