Thursday, October 28

Goals at the pace of venture capital | Business


Madrid-Barcelona derby played on April 10.
Madrid-Barcelona derby played on April 10.Oscar J. Barroso / Anadolu Agency via Getty Images

The venture capital fund CVC Capital Partners, specialized in investing in the professional sports sector, is back to its old ways. After failing in its attempt to convince the Italian Serie A, the entity that organizes the soccer championship in this country, of its plans regarding the commercial rights of the Soccer League, the British soccer giant private equity has ventured to sell the same idea in Spain. This time, his proposal to LaLiga has more options to reach the bottom of the net (although the two biggest clubs in the competition, Real Madrid and Barcelona, ​​have already rejected the agreement that has been reached).

CVC’s foray into soccer builds on its previous experience in the field of formula 1 and rugby. According to the plan of the venture capital firm, which must still be approved by the clubs at the LaLiga general assembly, CVC will pay 2.7 billion euros for 10% of a new entity that will focus on increasing income from rights to television and digital broadcasting and sponsorship of Spanish football. Ultimately, it aims to match the € 3.6 billion the English Premier League receives each year.

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Although the operation fixes the value of LaLiga at 24,300 million euros, CVC is not paying an arm and a leg. LaLiga’s national and international rights were worth an estimated € 2 billion in the last three-year cycle and are likely to reach € 2.3 billion this year, two well-informed industry sources told Breakingviews. This means valuing LaLiga at just over 10 times its commercial income, before CVC’s capital injection. The roughly € 17 billion Series A purchase plan valued the Italian League at nearly 14 times its sales, based on estimates that revenue would drop to € 1.1 billion this year.

That succulent offer was blocked by a minority of Italian soccer leaders, reluctant to give up too much possession. However, the same will happen in Spain is unlikely. Just over 40 first and second division clubs will be able to vote, most likely by a simple majority. This makes it difficult for heavyweights such as Real Madrid, which is directly opposed to the agreement, or Barcelona, ​​which has been left without one of its greatest assets (and also from the League itself, such as Leo Messi), to derail the plan.

Similarly, the agreement could make it difficult for these big names to go to a European Super League, as they threatened to do last April, failing in the attempt. CVC’s initiative for Serie A included high financial penalties for any team that wanted to separate from the National League, which irritated Juventus, probably the most cutting-edge club in Serie A. The LaLiga system would surely be the same, limiting the future options of the Spanish teams. Italian clubs are not the only ones going to be watching with interest from the touchline.

The authors are columnists for Reuters Breakingviews. Opinions are yours. Translation is the responsibility of EL PAÍS. Learn more at Breakingviews.reuters.com.


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