Unrealized Goals: An Analysis of the Risk and Return Profile of Premier League Soccer Clubs

Abstract

The English Premier League (EPL), once a haven for wealthy individuals searching for vanity projects, has become one of private equity’s hottest new investment sectors. This thesis empirically analyzes Premier League soccer clubs as acquisition targets for private equity firms. I use historical financial data from 2008 to 2018 to evaluate the risk-return profile of these clubs against the performance of traditional private equity asset classes, namely health care, technology, industrials, and financial services. Using this data, I evaluate the effect of team performance, European competitions, and player acquisitions on the club’s rate of return. This research is relevant to the current financial market as stagnation in traditional private equity sectors has pushed managers towards low correlation assets. Not only are investments in Premier League soccer clubs timely due to recession fears, but COVID-19 regulatory changes have only recently made it possible for private equity firms to hold majority shares in sports teams. Lastly, an empirical analysis of EPL teams as private equity opportunities has become more pertinent in the wake of significant private equity investment into soccer clubs — 9 of the 20 current Premier League teams are backed by private equity firms. My analysis concludes that while these acquisitions are risky, investments in the English Premier League’s “smaller clubs” can lead to exceptional returns. Empirical results show that the clubs outside the “Big Six” are strong investment candidates for three main reasons: growth potential, diversification, and valuation. Now is the ideal time for private equity firms to capitalize on the unrealized potential of Premier League club acquisitions.