CVC’s €2.7bn Acquisition of La Liga

By Demi Akinjide, Alicia Slater and Ujwal Gurung (University of Bristol), Mariona Planella Boix, Ismael Fathy Martínez, Pau Rodríguez Coll, Yair Trachtenberg (ESADE)


Overview of the deal

Acquirer: CVC Capital Partners

Target: La Liga

Implied Equity Value: €24.3B

Total Transaction Size: €2.1B

Closed date: TBC, with the risk of the transaction falling through

After 10 months of negotiations, Spain’s La Liga has agreed terms for a deal with CVC Partners after 38 of 42 clubs across the first and second Spanish football divisions voted in favour of the deal. The completion of the transaction would be the first deal pursued by a private equity group in Europe’s top flight football leagues.

According to Javier Tebas, La Liga president, CVC is looking to invest a total of €2.1bn with La Liga having an implied valuation of roughly €24bn. As a result, CVC will receive a minority stake in a new company that will be formed, whose revenues will be generated through La Liga’s broadcasting and sponsorship rights. More specifically, CVC will be entitled to 11% of media rights revenues for the next half-century. The buyout group will pursue the deal to increase the global audience for Spanish domestic games, which took a hit during the Covid-19 pandemic, in order to inflate the value of their rights.

In terms of La Liga, the league will look to use 30% of the funds to spend on players and pay down debts, and use the remainder to spend on stadiums and infrastructure.

“Without this agreement, without this investment, without this partner, we are going to have difficulties to keep growing our TV rights [in a] difficult market” - José Guerra Álvarez, Corporate Managing Director (La Liga)

Company Details: (Acquirer - CVC Capital Partners)

CVC is a world leader in private equity and credit with $115bn of assets under management, $163bn of funds committed and a global network of 24 local offices. CVC is majority-owned by its employees and led by its Managing Partners.

Founded in 1981, headquartered in Luxembourg

CEO: John Clark

Number of employees: 400

Market Cap: N/A (privately held)

Assets Under Management (AUM): $115B

Company Details: (Target - La Liga)

La Liga is a private law Sports Association that is solely and obligatorily comprised of all the Sports Corporations and Clubs that take part in the top two divisions of Spanish football. The entity is legally responsible for organizing such competitions in conjunction with the Royal Spanish Football Federation.

Founded in 1984, headquartered in Madrid, Spain

President: Javier Tebas

Market Cap: N/A (sports association)

LTM Revenue: €5.04B

Projections and Assumptions

Short-term consequences

Most Spanish premier and second division football clubs have embraced the partnership between CVC and La Liga. COVID-19 caused substantial unavoidable losses to football clubs due to match cancellations and the absence of sponsorship over the past 18 months. Although the bulk of the investment from CVC will recoup the long-term damage, we should also notice a short-term rebound.

Javier Tebas, President of La Liga said 15% of the funds will be allocated to increasing players’ wages as well as to transfer players’ fees. A further 15% will be used to pay off debts incurred throughout the pandemic. This should amplify Spanish clubs’ competitiveness over other European rivals, attracting wider international audiences and additional fans to Spanish domestic matches. Since CVC is an active investor in sports like rugby, the deal should be an invaluable growth opportunity for La Liga. LaLiga will nevertheless still retain its dominance over forthcoming matches alongside the management and organisation of audiovisual rights sales. Promoted and third division clubs will also acquire funds, enhancing their economic viability within this industry.

However, there is a serious dispute surrounding this deal. 4 clubs, such as Real Madrid, repelled against the deal, as its executives were excluded from pre-deal discussions, lessening the value of the deal. Clubs that opt out of the deal will not encounter the 11% cut in future revenues nor receive upfront cash from CVC.