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Football League clubs become the takeover target

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The interest in taking over clubs outside the Premier League is increasing.  A shift in club and investor behaviours has highlighted that it is clubs outside the Premier League have many attractive qualities, resulting in 40% receiving formal or informal approaches from potential equity investors in the last 12 months.

BDO's annual survey of football club finance directors questioned more than 50 clubs in the English Premier League (EPL), English Football League Championship (FLC), Football Leagues One (FL1) and Two (FL2) and the Scottish Premiership (SP).

Overall, 86% of clubs believe their current financial position to be ‘very healthy’ or at least ‘not bad’, with only a handful of financial directors suggesting their clubs’ finances are in need of attention and those that do overwhelmingly expect to continue to operate within Financial Fair Play (FFP) parameters. 

Premier League clubs will earn TV rights allocations of between £100m and £150m this season.  Three-quarters of clubs in the EPL say they are in a very healthy financial position and 93% expect to make a profit before player trading in their next accounting period.  However, despite continued high investor activity, EPL club shareholders are now largely taking a ‘hold’ position despite exit values having never been higher.

The English Football Leagues One and Two are showing how measured financial management, and an appreciation for the changing landscape, is highlighting the potential opportunities for investors to further grow these businesses.  

A staggering 73% of clubs in League One revealed that they had received an informal or formal approach from potential equity investors over the last 12 months.   

Increased investor interest is predominantly coming from international parties, although there is still interest from domestic fans and funds at the lower levels. This suggests a more medium to long-term strategy from investors, recognising potential for future value growth in Football League clubs – something that may not be available in EPL clubs where the impact of enhanced broadcasting rights may already be factored into valuations.

Ian Clayden, Head of Professional Sports at BDO, said: 'On the investor side, increased appetite and international diversity of ownership appears to be a natural reflection of the global appeal of English football.'

'Increased wealth from enhanced media rights and equity investment often leads to the perception that football is ‘all about the money, and in fact we may start to see smaller but more expensive first team squads as clubs sacrifice quantity for quality. However, in response and with a need to attract top talent as well as exploit a lucrative profit stream, clubs appear to have a financial justification for further investment into youth development.'

'Only 14% of our respondents across all the divisions believe that the enhanced EPL broadcasting revenues have had a negative impact on their club.Clearly this is causing some wage and transfer fee inflation (which may or not be sustainable long term) but one might expect market forces and FFP regulation to correct this if necessary.'

'Football clubs are dynamic organisations and will continue to adapt to their environment with unwavering commitment to balancing the interests of all of their stakeholders. As the new season kicks off, we should not lose sight of the fact that on the whole the sector remains both healthy and exciting.'