The billionaire takeover of European football

Real Madrid President Florentino Perez and the billionaire Agnelli family are united by a frustration with the economics of European soccer. Their attempt to overhaul Europe's top football league appears to be based on the principle that the top clubs should thrive commercially like the other businesses they oversee.

Both Perez's and the Agnellis' business acumen can only get them so far in football. Perez built up construction groups Actividades de Construccion y Servicios SA and Hochtief AG through cleverly structured acquisitions that made a little equity go a long way. In 2017, he was the underdog challenging Atlantia SpA's plan to buy Spanish toll-road operator Abertis outright with the backing of the billionaire Benetton family. Perez later succeeded in forcing the Italian infrastructure group to bring him in as a partner to thwart an auction.

The Agnellis are active managers of their assets and skilled M&A practitioners. Exor NV, their listed investment vehicle, has comfortably outperformed European stocks over the last decade.

But success in soccer depends heavily on brute financial muscle and outspending the competition. Spanish clubs like Real Madrid and FC Barcelona are owned by their supporters and can only take on so much debt to invest in players and facilities. Juventus Football Club SpA, 64% owned by the Agnellis and chaired by Andrea Agnelli, has already posted losses matching the 300 million euros ($362 million) it raised in a capital increase in 2019.

Given Barcelona's status as one of the world's top clubs, it seems strange it's not more successful as a business, but its revenues are sucked up by its wage bill. Debt-laden FC Internazionale Milano SpA has been in talks with private equity to raise capital. Covid is clearly a factor in all this, but the tricky economics of football, where player costs elbow aside most other claims on resources, were already clear before the pandemic hit.

Perez's European Super League is a blatant attempt to shift the economics back in favor of the top clubs, who draw the biggest audiences, and away not only from the smaller teams but also the players and their agents. The 15 perpetual members would be guaranteed to play each other, increasing the number of big-name contests that attract large audiences. Without the worry of relegation, the pressure to pay up for star talent who might help secure qualification for next year's competition might ease — perhaps.

Clubs would get a stable revenue stream and a higher valuation. It's therefore hard to avoid the suspicion that some of the clubs with commercial owners may have an eye on exiting their investments at least in part.

The obvious response to this would be for UEFA, host of the current Champions League competition, to be more aggressive in curbing overspending on players and exploring other ways for the top clubs to face each other more regularly. So far it's responded with threats to disqualify any participating players from national and international tournaments, and it's mulling a revamp of the league with U.K.-based asset manager Centricus, Bloomberg News reported. 

Business is about providing something that's good value for the people who pay for it, offering fairly remunerated work and leaving the community better off. It shouldn't be hard to run football clubs and competitions with a similar ethos. But while European fans might well want to watch the top teams play each other more often, they may not wish for this to involve a closed-shop competition that harms other clubs.

Perez and the Agnellis may be right that competitions should have a "sustainable financial foundation" and that the current system needs to change to deliver that. But if they see supporters as customers and clubs as corporations, that means giving fans what they want and being responsible corporate citizens.

Chris Hughes is a Bloomberg Opinion columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.

Disclaimer: This article first appeared on bloomberg.com, and is published by special syndication arrangement.