Our M&A community supports transaction professionals with events, insights and networking opportunities.
Latin America’s soccer giants may have missed out on World Cup glory last month, but the region’s clubs are attracting increasing investment interest. The region’s widespread passion for soccer - Latinos made up the largest group in total attendance in Russia - provides a great investment opportunity on and off the field.
Mexico: Rule change leads to M&A
The 2013 decision by Mexico’s professional soccer association Liga MX to prevent multi-ownership of first division teams has led to a flurry of deals.
Broadcasting giant Grupo Televisa [BMV:TLEVISA; NYSE:TV] sold one of its two first-division clubs, Aguascalientes-based Impulsora del Deportivo Necaxa, to a group of investors led by Ernesto Tinajero, founder of local telecommunications company Grupo Cable TV in 2014.
Last year, the local Chargoy family, which owns a construction company, also sold its second first-division team Club Puebla to a group of investors led by Manuel Jimenez, the controlling shareholder of pharmacy chain Farmatodo, according to local media reports.
Conditions are ripe for dealmaking in Mexico's soccer industry, said Luis Ramon Carazo, a local sports industry consultant. Given the size of the market, the number of fans, and the value of a soccer club as a public relations and branding tool, further M&A activity is expected in the short-term, driven mainly by local investors, he added.
TV Azteca, the country’s second-largest broadcaster, is reportedly looking for a buyer for its second first-division club Monarcas Morelia. Local media reports cite Salvador Necochoa, former owner of Santos Laguna, as a likely buyer.
This news service reported in September that local soccer academy CESIFUT failed in its attempt to acquire Monarcas.
Jorge Vergara, founder and majority owner of nutritional-products company Omnilife, is reportedly looking to sell Club Deportivo Guadalajara (Chivas), arguably Mexico’s most popular team.
Vergara has been retrenching its international soccer empire. In 2011, Vergara sold its stake in Costa Rican team Deportivo Saprissa. Three years later, its troubled Major League Soccer club Chivas USA ceased to operate.
The businessman took to Twitter last month to reject rumors of a possible sale of Chivas: "The team is not for sale."
Mexico’s soccer market has also attracted foreign investors. In March 2017, Spain’s Club Atletico de Madrid acquired a 51% stake in second-division team Atletico San Luis.
San Luis’ CEO Alberto Marrero said Atletico de Madrid could sell its stake in the Mexican team unless rules regarding the promotion of second-division clubs to the country’s first division are not clarified.
Colombia: A new beginning
The acquisition of a 55% stake in Envigado Futbol Club by Colombian private equity firm Progresion, in late-April marked a milestone in the turnaround for the soccer club - which until recently was blacklisted by the US Treasury Department under the anti-crime Kingpin Act - and the country’s soccer industry as a whole.
Local soccer teams have historically been linked with criminal groups. In 1983, the country’s Justice Minister Rodrigo Lara said more than half of the then 15 first-division teams received financing from drug traffickers and announced a narco-soccer investigation, according to Los Angeles Times. A year later, Lara was assassinated.
Over the past three years, however, teams have worked hard to distance themselves from criminal groups, Julian Guerra, Progresion’s general manager told this news service in May. The private equity firm spent about a year and a half performing extensive due diligence on Envigado, he added.
The turnaround involved, among other things, teams becoming private limited companies, according to IUSPORT, a sports law news site. Today, 32 of Colombia’s 36 professional soccer clubs are private limited companies, according to the local corporation oversight agency Superintendencia de Sociedades (Supersociedades).
The changes have resulted in better financial results. Last year, the 36 teams reported a combined net profit of COP 4.4bn, compared with a loss of COP 23.7bn in 2015, according to Supersociedades.
The overhaul has helped attract local and foreign investors. In 2012, New York-based PE firm Amber Capital acquired a minority stake in Azul y Blanco FC (Millonarios) and now owns 65% of the team.
Mexican sports holding company Grupo Pachuca was also interested in acquiring a stake in Millonarios but ended up acquiring a Chilean team instead, as reported. However, this news service reported in June 2016 that Pachuca plans to acquire another South American team and is particularly focused in Colombia.
Brazil: Forming tomorrow’s soccer stars
With the most successful men’s national team in World Cup history, Brazil bets on forming tomorrow’s soccer stars through the proliferation of youth soccer academies.
Campinas-based youth soccer academy company ProSports, which holds a controlling stake in Ronaldo Academy and Academia de Futebol do Palmeiras, plans to launch the first unit of a Neymar Sports youth soccer academy by year-end.
Owned by Sforza, the investment firm of Carlos Wizard Martins and his family, ProSports has received approaches from several local clubs interested in setting up their franchised youth soccer academies and could announce a new strategic partnership or joint venture next year, this news service reported last month.
For its part, Grupo Figer, a local sports management and marketing group headed by Uruguayan soccer agent Juan Figer, seeks an investor willing to put USD 50m - USD 100m to help it expand into China’s burgeoning soccer market, CEO Marcel Figer told this news service in September.
Ricardo de Carvalho, partner at M&A boutique Xingu Capital, which has helped Figer develop its expansion strategy, said the company is open to evaluatating different M&A options to expand into China, including a partial stake sale or a joint venture.
Figer is comprised of a broad range of companies, including Pele Club, a chain of franchised gyms and sports clubs that has a licensing contract with Brazilian soccer legend Pele; and REDE, a distance-learning institution that offers undergraduate and graduate sports courses.
According to a local sector advisor, players like ProSports and Grupo Figer are in a good position to consolidate Brazil’s youth soccer academy market given that most companies in this market lack strong capital structures and corporate practices.
The source also noted that youth soccer academies tied to famous Brazilian soccer players should find a fertile ground for expansion in places where soccer is growing in popularity, such as Asia, the Middle East, and the US.
by Dominic Pasteiner and Carlos Martinez in Mexico City, and Thiago Barrozo in Sao Paulo
An error occurred trying to play the stream. Please reload the page and try again.Close