Chelsea’s Rising Value Post-Takeover: A Financial Analysis

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In the summer of 2022, Clearlake Capital and Todd Boehly bought Chelsea FC from Roman Abramovich for £2.3 billion.

The club’s absolute value increase has seen them commit to Chelsea FC to a £1.75 billion investment.

Thus far, approximately £1.2 billion has gone into new player signings. However, while investments have had varying effects on the pitch, with Chelsea finishing 12th and 6th in their respective Premier League seasons, the club’s value has skyrocketed.

So, before we see why, find out how much it costs to own a football club in general. 

How much does it cost to own a football club?

In terms of time and money, the pursuit to be the owner of a football club varies depending on the club’s tier and location.

Generally, ownership of elite clubs, such as ones that belong to the English Premier League and the La Liga, this demands significant financial resources -usually in the hundreds of millions or billions – and also official approval from the owning League.

Normally, the acquisition period can be long, including intense negotiations and much financial planning. But, yes, there have been lottery winners who have bought football clubs, where their major jackpot has shortened this period.

For instance, buying lower league clubs should be easier for such individuals, typically ranging from a few hundred thousand to several million pounds. 

Performance on the Field Is Growing Faster than Performance at the Bank

Enzo Maresca’s appointment as head coach is the third managerial change under the new ownership, indicating a period of transition and adjustment.

While the success in sports has not been instantaneous, the financial value of Chelsea tells a different story.

In fact, Chelsea experienced an increase in value of nearly £500 million within two years.

Valuation Report of Football Benchmark

Football Benchmark, an Ace Advisory enterprise (from 2022 onwards), is a revolutionary tool for precise data analytics in the world of football.

According to their latest report, Chelsea’s enterprise value increased 9 percent from 2023 to 2024. This is despite a slight decline in the club’s positioning among Europe’s elite, indicating the broader upward trend in football clubs’ value.

Market incentives and future competitions

New competitions, like extended Champions League and the inaugural FIFA Club World Cup, are also shaping club values.

This might be good news for Chelsea because they could potentially reap significant rewards if they do great during such events.

Factors determining the club’s valuation

The methodology applied in Football Benchmark is as follow:

  • Profitability: Including staff costs to revenue ratio and profit/loss before player trading. 
  • Popularity: Indicating the number of followers on social media and their level of engagement. 
  • Sporting Potential: Dependent on the market valuation of the squad related to the on-field success. 
  • Broadcasting Rights: In terms of contracts for domestic and international TV deals.
  • Stadium ownership: Whether the club owns its home ground. 

These factors combined have contributed to Chelsea’s increased valuation, despite recent sporting challenges. 

Media Deals and Financial Disparity

The lucrative Premier League media deal makes missing the Champions League less of a financial blow for English clubs.

Also, when considering the top ten clubs in Europe as per their financial power, Arsenal’s valuation is a billion pounds more than that of the 11th-placed Borussia Dortmund.

Attractiveness to Investors

Recent transactions such as Chelsea’s takeover and INEOS’s investment into Manchester United reflect that investors are prepared pay for ‘trophy assets’ – elite clubs that are infrequently available on the market.

Prospects and Problems for Chelsea

The £2.8 billion valuation represents a bit of a climb. Nonetheless, there are some obstacles in the way. The impact on player market values and salaries may be pressured by regulatory adjustments, even though club values could potentially improve further as profitability increases due to these regulations.

Chelsea is also expected to streamline its wage bill, while key components of the scouting system, as coordinated by co-sporting directors Laurence Stewart and Paul Winstanley, will not drastically change.

However, there are matters of concern, particularly around stadium redevelopment and commercial activity.

Conclusion

Despite their evident on-pitch difficulties, the deal for Clearlake and Boehly to purchase Chelsea has been a financially shrewd one, with the club’s value still increasing.

There are challenges and opportunities in the wider financial context of football across Europe, but the Chelsea team-building strategy is set to rebound with new ownership going forward.

Source: https://www.nytimes.com/athletic/5558822/2024/06/13/chelsea-valuation-analysis/