ASK Joe Ravitch to sum up his experience of finding a buyer for English Premier League (EPL) club Chelsea, and the American readily admits it was "probably one of the worst episodes" of his entire life. It was a transaction carried out under extraordinary circumstances, with Chelsea's sanctioned Russian owner Roman Abramovich forced to sell his beloved team in the wake of Russia's invasion of Ukraine, and Ravitch under immense pressure to identify a suitable buyer as quickly as possible.
After a list of over 300 potential suitors was whittled down to just four, it was a consortium led by US financier Todd Boehly that got the green light to fork out £4.25 billion (S$6.78 billion) for the London team in May this year. It was the largest amount ever paid for a football club in any league in the world.
Ravitch, the co-founder and partner of US investment bank Raine Group, was in Singapore recently to speak on the business of sports at the Forbes Global CEO Conference. Before that session, he met BT Weekend to talk about the Chelsea deal, and why he thinks it's only a matter of time before Manchester City - the reigning EPL champions - will become the first team to hit that magical US$10 billion valuation. This interview has been condensed for brevity.
Take me through that whole process of finding a buyer for Chelsea and seeing the sale through.
Even if we had 6 hours, I still wouldn't be able to tell you all the stories. It was probably one of the worst episodes of my life. I say the worst, in terms of having to work 18 hours a day, facing non-stop constant pressure with war sanctions, dealing with governments, and all sorts of craziness.
It was a sale conducted under extraordinarily high-pressure circumstances. We had over 300 indications of interest from around the world. At the end of the day, we got about 20 to 30 strong bids, most of which were American. We picked four finalists that were mixed consortia. And I think we sold Chelsea at a discount.
If we had more time, without any of those pressures, and had we simply been focused on maximising price, we would have gotten a better price. (Abramovich) was not allowed to receive any of the money, so maximising price was not the prime motivation. It was about time, speed, certainty, and making sure the buyer was someone committed to investing in the club.
The amount you got was the highest ever paid for a sports team.
The transaction involved the buyer paying £2.5 billion, all of which would go into an independent charity to provide relief for victims of the Ukraine war. A separate sum of £1.75 billion would be committed to investment in the club - the stadium, the training facilities, the women's team, and more. In all, it's about £4.25 billion.
If you look at clubs like Manchester United and Chelsea, if they were put up for a sale in a straightforward and open process designed to maximise value, they would generate values well in excess of £5 billion. Unlike the sports teams in the US, the EPL clubs own their intellectual property and their trademarks. They have the ability to play anywhere they want, and to build their business anywhere they want.
Why do you see such a great upside for the top EPL teams?
There are more Chelsea supporters in South-east Asia than in the UK, there are more fans in China than in the UK, and more in Japan than in the UK. Chelsea has a combined total of zero employees in any of those markets. There is a lot of opportunity to grow that global fanbase. Clubs like Chelsea and Manchester United are truly global teams.
How did you arrive at your assessment that many clubs could be worth US$10 billion or more in the future?
It's because of the global nature of football as a sport, and the power of these clubs. If you look at a National Football League (NFL) team in the United States, their intellectual property and their content or trademarks are not owned by the team owner. It's owned by the NFL.
In the National Basketball Association, the Houston Rockets famously signed Chinese player Yao Ming (in 2002). But they were not allowed to play in China or generate any revenue from China without it going through the NBA. So the team gets three cents for every dollar. They don't have the ability as an independent club to capitalise on the value of a particular player or success, whereas the European football clubs generally do and they can be more global.
In my view, Manchester City will be the first to be worth US$10 billion. Look at the sprawling empire they (the City Football Group) have built. It's a single, unified brand (with 11 clubs) where the players can move from team to team. They all play a certain kind of football and they all train under the same coaches. If a great player emerges from their team in, say, Brazil or China, they can end up playing for Manchester City.
A club takeover can be a very divisive issue among the fans. There will always be concerns if the new owners have sincere intentions, or if they are buying it as a trophy asset. What's your take?
It depends on the owner. If a Russian billionaire were buying a football team today, the fans would be highly critical. But if you look at Roman, he was one of the most beloved owners in Chelsea's history. He never raised ticket prices and during his time, the team won multiple championships.
Now the fans hate Todd, because they feel he made a mess of the transfer window at Chelsea (during the summer). But Todd wants to win. I know him, he's a serious guy who wants to make money, but more importantly, he wants to win championships for Chelsea. And he feels that responsibility to do well by the supporters.