On the La Liga and CVC agreement

 

The story

While Spain prepare to meet Brazil for the Gold Medal match in Tokyo 2020, back home, their domestic football is at sixes and sevens because of the new deal between La Liga and CVC. The deal is about financial gains and rules and regulations, but the top clubs like – Real Madrid and Barcelona also have opposed the deal.

MARCA reports, “La Liga have managed to secure a cash injection of 2.7 billion euros after reaching an agreement with CVC Capital Partners, delivering good news to both Real Madrid and Barcelona, who are still attempting to fund the works at the Estadio Santiago Bernabeu and Lionel Messi's new contract.”

“La Liga have been working on the operation for a year now, and the investment will facilitate growth at all LaLiga Santander clubs once it has been approved. Fifteen percent of the 2.7 billion euros can be put straight to use to reinforce squads and to sign players, with the rest going to structural improvements at stadiums and facilities.”

“Once La Liga Santander's clubs have approved the investment, which values La Liga at over 24 billion euros, around 270 million euros will go to Barcelona, while Real Madrid will take closer to 261 million euros.”

 “It comes as good news for the smaller sides, namely Levante, who had to tighten their belts in order to meet La Liga's salary cap.”

“The 15 percent for investment will be distributed by taking the television income of the last seven seasons into account. La Liga are not selling any of their rights, but CVC are investing money that La Liga will manage and then a pay a fee to CVC.”

“CVC, meanwhile, runs the risk associated with any business deal.”

 If things go well, they win. If things go badly, they lose out. There are no guarantees covering them or protecting them.

La Liga confirmed in a statement that they are looking to continue the transformation towards a global digital entertainment company, improving the competition and the fans' experience.

Who are CVC Capital Partners?

CVC Capital Partners is a private equity and investment advisory firm with approximately US$111 billion in secured commitments since inception across European and Asian private equity, credit and growth funds. As of 2019, CVC managed US$75 billion of assets; the funds managed or advised by CVC are invested in 73 companies worldwide, employing over 300,000 people in numerous countries.

Since 1981, CVC has completed over 500,000 investments across a wide range of industries and countries. CVC was founded in 1981 and today has over 400 employees working across its network of 24 offices throughout Europe, Asia, and the Americas.

American banking giant, Citicorp, had established an investment arm in 1968 to focus on venture capital investments. By the late 1970s and early 1980s, Citicorp Venture Capital, at that time under the leadership of Chairman William T. Comfort, continued to invest in early-stage businesses but also expanded into the emerging leveraged buyout business. CVC Capital Partners was founded in 1981 as the European arm of Citicorp Venture Capital.

Among Citicorp Venture Capital's early employees and in Europe were Jon Moulton, Mike Smith, and Frank Neale. Of the group's original European leadership, most would leave by the late 1980s. Moulton left the firm to co-found Schroder Ventures, the predecessor of Permira, in 1985. Neale also departed to form Phildrew Ventures.

By the early 1990s, Michael Smith, who joined Citicorp in 1982, was leading Citicorp Venture Capital in Europe along with other managing directors Steven Koltes, Hardy McLain, Donald Mackenzie, Iain Parham, and Rolly Van Rappard. In 1993, Smith and the senior investment professionals of Citicorp Venture Capital negotiated a spinout from Citibank to form an independent private equity firm, CVC Capital Partners.

In 2006, the US arm of Citigroup Venture Capital also spun out of the bank to form a new firm, known as Court Square Capital Partners. CVC operated offices in London, Paris, and Frankfurt.

Following the spinout, CVC raised its first investment fund with $300 million of commitments, half coming from Citicorp and the rest from high-net-worth individuals and institutional investors.

Now independent, CVC also completed its transition from venture capital investments to leveraged buyouts and investments in mature businesses. CVC would follow up with its second fund in 1996, it's first fully independent of Citibank, with $840 million of capital commitments.

By 2000, CVC was one of the largest and best-known private equity firms in Europe. In 2001, CVC completed fundraising for its third investment fund, which was the largest private equity fund raised in Europe at the time, just ahead of funds raised by other leading firms, Apax Partners and BC Partners Also, around the same time, CVC expanded into Asia with a $750 million fund focusing exclusively on investments in Asian companies.

From November 2005 to March 2006, CVC gradually purchased 63.4% of the shares of the Formula One Group, owner of the Formula One auto racing championship.

In 2007, CVC expanded to the USA opening an office in New York City, headed by Christopher Stadler and overseen by Rolly van Rappard.

In the last decade CVC only grew bigger - In September 2016, CVC Capital Partners agreed to sell control of the Formula One Group to John Malone’s Liberty Media in a deal worth US$4.4bn. The two-part deal would see the US media group buy 18.7 percent of the F1 parent company Delta Topco for $746mn in cash from a consortium of shareholders led by CVC.

In 2017, the second payment of $354mn in cash and $3.3bn in newly issued shares in a Liberty Media tracking stock will see Liberty Media assume full control of Formula One once the deal is approved by regulators, FIA, and Liberty’s shareholders.

Towards the end of 2019, CVC Capital Partners purchased Ontic from BBA Aviation for $1.365 billion.

The dark side

In January 2015, CVC Capital Partners and Bencis Capital Partners were sentenced to pay fines by the Dutch Authority for Consumers and Markets after it charged the former Dutch portfolio company of the two firms, Meneba Beheer, with breaking competition rules through price-fixing.

The Dutch regulator ruled that the two firms must pay between €450,000 and €1.5 million after Meneba Beheer, which was itself fined €9 million by the authority, was involved in a collective agreement with competitors to keep prices stable between 2001 and 2007.

CVC is the largest shareholder in pharmaceutical company Alvogen.

In March 2021, their representatives on Alvogen's board led an internal investigation into allegations of abuse and bullying behavior against CEO Robert Wessman. The investigation highlights rising attention to conduct by corporate leaders in their dealings with colleagues and employees.

Chaos in the Italian Serie A

 Back in February 2021, a huge amount of €1.7 billion (US$2 billion) private equity deal between Italian Serie A and CVC, Advent, and FSI could be about to collapse as seven of Italian soccer’s most powerful top-flight clubs are set to block the investment, according to Reuters.

The global wire service has seen a letter signed by seven clubs – including Juventus, Inter Milan, and Lazio – that says they no longer see the deal as ‘viable’.

With 14 of the 20 Serie A clubs required to approve the investment, a rejection by seven of those would be enough to halt it.

According to Reuters, the letter addressed to the league’s president Paolo Dal Pino reads:

 “The term sheet submitted to the clubs belonging to the league has not reached a qualified consensus needed for the approval ... as things stand, this development opportunity is not viable anymore.”

The report says the signatory clubs cite a surprisingly positive response to Serie A’s domestic broadcast rights talks as an argument against the stake sale. The letter reportedly describes the tender as a commercial success, with the decline in annual fees being offered less than expected.

The seven clubs face opposition from eight teams that look favorably upon the private equity deal, according to Reuters.

The clubs also said in the letter they would not rule out talks with financial institutions to increase Serie A’s international market value, opening the door for private equity firms to agree with a similar arrangement for the league’s overseas media rights.

Real Madrid oppose the CVC agreement

CVC has been trying to strike gold with major leagues across Europe in recent years.

After the failure in Italian Serie A, they reached Spain.

But, at present, the picture is very gloomy.

The President of Real Madrid is the first person to raise his voice against the deal.

The CVC deal, which would have offered Los Blancos a helping hand in pursuit of Kylian Mbappe, but the 13-time European Champions are not keen on the idea, calling it “an opportunistic fund.”

Perez said, “This agreement was reached without the involvement or knowledge of Real Madrid and today, for the first time, LaLiga has given us limited access to the terms of the agreement.”

“The clubs have signed over their audiovisual rights exclusively for their sale on a competitive basis for a period of three years. This agreement, by way of a misleading structure, expropriates 10.95 percent of the clubs' audiovisual rights for the next 50 years, in breach of the law.”

“The negotiation was carried out without competitive proceedings and the financial conditions agreed with CVC Capital Partners give them annual returns of over 20 percent. This opportunistic fund is the same which tried and failed to reach similar agreements with the Italian and German leagues.”

“Real Madrid cannot support a venture which hands the future of 42 Primera and Segunda Division clubs over to a group of investors, not to mention the futures of those clubs who qualify over the next 50 years.”

“Real Madrid will convene the Assembly of Representative Members to debate the agreement and discuss the significant loss of equity, unprecedented in our 119-year history.”

Barcelona join Real Madrid

Even though the rivalry is legendary on and off the pitch, but this time around, Barcelona President, Joan Laporta has joined Real Madrid regarding the oppose of the CVC agreement.

“FC Barcelona considers that the operation that has been announced has not been sufficiently discussed with the clubs (the owners of the TV rights); that the amount is not congruent with the years of duration, and the deal affects part of all clubs' audiovisual rights for the next 50 years,” a club statement read.

“The terms of the contract that La Liga is describing condemn Barcelona’s future with regard to broadcasting rights.”

FC Barcelona wishes to express its surprise at an agreement driven by La Liga in which the teams' opinions, including those of FC Barcelona, have not been taken into account.”

“There has not even been a presentation of options offered by other competitors in order to evaluate the pros and cons in a post-pandemic situation in which there are still many questions that are left unanswered.”

Conclusion

It would be hard for CVC and La Liga move on without the green signal from top clubs like Real Madrid and Barcelona. Already, the Lionel Messi saga has created a very critical situation and with no Messi available in La Liga, automatically, CVC and their agreement would not be able to attract enough audience like before. One thing can be said, the deal might meet a sad end.

Note: The article has been posted at Cricketsoccer as CSdesk on 06/08/2021 On the La Liga and CVC agreement

Thank You

Faisal Caesar