Sept. 12, 2019
Steve Horowitz doesn’t like to sugarcoat.
“The first meeting we have with anybody, we really scare them. We tell them all the things that can go badly – and there are a lot,” he tells me in an interview. “Owning and running a football (soccer) club is hard. It’s really hard.
“If after the first meeting they still want to own a football team, it’s game on.”
Horowitz is a partner at Inner Circle Sports, a New York City-based “boutique investment bank” focused on the global sports industry.
Inner Circle Sports provides services including corporate finance, capital raising, valuations and advisory on acquisitions and sales of sports teams.
It also helps wealthy investors buy soccer teams.
“Not everybody who buys a club makes it better, but we’re trying to bring in earnest people, to do real deals and to be smart,” Horowitz says. “We spend a lot of time educating people on how player transfers work, how Financial Fair Play works, how dealing with agents works and always how relegation works.
“We have what we refer to as ‘Football 101,’ and we take potential investors through it. We really explain to them, this is how it actually works.”
While Inner Circle Sports works across different sports, it has been involved in several big deals for European soccer clubs. Horowitz advised Fenway Sports Group on its transaction to buy Liverpool in 2010 and the consortium led by Erick Thohir that purchased Inter Milan in 2013.
The company has also advised on more recent purchases of lower-league clubs, including former Disney chief executive Michael Eisner’s deal for League One club Portsmouth in 2017. Last year, Horowitz helped former U.S. goalkeeper Tim Howard and New York Yankees shareholder Peter Freund complete a takeover of Dagenham & Redbridge, which plays in the fifth tier of English soccer.
“Everybody has a different mindset of what’s important to them,” Horowitz says. “It might be the league, the history of the club, the strength of the academy, or it might be the journey.
“If you look at the Premier League, it’s filled with people with different motivations for being there. Outside the Premier League, some people want to build a club up because they have the dream and it’s a pretty cool thing to move up the football pyramid.
“We love the thoughtful owner, who really wants to understand before he gets in. You get an owner like Michael Eisner–he knows it’s hard. But he’s trying to build a club for 50 years, not 15 minutes.
“They may never win the Premier League, they may never make the Champions League, but it won’t be because they didn’t make an honest effort to do what’s best for the community and what’s best for the club in the long term.”
The Premier League’s global appeal has made it particularly popular with international investors. Of the 20 current teams, only seven are controlled by UK owners.
“I believe if you own an NFL team, you own the biggest sport in America,” Horowitz says. “If you own an EPL team, you own the biggest sport in the world. It’s the global game now.”
Spurred on by television rights and lucrative sponsorship deals, the Premier League is comfortably the world’s biggest revenue-generating league.
Outside the Premier League, plenty of clubs are struggling financially. Last month, Bury were expelled from the English Football League after 125 years, prompting the UK Government to launch an inquiry into the financial governance of clubs.
“I think it’s possible to make money in the Premier League. I think it’s hard to make money in the lower leagues unless you’re trading players well,” Horowitz says.
“We say to people: ‘The more money you have coming from revenue, the more you can spend on players. The more you can spend on players, the more you win. The more you win, the more money you make in prize money from a higher league finish or qualifying for European competition.’ It’s a virtuous circle.”
A prospective Premier League club owner must pass the competition’s owners’ and directors’ test, also known as the “‘fit and proper person’s test.” Designed to convince the league the prospective owner has the ability to run the club responsibly, the test has faced criticism for being ineffective.
The main barrier to entry for someone with sufficient resources to buy and run a Premier League club, then, is that clubs don’t often come on the market.
“If Manchester United came on the market tomorrow, although it would be a big price, I’m sure there would be lots of people interested in it,” Horowitz says. “Most of the clubs don’t move quickly. You don’t need to rush into things. You just really need to understand what you’re getting yourself into first. But even with all the preparation, it’s still hard.
“We want owners to be happy at closing, a year later and five years later. They may not always win, but we don’t want unanticipated surprises from the business.
“We tell people every day of their responsibility: ‘The supporters own the club. It’s not your club; you’re just the custodian. You need to leave the club in a better place than it is now.’
“The great owners understand this.”