The recent sale of English Premier League club Chelsea F.C. set the EPL record for most money ever paid for a team, at $5.24 billion for the club and its stadium. But according to a recent analysis, the better values for teams may reside in little known towns like Arbroath, Cheltenham and Grimsby.
“From a private equity or American ownership point of view, many clubs outside of the Premier League can be picked up for a comparatively modest fee,” said Josh Davy, who led a study with Sheffield Hallam University sports finance expert Rob Wilson on potential U.K. sports takeover targets. “A whole host of clubs, especially those in League One and Two or [in] Scotland have fewer modern assets, but still demonstrate a dedicated fanbase and a piece of history.”
The study, commissioned by BetVictor, a European bookmaker, didn’t seek just to identify the most valuable soccer teams—there are six clubs worth at least $3.5 billion and they all finished in the top six of the EPL table this past season. The authors mainly wanted to see which clubs have the most potential for financial returns based on a series of traditional financial and less tangible factors. Those factors include the club’s digital footprint; fan base and enthusiasm; the state of team infrastructure and its utilization; the opportunity to expand capacity and generate more income from both sports and others events; and generally good financial health—figures that are known given the annual financial reporting disclosures of private businesses in the U.K.
The study looked at 114 clubs in Britain and boiled them down to a top 10 well outside the Premier League, including names perhaps only die-hard soccer fans would know. The best value club according to analysis? Scotland’s Arbroath. It finished second in Scotland’s second division but comes out on top for value by scoring best for the potential its aging, under-used stadium could provide for a new, well-financed owner, according to the authors.
“My academic mind bent out of shape when clubs like Arbroath come out on top, but the data backs it up,” professor Wilson said in an email. “Blending typical financial valuation methods with additional variables such as digital footprints, infrastructure condition and audience size allows us to generate a more holistic conclusion on the most attractive clubs for investment.”
Second in the study’s top 10 is Ayr United, also in the second level Scottish league. Even though it hasn’t been in the top division since the 1970s, the club has a strong fan base. Other best values include seven teams in England’s League 1 and League 2—the third and fourth levels of English soccer. Only one top division team, Livingston F.C., which finished mid-table in the Scottish Premier League, made the top 10 values. In the case of Livingston, Wilson and Davy contend it would benefit from a team owner investing in financing transfer window purchases, compared to the cut-rate approach from the current owners.
Buying a club based on less-tangible factors such as fan base isn’t unheard of; it’s one of the factors that made Leeds United a draw for Italy’s Andrea Radrizzani and the 49ers’ York family. And buying a lower-tier soccer team is probably more of a possibility since actors Ryan Reynolds and Rob McElhenney purchased fifth-tier Welsh club Wrexham for a promise to invest more than $2.6 million into the club in 2020.
On top of that, interest in owning sports teams is likely at an all-time high, at least based on the increasing valuations for teams across the top-level leagues. There has been an influx of capital seeking to buy into the sports industry, and it’s not out of the realm of possibility money could seek out value plays.
For example, there are about 15 active special purpose acquisition companies that have stated openness to buying a sport team. One problem: Most of the SPACs have too much capital. The smallest active team speaking SPAC—the sports-executive-heavy Counter Press—raised $86 million at its IPO, meaning about $69 million would need to be spent on a club based on SPAC rules. That is probably way too much for the study’s best values. For example, Grimsby Town F.C., at No. 5 on the list, generated $3.4 million in revenue in the year ended May 2021, albeit without spectators due to the pandemic. Grimsby Town is one of 57 clubs in the analysis that probably are worth less than $12 million, with only 24 clubs in the U.K. likely worth $120 million or more, based on standard financial metrics.
“Just take out making money from the mix and I love everything about it,” said Steve Horowitz, a partner at Inner Circle Sports, which has worked on a number of soccer team deals, including Wrexham on behalf of the actors. “If you’re getting into this thinking, ‘I’m going to buy a lower level club and have a return on my capital,’ you are setting yourself up for disappointment. That is, unless you have some sort of super power or alternate revenue opportunity away from normal football operations”.
Still, the promotion and relegation model of U.K. soccer offers the allure of taking a dark horse and winning a place up into the Premier League. Indeed, Manchester City was a third-division club as recently as 1999, and it took in nearly $800 million in return for seemingly limitless owner spending. “In the near future, we expect that many clubs will try and ‘moneyball’ their way out of the lower divisions with advanced data, shrewd acquisition and moderate spending on team’s players and facilities,” said Davy. “With the promise of riches and broadcasting revenue at the top of the pyramid being so alluring, a buyout ranging from $5 million, $10 million or even $25 million could be ascribed by a fund without much oversight.”