Value Creation Model in Football.

Introduction to Multi-Club Ownership (MCO).

In the football sector, the concept of Multi-Club Ownership (MCO) refers to the practice in which an entity, whether it be an individual or a legal entity, holds stakes in multiple football clubs.

This approach has become increasingly prevalent in the modern football industry.

Organization of an MCO

The MCO model can take various forms, ranging from holding a minority stake in several clubs to owning the majority of shares in each of them. This structure allows an entity to consolidate its presence in multiple clubs, providing a significant competitive advantage.

MCOs are often structured pyramidally, with a “flagship club” at the top of the hierarchy. This primary club is typically located in a major league and frequently benefits from substantial investments to enhance its competitiveness. Below the flagship club, several smaller “satellite clubs” may also be part of the MCO structure.

 

Objective of an MCO

The primary goal of MCOs is generally to maximize synergies between clubs, resulting in both economic and sports-related advantages. For instance, MCOs can facilitate player or coaching staff transfers between member clubs, establish centralized recruitment strategies, or negotiate more advantageous sponsorship contracts by grouping multiple entities.

The key to value creation often lies in free transfers and intra-club loans, a practice in compliance with UEFA’s Financial Fair Play (FFP) regulations. This approach allows MCOs discretion over transfer fees, promoting the smooth movement of players within their network.

In terms of portfolio, implicit synergies can lead to a higher valuation for the parent group, which may command a premium compared to a Sum-Of-The-Parts (SOTP) valuation of its football clubs, similar to the Buy & Build strategies employed by private equity funds. The MCO structure has attracted the attention of private equity funds entering the sports sector, especially those with a dedicated sports fund.

 

From Red Bull to Brera

A noteworthy figure is that 41.7% of major European clubs are part of an MCO (source: Pitchbook).

Red Bull, which owns five football teams in Europe and America and has partnerships with 13 clubs on five continents, is a leader in the rapidly growing private MCO movement.

One player to watch is Brera Holdings PLC (Nasdaq: BREA), which a year ago became the first Italian football club to be listed on the Nasdaq with an initial public offering of $7.5 million. Brera is the only publicly traded MCO globally, holding six assets in its portfolio of professional sports teams

In a nutshell:

To conclude, Multi-Club Ownership (MCO) represents an emerging form of ownership in football, presenting both opportunities and challenges for the industry.

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