This week, we received the shocking news of the passing of Thai businessman, Vichai Srivaddhanaprabha – the owner of King Power and Leicester City Football Club – after his helicopter crashed just outside the King Power Stadium after a game between Leicester City and West Ham United. Mr Srivaddhanaprabha was one of many businessmen from emerging market states who have invested in British football in the past decade and changed the face of the game.
The case of Mr. Srivaddhanaprabha is quite extraordinary as his investment into Leicester City resulted in one of the biggest routs in football history. King Power signed a deal with Leicester City as a shirt sponsor and thereafter purchased the club through Asian Football Investments (AFI) – a Thai-led consortium – that was valued at about – a Thai-led consortium – that was valued at about £39 million in August 2010. Leicester City made a “seven-year rise” that had only been achieved by Ipswich Town in 1962 by climbing up from the third tier of English football to Premier League Champions. The road took seven years and was greatly impacted by the presence and investments of Mr. Srivaddhanaprabha who led the Foxes to a Championship (tier 2) title in 2013/14 and the promotion to the Premier League (tier 1). The Foxes first season saw them narrowly escape relegation back to the Championship. Their second season changed the face of football as Leicester won their first ever Premier League in their history after beating odds of 5000/1 to achieve this; this season saw the Foxes spend £27 million on the transfer market and end the year with a profit of £26 million. Leicester unbelievable feat could not have been achieved without the foreign investment and management that reinvigorated the side to make history. The Foxes went on to record a £16 million profit in 2016 and £92 million in 2017. Mr. Srivaddhanaprabha pulled off a modern day miracle with the club and vastly impacted the city of Leicester in the process and through his philanthropy. After his passing this week, there has been an outpour of good wishes and respect from players, clubs, fans and politicians amongst others demonstrating the incredible impact he had on football and his positive image in the UK. He should be emulated by future investors from emerging markets when trying to enter the football market. He worked smart to get the most out of Leicester City FC by branding the stadium with ‘King Power’ and the shirts of the club were similarly bearing his brand that created a large market for Foxes merchandise in Thailand and created an unprecedented awareness of the King Power name. At the moment Leicester City FC is valued at £500 million representing a growth of 1,282% over just eight years.
The British football transfer market is one of the biggest consumers of the global multi-billion pound industry that is dominated by Europe however over the past decades many of the startling transfer fees have been paid by clubs owned by individuals, companies and consortiums from emerging markets and foreign developed economies. Perhaps the largest success stories in the English Premier League have been Chelsea and Manchester City under owners from emerging economies with Roman Abramovich (Russia) purchasing Chelsea in 2003 and Sheikh Mansour bin Zayed Al Nahyan (UAE) buying out City in 2008. The former is the primary owner of Millhouse LLC – a private investment firm – whereas the latter is the deputy Prime Minister of the UAE and a member of the Abu Dhabi royal family. Roman Abramovich took over Chelsea in 2003 when he purchase just above 50% of it’s share capital thereafter quickly consolidating the remaining shares to close a £140 million acquisition and further absorbing the club’s £80 million debt. Currently Chelsea is valued at £1,530 million and is ranked as the 8th largest club by Forbes and recognised as a top brand in football. Chelsea filed losses for their first nine years of Abramovich’s tenure turning their first profit in 2012 and their largest profit in 2014 after which they have failed to record a profit. The Abu Dhabi United Group for Development and Investment valued the club at £200 million – inclusive of all equity and debt – purchasing the club from former Thai Prime Minister Thaksin Shinawatra. The club is currently valued at £1,835 million and is filing profits after its numerous successes that offset the losses in the early years of the takeover that were characterised by exorbitant purchases that kept the balance sheet in the red. Chelsea and Manxchester City are fantastic examples as they are success stories that brought immense success to clubs who were starved of titles. Since Abramovich took over Chelsea have won 5 Premier League titles, 5 FA Cups, 3 League Cups, the UEFA Europa League and the UEFA Champions League in his 15 year tenure. On the other hand since Sheikh Mansour took over Manchester City they have won 3 Premier League titles, 1 FA Cup and 3 League Cups in the ten-year tenure of the Abu Dhabi firm. This demonstrates the undeniable impact of foreign investment especially from emerging markets on the English game and the potential for profit and global exposure if the brand is built well. Currently the Premier League hosts 7 clubs that are partially or fully owned by individuals/firms from emerging markets as follows:
Alisher Usmanov – Russia – 30% stake of Arsenal
China Media Capital – China – 13% of Manchester City
Guo Guangchang – China – 100% of Wolverhampton Wanderers
Maxim Demin – Russia – 75% of Bournemouth
Roman Abramovich – Russia – 100% of Chelsea
Sheikh Mansour bin Zayed Al Nahyan – UAE – 87% of Manchester City
Vichai Srivaddhanaprabha – Thailand – 100% of Leicester City
Vincent Tan – Malaysia – 51% of Cardiff City
This does not take into account the 9 clubs in the Championship (tier 2) owned by individuals/firms from emerging markets and the countless others in the lower tiers of football. Investing in football can be lucrative but needs to have realistic expectations when going in to the game. Emerging markets are taking advantage of the love of the game to bring merchandising, football tours and television viewership around the world. Football is big business, so should more emerging economy investors look into it?
References:
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