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Ben Hayes - Charlton Athletic programme

New era in football finance


In the past wealthy individuals from the Middle East and Russia with money to burn bought football clubs as a prestige acquisition or a form of political insurance.   By and large, the days of individuals with deep pockets are over for reasons that have been discussed before on this page such as the fall in the oil price.

What we are seeing, as football clubs go back into the black, is professional investors taking minority stakes.   They aren't investing in the top clubs, which aren't looking for additional funds anyway, but in less glamorous Premier League clubs like Bournemouth and Crystal Palace which can benefit from the riches of the new broadcasting contract.   There is an element of risk because Bournemouth in particular could be relegated, but the investors have clearly factored that risk in.

All except one of the Premier League clubs made a profit in 2014/15.   Admittedly, Chelsea did report a sizeable loss this week, but there were special factors at work there and it could not be said to represent a trend.   The Premier League's operating profit of £614m last year was treble the previous record set by the Bundesliga in 2012/13.

The new UK broadcasting rights deal for the Premier League is worth £5bn or 70 per cent more than the previous agreement.   That is before you add in international rights which are increasing at a rapid pace with the global appeal of the Premier League.

Trevor Watkins, partner at Pinsent Masons reckons that the ability of a club to play itself into trouble and go bust is much less than ten years ago.   Leeds United and Portsmouth are the classic examples of clubs that got into financial difficulties and are yet to recover.

Watkins thinks that outside of the top four a typical Premier League club is now worth £120-£150m compared with the £62m Randy Lerner paid for Aston Villa in 2006 or the £100m valuation put on West Ham when it was bought in 2010.

When Crystal Palace went up to the Premier League in 2013/14, players' wages at the club doubled. However, revenue in the form of television rights, prize money and sponsorship went up by more than 500 per cent.

The Eagles are close to finalising a deal to sell minority stakes to Josh Harris and David Blitzer, two US private equity executives with a track record of buying into sports clubs.   The deal will release funds to upgrade Selhurst Park, but will allow control to remain with a group of wealthy fans who are devoted to the club.

The latest development is at AFC Bournemouth who have sold a 25 per cent stake to PEAK6, a Chicago-based investment vehicle run by financier Mark Hulsizer.  He is a minority owner of NHL team Minnesota Wild.