The Decline of America's Infatuation with Investing in the English Premier League

The English Premier League has become a popular destination for American investors over the past twenty years, with almost half of the 20 clubs now under their ownership as they kick off a new season in London.

The interest was turbocharged when a group led by billionaire Todd Boehly acquired Chelsea two years ago.

But they are now souring on English football, according to seven people involved in buying and selling teams. And interest has particularly waned amid Chelsea’s struggles, some of those familiar with the market said. That is despite spending more than £1 billion (S$1.7 billion) on players.

The group – a mix of advisers and investors in the US and UK – said financial losses and little progress on limiting overspending on squads has turned US investors off. There is also the risk of not qualifying for lucrative European competitions or, even worse, getting relegated to the second tier.

“There’s no cost control, and you have irrational competitors like Todd Boehly who distort the market,” said Roger Mitchell, who runs Albachiara Group, a consultancy focusing on the value of sports investment.

The Premier League has a “great product, but it’s not a business”, he added.

Historic clubs such as Manchester United, Arsenal and Liverpool had also fallen under US ownership as investors flocked to England. But it is not just the biggest teams. More than 30 in total, down to Carlisle United in the fourth tier of the English football pyramid, are owned by US entities.

But the clamor has definitely cooled.

Teams such as Tottenham Hotspur, Brentford, Crystal Palace, Wolverhampton Wanderers and West Ham United have been trying to sell minority stakes for months, so far without success. Relegated Sheffield United are still looking for a new owner. Everton have now been up for sale since at least January 2023.

Adam Sommerfeld of Certus Capital, who advises high net-worth individuals on investment in sports, says many of these assets have been over-marketed and over-priced. That is pushing more clients toward women’s teams and niche sports such as padel. The NFL (National Football League) is also expected to soon allow private equity. 

“The American investors we are dealing with like being presented with a unique opportunity,” Sommerfeld said. They want the “possibility of making a short-term impact with a similar-sized investment”.

One representative for a large American sports fund said that the Premier League had become so competitive it was hard to contain costs. In addition, there are signs of less competition for media rights, which has led to a flattening of some recent deals with broadcasters.

Another executive for a US sports group said he believed most Premier League teams will keep losing money unless they get lucky on the sale of players. It is difficult to see tough restrictions on player spending, such as a hard salary cap coming in.

Collectively, the Premier League’s revenues, boosted by packed stadiums and the most lucrative television deals in Europe, have jumped to almost £7 billion a year. Yet the most recent set of filed accounts showed that only four out of 20 teams made an operating profit in the 2022-23 season.

Those losing money include Fulham, which is controlled by Jacksonville Jaguars owner Shahid Kahn, and Aston Villa, part-owned by US billionaire and private equity investor Wes Edens. At Chelsea, the loss before taxes was about £210 million for the past two seasons combined.

A new set of spending regulations this season is being tested, and Richard Masters, the Premier League’s chief executive officer, is hoping that the competition will move towards a more profitable future.

He said recently that the “perfect state” was to have a model that fosters competition but also sustainable finances.

For sure, some US sports funds still rate the league highly as an investment. Ares Management Corp. sees the allure of historic clubs, loyal fan bases and increased demand for sports content, said Mark Affolter, partner and co-head of its sports, media and entertainment strategy.

“We believe in the long-term value and growth potential of the English Premier League,” said Affolter, whose firm backs Crystal Palace via Eagle Football and is also a lender to Chelsea.

But in the short term, sales are proving tougher.

Earlier in August, US sports investor Marc Lasry bought into newly promoted Ipswich Town alongside English musician Ed Sheeran. Before that, the last team to attract an external investor was way back in December when investment company Atairos bought a stake in V Sports, a joint venture of Aston Villa’s owners.

Exchange rates have also lowered interest in buying into clubs, said Christina Philippou, a lecturer in accounting, economics and finance at the University of Portsmouth. The US dollar has lost ground against the British pound since nearly reaching parity in 2022.

“A few years ago, valuations were more favourable for American investors,” she said. “But (now) there are fewer and fewer investors willing to pay for an asset that is increasingly loss-making.” BLOOMBERG