Open goal in English football for Middle East investors

The English game has enjoyed investment from this region for some time but with a huge TV rights deal about to kick in and a falling post-Brexit pound, many forecast a new surge of cash from the Middle East.

Fans wait for players' arrival prior to a match between Abu Dhabi-owned Manchester City and West Bromwich Albion at the Etihad Stadium in April. Middle East investment has helped to spur City to the top ranks of the English Premier League. Gareth Copley/Getty Images
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LONDON // The English national football team may have proved about as effective as a melted sorbet as they crashed out to a fiery Iceland in the Euros last month but with domestic game kicking off at club level again on August 6, the country is still a world champion.

And, since Sheikh Mansour bin Zayed bought Manchester City in 2008, the Middle East’s influence over club football, particularly the English Premier League (EPL), has grown.

There has been a boom in the region’s involvement with football such as major sponsorship deals by Etihad and Emirates airlines at City and its EPL rival Arsenal, respectively, to the Iranian steel and energy magnate Farhad Moshiri’s acquisition of a controlling stake in Everton, also an EPL member. In addition, Everton’s city rivals Liverpool are attracting a lot of interest from the Middle East and there are ongoing rumours that the Anfield hierarchy have been in advanced talks over a potential takeover.

But what do the English think?

"It's against our football heritage to have owners pumping money in," says David Conn, a journalist at the UK newspaper The Guardian and the author of a book chronicling Manchester City including the impact of Sheikh Mansour's takeover.

“Bigger clubs were always bigger than smaller clubs because they had bigger crowds until [the late British steel magnate] Jack Walker bought Blackburn Rovers in 1988, but it’s since become accepted. Now most modern fans seem to want rich owners to come in.”

The Russian billionaire Roman Abramovich’s acquisition of Chelsea in 2003 has also been part of that acceptance, but the notion of oil and gas-funded injections of cash from the Middle East has become a popular dream, and sometimes a reality, for English fans. In return for that investment and sponsorship, companies from the region, and the region itself, are now firmly established in the minds of British football fans and the wider public.

There have been casualties. British Airways (BA) was once a byword for first-class air travel. Now, a simple Web search shows a host of comparisons on British-hosted message boards with other airlines. Emirates, Etihad and Qatar are often quoted as a barometer for quality and could be seen as having replaced BA in British affections.

The game’s constant association with the top players and managers also helps to fuel the profile of owners and sponsors from the Middle East, says Simon Chadwick, a professor of sports enterprise at Salford University’s Business School near Manchester.

“Premier League clubs are demonstrating their commitment to retaining their status as being the football world’s most compelling propositions by already having signed high-profile players and managers such as [Pep] Guardiola [at City] and [Jose] Mourinho [at cross-town rivals Manchester United]. This creates a halo-effect, which in turn confers status and prestige upon investors and club owners,” says Prof Chadwick, who expects more investment from the Middle East after the British public voted to leave the European Union last month.

“Given the post-Brexit fall in the value of the pound, English Premier League clubs just got a little easier to buy than they were even just a few weeks ago,” he says.

“Some of the instability and uncertainty created by Brexit may be an opportunity for Middle Eastern investors to make their moves on English football, especially as the British government is likely to protect the competitive advantage the Premier League’s football clubs currently enjoy.

“One example of this is likely to be the preferential treatment and special dispensation it will give to the league when establishing a new work permit regime for immigrants. As such, one surmises that there hasn’t been such a good time to buy an English club for quite a while.”

Even with the fall in the pound, with a new three-year television deal between the Premier League and Sky that valued domestic rights at £5.1 billion (Dh24.67bn) starting in the 2016/17 season, Manchester City have been a sound investment for Sheikh Mansour.

“Revenue streams from television are lucrative in their own right, suggesting a healthy return for any investors who may potentially be keen to acquire an English club,” adds Prof Chadwick. “Strengthening television coverage creates further opportunities to generate other revenues from sources such as sponsorship and merchandising.”

In 2016, Manchester City were the world’s fourth-most valuable football brand with a value of US$905 million – up from $510m in 2014 – according to the UK-based consultants Brand Finance.

Richard Haigh, the managing director at Brand Finance, says: “Matches are now shown on state TV in China, opening up a huge new market for the teams and the league to exploit. Middle Eastern investors and companies alike should be sitting up and taking notice of the growing platform to promote their business and enhance their wealth.”

The Premier League has opted to host its biennial pre-season tournament in Asia. Scorching temperatures in the Middle East during the English off-season will have played a part in that strategy, but the EPL has certainly embraced the region.

“In the last decade the Premier League has nurtured a strong, healthy relationship with the Middle East,” says Richard Battle, a senior manager at Deloitte’s Sports Business Group. “Having a strong relationship with the Middle East region will be an important launch-pad for the Premier League as it seeks to grow its eminence in North Africa and the Far East, particularly China.”

Overseas TV rights are expected to bring in about another £3bn to EPL clubs between 2016 and 2019. Like many others in the United Kingdom, Mr Battle also expects further Middle East investment.

“Premier League clubs now enjoy a significant revenue advantage over all but a handful of the biggest clubs from elsewhere in Europe. This has earned the Premier League clubs a huge and self-perpetuating advantage over continental peers in terms of attracting playing talent,” he says.

“The security of world-leading revenues, now augmented with sustained profitability, aided by cost control measures in place for both domestic and European competitions, makes clubs playing in the Premier League, and those with aspirations to get there, particularly attractive to investors from around the globe.”

With overseas interest in English football increasing, investors have started to look further down the English club pyramid and this has only fuelled fans’ hopes of oil-rich Middle East backers emerging to plough in cash.

Among those to have made the jump already are the Bahraini banker Hisham Ahmed Al Rayes, who since 2012 has had a stake in the second-tier Championship club Leeds United; the Saudi Prince Abdullah Abdulaziz, who in 2013 bought a 50 per cent share in the club’s Yorkshire rivals, the third-tier League One outfit Sheffield United; and the Kuwaiti Al Hasawi family, who own the Championship side Nottingham Forest they bought in 2012.

The expectation in England now is for more Middle East groups to look further down the Football League and emulate the Jordanian businessman Wael Al Qadi, who acquired the League One side Bristol Rovers earlier this year.

“High-level investors from the Middle East will have to compete with investors from the global south, indeed many may have to look towards the Championship, League One and League Two to begin their investment gamble and bids to access the lucrative access to the Premier League cash cow,” says Daniel Parnell, a senior lecturer in business management at Manchester Metropolitan University and a member of The Football Collective, a network of people who wish to bring critical debate to football.

As foreign interest in English football grows, English fans are showing more interest than ever in owners. Still, any Middle East money that does find its way into English football will be subject to intense scrutiny.

James Mathie, the club development manager at Supporters Direct (SD), a British organisation set up to help fans take a greater role in running and owning their clubs, says: “For SD and our members the most important thing is not where an owner is from, it’s how they run the club. The best owners recognise their role as custodian, looking to involve supporters and the community in decision making wherever possible, and ultimately leave the club in a better position than when they found it.

“Of course many supporters get excited about new investment, but it must be sensible otherwise clubs are at risk of falling far quicker than they rise, and rarely do those owners – wherever they are from – stay around to pick up the pieces.”

Relating to the fans remains paramount for any investor, says Michael Brunskill, the director of communications at the Football Supporters Federation. “There’s little doubt the Premier League is now global, fans understand that, although there is still a strong sense that owners – be they Middle Eastern, Asian, European or North American – must strive to understand the local culture from which their club was born.”

And this is where Sheikh Mansour and his team’s operation of Manchester City has succeeded, certainly with the club’s fans, in making a positive difference to perceptions of Middle East ownership in English football.

Mr Conn adds: “They have understood from the beginning that they shouldn’t just come across as rich oil sheikhs and should do things with dignity and class.

“Manchester City is in one of the most impoverished areas of Britain and the stadium was built there to bring more prosperity to the area and the owners have been very good at maintaining that. On the field they have signed players pretty well and done good community work in terms of investment and speaking to the fans.”

Mr Conn reiterates that the notion of pumping money into clubs remains anathema to British traditions, but – regardless of oil and gas prices – with one of the world’s biggest TV rights deals about to kick in for the EPL, Middle East investors are widely viewed in Britain as still being ready buyers.

“The Premier League’s impending and massive new television deal means that many of its clubs could be dramatically thrust into the shop window for many affluent Middle East investors,” says Prof Chadwick.

Post-Brexit, the English football industry is certainly open for business and buyers from the Middle East are expected to be in the shopping queue.

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