So You Want To Buy A Sports Team? Opportunities 'Abbondare' In Italy

Nov 12 2014 | 1:52pm ET

By John Goldman and Bryan Meltzer
Herrick, Feinstein LLP

Traditionally, professional sports teams have been largely owned by wealthy businessmen who treated them as hobby investments or public trusts. But in the past few decades, the big four North American sports leagues have evolved considerably. Today, high-net-worth investors and others with a background in alternative investments are all over the sports business landscape. These savvy owners treat their teams just like any other investment, and they deploy a number of strategies to maximize their revenue and increase the team’s value.

Partly because of this new breed of owners, valuations are at all-time highs. If you want to own a piece of an NBA, NHL, MLB or NFL team today, your bank account better have quite a few zeros in it: Just look at the $2 billion Steve Ballmer paid for the L.A. Clippers, or the $1.4 billion Terry and Kim Pegula recently paid for the Buffalo Bills. Those lofty prices have even trickled down to places like Minor League Baseball, which has undergone a similar renaissance in the past decade.

So where can the smart money go to find sports opportunities with significant upside? One league that is gaining attention is Italy’s storied Serie A, the country's top professional soccer league. To date, two North American ownership groups have purchased teams in the league, and more might be on the way.

The first group, which included former hedge fund manager James Pallotta, crossed the pond in 2011. For a relatively paltry €70 million (US$87 million), the group got a 60 percent stake in A.S Roma, a renowned franchise known affectionately in Rome as the Giallorossi, or yellow-reds. At the time, Palotta called A.S. Roma “the most undervalued sports team in the world.” Following through on that claim, the group quickly moved to build Roma into a global brand, along the lines of the English Premier League’s Manchester United. They significantly expanded their media and marketing efforts, striking deals with large corporate sponsors including Disney, Nike and Volkswagen. This year the team also unveiled plans for a new, privately-funded 52,000-seat stadium, which would make A.S. Roma one of the few Italian clubs to own their own ground. 

Bryan MeltzerBryan MeltzerFollowing them into Serie A was New York litigator Joe Tacopina and Joey Saputo, owner of Major League Soccer’s Montreal Impact. The two of them led an investment group that purchased Bologna FC 1909—a longtime Serie A member relegated to the second level of Italian soccer this year—in October. According to Tacopina, who cut his teeth as a minority investor in the A.S. Roma deal, “Serie A is the English Premier League 15 years ago.” 

And therein lies much of the appeal to investors.

Today, five of the most valuable soccer clubs in the world call the English Premier League home, led by Manchester United (US$2.8 billion), Arsenal (US$1.3 billion), Chelsea (US$868 million), Manchester City (US$863 million) and Liverpool (US$691 million). Serie A has just one club in the top ten: Juventus, which at US$850 million is only the ninth most valuable team in the world. 

But 15 years ago, the English Premier League suffered from many of the same issues that hold Italian soccer back today. Back then, EPL clubs were marred by an unhealthy balance of revenues, valuations primarily driven by media rights deals, stadiums falling apart and limited opportunities to generate revenue from merchandising, sponsorships and other commercial pursuits. Those same issues plague Serie A today, where clubs earn a considerable part of their revenue from league-controlled media rights, with the balance coming from underexploited match-day, sponsorship and other commercial pursuits. The goal in Serie A, according to Tacopina, is “an English Premier League-style revenue balance, with one-third of a club’s revenue coming from media rights, a third from match-day revenue, and a third from various commercial pursuits.”

Tacopina also believes that, as more and more like-minded owners enter Serie A, they will push the league to generate more revenue from its media rights. Serie A’s latest television rights package, which was announced this summer, is worth €943 million (US$1.17 billion) per season—an increase of more than €100 million (US$124 million) over the previous three years. That may seem like a lot, but it’s less than half of what the EPL receives for its rights.

While media rights are extremely lucrative, the real money may come from exploiting commercial pursuits that Italian owners overlook. Unlike North American sports leagues, which feature league-oriented constraints, such as salary caps and revenue sharing, Serie A owners keep all of the proceeds from concessions, tickets, merchandising, sponsorships and other commercial pursuits. So if Bologna FC strikes a deal to sell 100,000 jerseys in the U.S., that revenue is exclusively for Bologna. But if the Atlanta Braves do the same thing in Italy, part of that revenue gets split with the other 29 MLB teams. 

That’s a powerful motivator for smart investors who know how to exploit these revenue channels. If Pallotta, Tacopina and Supato are right, five years from now, Serie A may look a lot more like the EPL. Until then, North American investors should take notice that Serie A presents a unique—and possibly disappearing—opportunity to purchase an undervalued sports franchise at a relatively affordable price.

John Goldman is a partner at Herrick, Feinstein LLP, and a member of the firm’s Sports Law Group. John regularly advises franchise owners and investors in a wide range of sports disputes and transactions, including Joe Tacopina’s foray into Serie A. 

Bryan Meltzer is an associate in Herrick’s litigation department, where he has advised clients on a number of high-profile sports-related disputes. While in law school, Bryan worked as a law clerk for the National Football League.


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