Liverpool and Man Utd are united in contrasts

Both narratives trickle down to how the inherent value of each club has changed since 2016. Among 11 super-clubs in European football, Liverpool has doubled its enterprise value (EV), the third best jump after Tottenham Hotspur and Paris-Saint Germain (PSG), according to Football Benchmark, a business intelligence tool. Unlike the other two, it’s done so without stacking up debt. In contrast, Manchester United is one of the two clubs whose EV has declined.

Barring the universal covid-19 setback, Liverpool’s EV gains are significant and consistent, reflecting a stretch of success on the field and fan-drawing narratives. Other clubs, too, have shown similar jumps in EV, but some are strung together by the high-risk, high-return strategy of big-player signings (for example, PSG signing Neymar and Lionel Messi) or the debt burden from a new stadium (Tottenham).

Premium Assets

EV IS a baseline of sorts of how much a club would fetch if it were to be sold. However, prized assets usually command a mark-up, especially in sports. Earlier this year, another marquee English club Chelsea was sold for $3.2 billion—about a 30% premium to its 2021 EV. In a 2022 report, Football Benchmark explained this markup: “…the scarcity of clubs of such stature for sale, combined with the ego-driven desires of investors in wanting to own such ‘trophy assets’ are perhaps the biggest drivers for such expensive quotes.”

In that sense, even with its current troubles, Manchester United is likely to fetch a handsome premium. The same is the case with Liverpool, one of whose interested buyers is reportedly Mukesh Ambani. What makes Liverpool attractive is that despite having the second-highest revenues among English clubs in 2019-20, it had relatively low levels of debt. A $4-6 billion valuation is being reported for the two clubs.

Asset Plays

LIVERPOOL HAS also done better on revenues in recent years, bridging the gap with Manchester United. During this period, it brought in a new manager, German Jurgen Klopp, who sketched a style of playing with flair, assembled a team in that spirit, and wrapped it with emotion and values. The team has won lots and has been one of the smartest in trading for players. Its owners since 2010, the Fenway Sports Group, also the owners of Boston Red Sox baseball team, are poised to see a roughly $500 million purchase price fetch a rich multiple.

But for a football club, even the most marketable ones, increases in revenues have limits. Unlike companies for traditional corporate sectors, they can’t double revenues in three to five years. Further, they are hugely dependent on big jumps in TV rights money. Hence, more than revenue and growth plays, football clubs are asset plays, just like teams in cricket’s Indian Premier League.

Minority Losses

BEING AN asset play, rather than a growth play, diminishes the investment case of football clubs for minority investors. Several top clubs are listed on exchanges. Besides Manchester United, there’s Juventus of Italy, Borussia Dortmund of Germany and Ajax Amsterdam of the Netherlands, among others. Barring short blips linked to a surge in performance (Dortmund) or the arrival of a superstar (Cristiano Ronaldo at Juventus), their stock performance has been underwhelming.

When the Glazer family took over United in 2005 for about $950 million, it wrested stock from minority shareholders and delisted the company. They relisted it in 2012. In the last 10 years, the club has returned just 4.7% in compounded annual returns. If they completed the sale, they will reap a good pay day and minority shareholders might get a temporary bump.

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