By Samuel Smith, Rhodie Lianne Ferrer, Deepankumar Sakthive and Amarthya Chandrappa (University of Warwick), Adil Amlaiky, Juan Bátiz, and Blake Dal Santo (McGill University)
Photo: Simon Reza (Unsplash)
Overview of the deal
Acquirer: Todd Boehly and Clearlake Capital
Target: Chelsea Football Club
Total transaction size: £4.25bn
Announcement date: May 6th 2022
Closed date: May 30th 2022
Target advisor: The Raine Group
Acquirer advisors: Deutsche Bank, Goldman Sachs, Moelis & Company, and Robey Warshaw
The deal outlines the continued investment of Todd Boehly into additional athletic franchises, following his investment in the Los Angeles Dodgers, the Los Angeles Lakers, and the Los Angeles Sparks, among other holdings. This investment is being made in conjunction with Clearlake Capital, which operates in various private equity and credit investments. The new owners said they are "committed to investing in key areas that will extend and enhance Chelsea's competitiveness, including the redevelopment of Stamford Bridge, further investment in the academy, [and] the women's team and Kingsmeadow stadium."
“Along with our commitment to developing the youth squad and acquiring the best talent, our plan of action is to invest in the club for the long-term and build on Chelsea's remarkable history of success." - Todd Boehly
Company Details (Acquirer - Todd Boehly)
Todd Boehly is an American investor and CEO of Eldridge Industries, a holding company with investments in a variety of industries including financial services, technology, sports, and media. Boehly has ownership stakes in a variety of sports franchises such as the Los Angeles Dodgers, Lakers and Sparks. In 2017, Boehly added to his sports portfolio by acquiring DraftKings, an online sports betting house, which later went public in October 2021. As of 2021, Boehly ranked amongst the richest 500 individuals in the world with a net worth of ~$5 billion.
Born: September 20, 1973
Net Worth: $5.3bn (2023)
Los Angeles Dodgers
Los Angeles Lakers
Los Angeles Sparks
Previous positions: Citibank, CS First Boston, J.H. Whitney & Company and Guggenheim Partners
Education: College of William & Mary, London School of Economics
Company Details (Target - Chelsea Football Club)
Chelsea Football Club is a professional football club based in Fulham, London, and competes in the Premier League, the highest tier of English football. Founded in 1905, the club's accolades include: six top-flight titles, eight FA Cups, two UEFA Champions Leagues, two UEFA Europa Leagues and the FIFA Club World Cup, among others. The club's home ground is Stamford Bridge, where they have played since their foundation.
Founded in 1905, headquartered in London, England
Ground: Stamford Bridge
Head Coach: Graham Potter
2021/22 Season Table Position: 3rd of 20
CEO: Guy Lawrence (since January 2018)
Number of employees: 817
EV: £2.4bn (as of 2021)
2021/22 Season Revenue: €493.1mn
Projections and Assumptions
A condition was placed when Chelsea was initially put up for sale by Roman Abramovich that the new owners commit to building a new, state-of-the-art stadium. Boehly plans to rebuild Stamford Bridge, the Chelsea stadium, which could result in Chelsea moving to Wembley stadium for up to five years as part of the ten-year construction of Stamford. This would follow Tottenham Hotspur’s prior move to Wembley, after the construction of their own White Hart Lane Stadium, and could affect future attendance as it is a 40-minute drive away from their current ground. The development is also complex, including railway and Tube lines that could delay construction. In the interim period, Chelsea would likely benefit from the doubling of stadium capacity which would allow for greater revenue on matchday and improved stadium atmosphere.
The Club will also face some redistribution of funding, with additional capital being allocated to the youth team, the women’s team, and Kingsmeadow stadium, home to Chelsea Women and Chelsea U21s, providing more diversity to the Chelsea investment, and sparking what could be a large increase in interest for the other teams within the larger organisation. Unrelated to Chelsea, over half of the £4.25bn sale of the club is currently being frozen in the U.K. bank account of Roman Abramovich, with the guarantee that it will be reinvested into humanitarian efforts in the Ukraine, hopefully initiating positive change for many residents.
Under Roman Abramovich, Chelsea’s former owner, the football club had lost over £900,000 a week, on average, throughout his 19-year reign. The sanction imposed upon Abramovich in March 2022 further strained Chelsea’s prosperity as it experienced difficulty in selling or signing players or offering new contracts. Given that upon completion of the sale, the UK Government lifted its sanctions on Chelsea, the club may initiate the rebuilding of the former manager, Thomas Tuchel’s team. Following Chelsea’s win over Watford on the final day of the Premier League season, Tuchel suggested a necessary “rebuild” with a clear focus on defence and investment in forwards. Furthermore, as Clearlake Capital takes the majority shareholding in Chelsea, football finance expert, Kieran Maguire, told Sky Sports that the consortium “will take a more data analytical and more Moneyball approach in terms of player recruitment. We won't necessarily see the same merry-go-rounds we've seen in terms of coach appointments.”
Post-transaction, it is intended that Chelsea’s women’s team and academy will receive continued investment, as Abramovich stated earlier in May 2022 that he wanted the club’s new owners to “commit investing in the club - including in the academy [and] women's team.” Such commitment would be indisputable as the new owners’ confidence in enhancing the growth of the women’s team lies in leveraging the verified success of Emma Hayes, manager of club Chelsea Women, in raising their profile.
Stamford Bridge, the Premier League’s ninth-largest stadium, may see its grounds modernised since Chelsea has evidently outgrown its capacity. Abramovich’s plans to rejuvenate the stadium were suspended in 2018 due to the “unfavourable investment climate”, and has since made it clear to his successor to commit to the “necessary redevelopment of the stadium.” Although the Chelsea Pitch Owners possess the freehold to Stamford Bridge and have been designed to “protect the future of the stadium”, the new owners meet this additional layer of complication with optimism, saying they are “committed to investing in key areas that will extend and enhance Chelsea's competitiveness.”
Risks and Uncertainties
Chelsea Football Club has been struggling due to a lack of clear transfer strategy, poor manager policy, and a lack of squad cohesion. As a result, Todd Boehly would face huge sunk costs in order to fix the underlying issues prevalent at Chelsea.
These issues have contributed to the club's underperformance in recent years, despite consistent finishes in the top four of the Premier League and rare European success. In order to turn things around, Chelsea will need to invest heavily in new players, with estimates suggesting that at least £500mn will be needed. This will be a significant undertaking, as the club has already spent approximately £1.2bn on player acquisitions since 2016, but has only one Premier League title and one unexpected Champions League trophy to show for it. The club's track record of hiring and firing managers frequently has also hindered their ability to implement a consistent playing style and mount a successful title challenge, which has led to an unbalanced squad with poor-quality and injury-prone players.
One factor contributing to Chelsea's struggles is the increased competition for Champions League spots from other heavily-invested clubs. In order to be successful on the global stage, it is almost necessary for a club to spend large amounts of money on top players. However, this puts pressure on the club to perform well in order to recoup these investments and avoid financial losses. While Todd Boehly has significantly backed recently appointed manager Graham Potter, investments have been quite sporadic, with a lack of clear transfer strategy to build upon Potter’s style of play.
In addition to the challenges of building a successful team, Chelsea will also need to spend £2.2bn to renovate Stamford Bridge in order to increase seating capacity and keep up with other Premier League clubs. This will be a significant undertaking and will require careful financial planning in order to avoid any potential risks or violations of UEFA Financial Fair Play regulations. Given the numerous challenges facing the club, it may take at least three to four years of strong investment and trust in both Chelsea’s manager and owners to return the club to its former glory. The question is whether fans have the patience to support such a period of transition, having already tolerated years of underwhelming performance. Although Todd Bohely has had experience with sports in the NBA and MLB (through his part ownership of the LA Dodgers and Sparks), managers there tend to be more sporadic compared to the long-term project Chelsea need, so it is yet to see the progression of Boehly’s and Potter’s relationship.
“We are excited to commit the resources to continue Chelsea’s leading role in English and global football, and as an engine for football talent development. Together [Boehly and Clearlake Capital], we will expand the Club’s investment across infrastructure, technology, and sports science to support the incredible Chelsea football and commercial teams – all with the goal of leveraging this growth to fuel even more on-pitch success.” - Behdad Eghbali and José E. Feliciano, Co-Founders and Managing Partners (Clearlake Capital)