The inside track on American investment in Sunderland and Southampton - and what it could mean in the future
Football is a game of trends – from boots to facial hair; kits to cut-out fans.
But the latest trend sweeping the domestic game is coming in the boardroom, where English clubs are receiving a host of interest from American investors – particularly those involved in the technology industries.
Sunderland have been one of the beneficiaries of the new-found American interest in the English game, agreeing a $12million loan with FPP Sunderland – a group of individuals with links to tech tycoon Michael Dell – in November 2019.
A similar, albeit different, group have this week invested in Southampton, while technological giants Silver Lake last year bought a fraction of the Manchester City’s ownership company the City Football Group for $500million.
But why are these American investors targeting clubs such as Sunderland, and what could it mean for the future of English football?
We spoke to Kieran Maguire of the University of Liverpool to gain the inside track on the latest investment trend:
So why English clubs?
Sunderland and Southampton are far from the first English clubs to be the subject of investment from Americans, the close proximity of the deals struck with both clubs (only seven months have fallen between the finalisation of Sunderland’s agreement with FPP Sunderland, and Southampton’s subsequent agreement with MSD UK Holdings) is telling.
Football is seen as a real growth market by American firms who, by bringing their own technological expertise, feel that there are new avenues to be explored by clubs in the long-run.
And of course, these will be monetised.
“At present, investors see football as an industry where you can pick up things on the cheap – and they’re looking beyond COVID-19,” explained Maguire.
“We are now looking at football as not being you and me, turning up at the Stadium of Light with a pie and a pint shouting things for ninety minutes. We're now seeing football as a product to cash in on.
“That was very evident when the tech company Silver Lake invested in Manchester City. These tech companies are looking to turn all the data that we have on fans into cash.
“Michael Dell is clearly in the tech sides of things, so it’s no surprise that organisations linked to him are getting involved in football – because we’re going to consume it in a different way.
“There’s an audience out there who are football mad – and whether it’s through streaming, through augmented reality, or embedding camera’s into Lionel Messi’s shirt so you can watch the match through him – these are huge opportunities and show where football is going.”
A race to the front
Of course, it’s key to note that in the cases of Sunderland and Southampton the American investors have not taken a shareholding in the respective clubs. At the moment in time, they have effectively given both clubs a loan. They own no shares and have no control over the clubs.
But this doesn’t mean that won’t happen in the future.
Maguire believes that the deals struck with the Black Cats and the Saints could allow those associated with Dell to test the waters before potentially later strengthening their involvement in the English game.
There is also a desire to be one of the first involved in the game – so when there is a chance to further monetise football, these individuals and firms are already prepared.
“If you take a look at what happened with Silver Lake and Manchester City, it cost Silver Lake $500million,” explains Maguire.
“The costs involved for Sunderland and Southampton are going to be substantially less than that, so it allows you to get the experience.
“If it doesn’t work out, then it’s a relatively small cost from their perspective – and given it’s a loan they would hope to get that money back anyway.”
“I think American tech companies have realised that football is the biggest showing pound in terms of attracting a global audience,” he continued.
“It’s a bit like things such as driverless cars, you want to be at the front of the queue when that technology is converting.
“These companies have realised that American sports companies have a limited audience, and while that’s very lucrative they’re looking four or five years down the line. Football is the most attractive sport, and they want the opportunity to participate in that.”
What does it mean in the long-run for Sunderland, Southampton and other clubs?
That’s the question on the lips of fans of the Black Cats at the moment.
Maguire feels that the investment by the group in two clubs signals a desire to be involved in the game in the long-term – although that may not necesarilly be with Sunderland.
“These loans could potentially be converted into equity into time,” he said.
“Under normal circumstances, you wouldn’t lend money to a football club because the risk associated with football are too high.
“So you would suspect they will be looking at some form of longer-time involvement through whatever means.”
It’s also worth noting that there is nothing to stop either FPP or MSD UK investing in further clubs – providing they take no shares in sides – after the latter group were previously linked with Derby County.
“The rules for both the Premier League and the EFL prevent joint-ownership – but to have ownership you need to have the majority of shares,” explains Maguire.
“To a certain extent, this arrangement is no different to Santander or Barclays lending money to various football clubs. They don’t have an involvement in strategic decision making, they don’t get involved on the day-to-day activities of the club – it’s just a lending and borrowing relationship.”