Bloomberg latest news, DFL alliance decisive decision-making, Deutsche Bank will be responsible for matchmaking, looking for strategic investment partners. Sources close to the matter revealed that DFL's diversified investment strategy is not limited to loans, but also includes the disposal of media assets, such as the Bundesliga, Bundesliga B broadcasting rights of the shares.DFL intends to cede up to 20% of the shares, valued at or up to 18 billion euros, a move that will bring about 3.6 billion euros in revenue, helping to fill the financial gap.
Media broadcasting rights, a scarce resource at the top level of the game, often hold value-added potential.The DFL's move has attracted a lot of capital. More than 10 private equity firms are expected to submit applications by September, with offers expected to be unveiled by the end of the year. Leading private equity firms such as Advent Capital, Blackstone Group and CVC Capital are expected to participate in the deal.
Facing huge losses, the DFL has had to seek external financial support and is even preparing to sell its broadcasting rights. Since the outbreak, the Bundesliga and Bundesliga B have lost more than US$1.1 billion. in the 2020-21 season, total revenues for the Bundesliga and Bundesliga B fell by 10.5 percent to US$4.5 billion. Sharp declines in gate receipts and a downturn in media rights deals have exacerbated the financial pressures on the DFL. 2022 DFL releases show that ticket sales are down by about 95% compared to the pre-outbreak period, while clubs face about $1.4 billion in pending taxes and a nearly 50% reduction in their workforce.
Of the 36 teams in the Bundesliga in the 21/22 season, only Freiburg, Leipzig and Bayern made a profit, while the others lost money, with Hertha Berlin and Borussia Dortmund making the worst losses at €77.9 million and €72.8 million respectively.
DFL CEO Donata Hopfgarten has emphasized the need to explore new paths to lead German professional soccer into the future. the DFL has long been on this quest, with KKR, Bridgepoint and CVC shortlisted for private equity investment in the Bundesliga's overseas broadcasting rights in 2021, but talks were eventually called off.
Selling future broadcasting rights has become a common means for sports leagues or clubs to resolve their financial woes. Sports Big Business analyzes that broadcasting rights of top leagues or clubs are extremely rare in the sports industry, and that quality media rights are the most competitive segment of the competition and performance industry, which can bring in huge revenues and put the holder at the top of the sports industry pyramid.
Rights contracts for top events have been climbing in recent years, for example, in February 2022, the Premier League announced record revenues of £5.3 billion for overseas broadcast rights over the next three seasons. The investment-enhancing attributes of media rights are one of the main reasons why they attract private equity.
The value of Premier League broadcasting rights continues to climb. For the luxury clubs, even if the results are not good, they can still get stable income, the New York Knicks is an example in recent years. As a result, powerful clubs with enough strength are more willing to sell future broadcasting rights for cash.
Barcelona has repeatedly set an example in the sale of future broadcasting rights, twice selling 25% of its TV rights for the next 25 years for €600 million in revenue. Manchester United are also considering selling some of their future TV rights to expand Old Trafford and cope with net debt of up to £496 million.
Clubs need to be cautious about selling future broadcasting rights; overdrawing on the future could lead to increased debt, which in turn could put the club in a difficult position.
In recent years, the sports world in Europe and North America has seen a wave of private equity investment. If the DFL reaches an agreement with private equity, the Bundesliga will become the third of Europe's "big five" leagues to take the private equity route. Ligue 1 and La Liga have also accepted private equity investment. At the club level, the penetration of private equity is also increasing, such as the Boston Red Sox and Golden State Warriors in the NBA.
Return on investment is an important factor in investors' decisions. Data shows that the return on investment for the top teams in the United States is between 15 and 20 percent, much higher than the 7 percent for the Standard & Poor's 500 Index. This high rate of return has attracted more private equity firms to invest in the European and North American sports scene.
With many sports leagues or clubs struggling under the impact of the epidemic, private equity capital has seen an opportunity to "take the plunge". With such a high return on investment, more private equity firms are expected to take the plunge.
