The Most Valuable Premier League Clubs

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Friends,

Sportico released its annual list of Premier League valuations yesterday, rounding out valuation studies on four of the largest professional sports leagues in the world — the NFL, MLB, NBA, and Premier League.

Here are the top 5 most valuable EPL clubs:

1. Manchester United: $4.65 billion

2. Liverpool: $4.14 billion

3. Manchester City: $4 billion

4. Chelsea: $3.35 billion

5. Arsenal: $3.06 billion

Furthermore, these are the most valuable professional sports organizations in the world — regardless of the league:

1. New York Yankees (MLB): $6.75 billion

2. Dallas Cowboys (NFL): $6.43 billion

3. New York Knicks (NBA): $5.42 billion

4. Golden State Warriors (NBA): $5.21 billion

5. Los Angeles Lakers (NBA): $5.14 billion

6. New England Patriots (NFL): $4.97 billion

7. Boston Red Sox (MLB): $4.8 billion

8. Manchester United (EPL): $4.65 billion

9. Los Angeles Dodgers (MLB): $4.62 billion

10. Chicago Cubs (MLB) / Liverpool (EPL): $4.14 billion

As for clubs within the Premier League specifically, today we’ll run through a few things I thought were interesting.

The (Large) Valuation Disparity

When the European Super League was announced earlier this month, a total of six Premier League clubs — called the Big Six — had agreed to join the newly-formed, closed league.

Why are they called the Big Six?

Look no further than the valuation disparity within the EPL.

Here’s a wild stat: The 6 most valuable Premier League clubs — Manchester United, Liverpool, Manchester City, Chelsea, Arsenal, and Tottenham — are worth a combined ~$22 billion, while the remaining 14 clubs are worth less than $4 billion combined.

Another one?

Tottenham is the 6th most valuable Premier League club at $2.85 billion, while the 7th most valuable club, Everton, is only worth $525 million. That’s an 80% dropoff.

Since the Premier League was founded in 1992, these six clubs have formed a quiet alliance. They have the biggest stadiums, the largest fanbases, and, as a result, the healthiest bank accounts.

That enables them to spend more money on players, drastically reducing the statistical probability that they would ever be relegated. And without the chance of being relegated, their valuation multiples are much higher.

For example, the Big Six clubs are valued at 5-6x revenue — similar to NFL, NBA, and MLB franchises — while the bottom 14 clubs are valued at 1-2x revenue due to the uncertain nature of their financial future.

The Super League wasn’t a great idea for many reasons, but with the top 6 EPL clubs essentially creating an invisible alliance through revenue domination, don’t expect the valuation disparity to change anytime soon.

Enterprise Value vs. Estimated Valuation

As the only publicly traded club in the Premier League, it’s often fun to compare Manchester United’s equity valuation to the implied valuation they might command through a private sale.

Today, Manchester United’s ($MANU) enterprise value — the measure of a company’s total value by comparing its market cap, debt, cash, and more — is just under $3.2 billion. But Sportico suggests that if the Glazer family ever sold the club, they would pocket a much loftier fee — around $4.65 billion.

There are several other factors to consider — think cash flow, liquidity, debt, etc. — and I don’t claim to be an equity analyst, but that makes $MANU look rather cheap, especially as fans return to stadiums and boost long-depressed profits.

Do your own research :)

Revenue Source Breakdown

Along with the idea of valuation disparity within the Premier League, it’s also interesting to look at how individual clubs make money.

As you might imagine, the sheer size, scale, and reach of the EPLs Big Six awards them the ability to properly diversify their revenue streams.

Looking at the example below, Manchester United — the most valuable club in the league — has a pretty even split between broadcast, commercial, and matchday revenue.

The interesting part?

On the opposite end of the spectrum, a team like Southampton — the 15th most valuable club in the league — receives about 75% of its annual revenue from broadcasting fees.

In the end, I believe we will continue to see an acceleration in interest from American investors looking to gain equity exposure to European football clubs.

The expensive teams offer diversified revenue streams, a low probability of relegation, global branding, consistent valuation growth, and more. While the lower-tier teams — think league one & league two — offer the dream of Premier League promotion, eventually seeing the increased revenue & higher valuation that come with it.

Private equity investors like Silver Lake and RedBird Capital have already gotten involved, but it will be fun to see who is next.

As always, have a great day, and we’ll talk tomorrow.

If you want to read the entire Sportico valuation study, you can check it out here.

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