American money began to catch up with German football, where decades of strict ownership rules favored spectators over speculators.
Sensing the opportunity to enter one of Europe’s wealthiest leagues and not being swayed by a fan base that sometimes turns down wealthy owners, US businessmen Paul Conway and Jordan Gardner are among the deals eyeing. Their interest came with clubs including the opening of Eintracht Frankfurt and SC Paderborn 07 to possibility of external investment.
Even before the coronavirus crisis closed off arenas and sent football clubs looking for ways to shore up their finances, people in Germany were looking for ways to start bridging the money gap with rivals in England and Spain.
“Germany is attractive to us strategically,” Conway, co-founder of the investment firm Pacific Media Group, said in a telephone interview. “We have approached a number of clubs to see if there is a common philosophy and to see if we can help.”
The Bundesliga is home to the world’s greats, including Robert Lewandowski, and rising stars like Erling Haaland. The clubs, such as FC Bayern Munich, Borussia Dortmund and FC Schalke 04, known for their passionate fan base. Bundesliga matches have the highest average attendance in Europe’s top five leagues, according to Deloitte.
Conway said the country’s teams were a good fit for the existence of his company stable European lower league football club, which is managed with a focus on developing young talent and a more attractive attacking style of play.
“A lot of teams play with a high press, they have a balanced budget and are committed to young players,” according to Conway, who said Pacific Media could make more than one investment in Germany.
Among those weighing money from outside is SC Paderborn 07, according to people with knowledge of the matter. The second division German team had held discussions with at least one American group, said the people, asking not to be named discussing classified information.
Eintracht Frankfurt, one of Germany’s most famous teams, have also been exploring the possibility of introducing new investors, said people familiar with the club’s thinking. It has held preliminary talks with bankers about its potential value in any minority stake sales, one of the people said. The club board has yet to make a formal decision on whether to pursue a deal, others said.
Representatives for Eintracht Frankfurt and SC Paderborn 07 declined to comment.
Last year, an international group of investors approached third tier club TSV 1860 Munich to buy a majority stake, according to someone with knowledge of the matter. The consortium has yet to reach an agreement with the club’s main investor, Jordanian businessman Hasan Ismaik, the person said.
TSV 1860 Munich representatives declined to comment, referring questions to Ismaik. Attempts to contact Ismaik via TSV 1860 Munich and other companies he owned were unsuccessful.
“Many, including myself, see Germany as an untapped and potentially lucrative market,” said Gardner, an American football executive who has minority investments in Swansea City AFC England and Dundalk FC in Ireland, and is a majority shareholder in FC Helsingor Denmark. .
Clubs in the top two divisions of the Bundesliga generated around 4.5 billion euros ($ 5.3 billion) in revenue during the 2019/2020 season, 5.7% less than the previous year, according to numbers from DFL. Germany’s sports body warned that the impact on the latest season would be more severe as a result of the ongoing stadium lockdown.
“Covid will have an impact on the ownership structure of the German team in the long term,” said Daniel Erd, a lawyer at Pinsent Masons in Germany. “In the end they will not find a long-term solution other than external investment.”
A DFL representative declined to comment.
Since 1998, the so-called 50 + 1 the rules has prevented commercial investors from holding more than 49% of the voting rights in any German club. The edict has been credited with keeping the country’s wage bills and ticket prices low compared to other major European leagues, where super-rich investors have poured millions into buying players but led to rising costs for fans.
“The 50 + 1 rule model ties a bit of the football industry with regular fans through a membership-owned system,” said Tilo Zingler, founder of the official Borussia Dortmund fan club in the US. “As a fan, I can have my say. “
There are outliers. VfL Wolfsburg is owned by automobile giant Volkswagen AG, and Bayer 04 Leverkusen by the pharmaceutical group Bayer AG. These clubs were exempt from 50 + 1 because their owners had invested consistently for more than two decades. The other is TSG 1899 Hoffenheim, whose billionaire owner – co-founder of SAP SE Dietmar Hopp – has become divide strength in German football.
The emergence of RB Leipzig, supported by energy drink maker Red Bull GmbH, is the latest example of a shift in the fan-first culture that has earned it the nickname of a “plastic” club by rival supporters.
This resistance for more conspicuous owners did not deter wealthy Americans.
“In general, German clubs are well managed, and well supported commercially,” said Gardner. “Opportunist investors are eager to get into German football.”
– With the help of Stefan Nicola, and Jan-Henrik Foerster