CVC fiscal muscle for LaLiga top flights

Article posted by Coliseum, August 9^th, 2021

Image: LaLiga

Spain’s top flights including Real Madrid and Barcelona would get lucrative cash infusions under a proposed 2.7 billion euros ($3.2 billion) deal between the country’s top league and a private equity firm CVC.

‘Reuters’ quoted LaLiga as stating that clubs will have to utilize major part of the money (70 percent) on infrastructure upgrade, such as use of cutting-edge technology.

LaLiga didn’t say what structural improvements it envisaged but these could include stadium and training facilities.

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The rest of the amount can be used on player acquisition (15 percent) and a further 15 percent to finance debts.

LaLiga is the men’s top professional football division of the Spanish football league system.

LaLiga said it had agreed in principle to a “multipronged” deal with CVC including the 2.7 billion euros infusion in return for 10 percent of its revenue, as well as the creation of a newly formed company housing a range of commercial activities in which CVC would also take a 10 percent stake.

CVC Capital Partners is a private equity and investment advisory firm with approximately US$111 billion in secured commitments since inception across European and Asian private equity, credit and growth funds.

The Spanish football league’s Executive Committee later approved the plan, dubbed ‘Boost La Liga’ (La Liga Impulso), and it will now be voted on by all league members at a General Assembly on a date to be set.

‘Reuters’ further stated that the deal values La Liga at around 24.25 billion euros in total and, if approved by clubs, will fund what it called “structural improvements” while offsetting some of the immediate impact from COVID-19.

LaLiga said the cash injection – 90 percent of which will go to clubs – would be distributed on the basis of a formula derived from average audiovisual revenues over the last seven years, when LaLiga started commercializing rights as a collective – implying the top two would get the biggest chunks.

CVC was part of a consortium last year which entered talks to buy a stake in the media business of Italy’s top soccer league, but the deal fizzled out following objections from some clubs.

Alternative revenue streams

With nil gate-related earnings due to the coronavirus scourge and faced with the end of a cycle of rapid growth in the value of TV rights, soccer leagues and clubs not just in Spain are scrambling to find alternative sources of revenue. The failure of an attempt earlier this year by 12 of Europe’s biggest clubs to set up a breakaway Super League ratcheted up pressure on the top clubs.

Under the terms of the deal, LaLiga would set up a new company to house commercial elements, such as sponsorship deals, the league’s technology arm LaLiga Tech and their joint U.S. venture – including plans to stage a league match in the United States – in which CVC would take a tenth.

LaLiga informed that management of the league’s sporting responsibilities and its audiovisual rights business would remain outside the scope of the transaction.

A spokesperson stated, “When it comes to the rights strategy and sales, this will continue to be handled by LaLiga.”

With the boost from the investment, the Spanish league hopes to match or exceed the English Premier League’s business in the next six to seven years, a source close to LaLiga added.

For CVC, which used to own Formula One, the deal would add to its interests in sport. It agreed in March to invest 365 million pounds for a share in rugby union’s Six Nations tournament, grouping France, Ireland, England, Scotland, Wales, and Italy.

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