As Glazers seek sale, how much is Manchester United worth?

I previously wrote about the finances of Manchester United in a deep dive a couple of months ago.

I talked about the controversial leveraged buyout through which the Glazers took control of the club, as well as the dividend streams they have recouped, the debt on the club, and the capital expenditure.

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Last week, the unpopular owners announced that they were “commencing a process to explore strategic alternatives” for Manchester United. That’s some extreme corporate speak for “we kind of want to sell, but only if we get a good price”.

They will hope that this settles the fans down, much like Mike Ashley used to do with Newcastle before he eventually sold the club last year (a fact I am unfortunately well aware of, as a Newcastle fan). The difference between “considering a sale” and actually selling the club is vast. But that is neither here nor there.

So, what is Manchester United worth?

Qatari owners target €4 billion valuation for PSG

The news preceded another interesting announcement in the world of football. And I don’t mean Cristiano Ronaldo taking a leaf out of Meghan Markle’s book by giving a jarring interview that closed the door on his disastrous second spell in the Premier League.  

I mean the Qatari plan to divest in Paris Saint-Germain, the titans of French football. Owned by Qatar Sports Investments (QSI) since 2011, this is a subsidiary of Qatar Investment Authority (QIA), the state-run sovereign wealth fund in Qatar.

The French champions have been in discussions with several investors since earlier this year about selling a stake of between 10% and 15%. The valuation targeted provides a benchmark with which we can value Manchester United.

The PSG President Nasser Al-Khelaifi outlined the target as “over €4 billion” but did warn that such a deal could “take months”. If we get our calculators out and flip this to dollars, it translates to a valuation of about $4.2 billion, which is a significant jump up on another benchmark we have – that of Chelsea, sold a few months ago for around $3.2 billion at the time (£2.5 billion) to an investment consortium led by American Todd Boehly.  

Are Manchester United more valuable than PSG?

If PSG could fetch investment valuing the club at €4 billion, this would no doubt be a boon to the owners of Manchester United. PSG was valued most recently by Forbes at €3 billion, although Forbes did vastly undercut the valuation of Chelsea prior to its sale.

Valuations have been rocketing in recent years for sports teams. This is mainly due to mushrooming broadcast deals, which have been pursued by big institutional investors.

We have also seen state money shoulder its way into the game too. Beyond Qatar and PSG, Newcastle were taken over by the Saudi sovereign wealth fund earlier this year, throwing up all sorts of conflicting emotions for us Newcastle fans. Manchester City are the other striking example, owned by a member of Abu Dhabi’s royal family.

PSG’s owners purchased the club for only €70 million in 2011, which in today’s terms looks like a bargain better than signing Nick Pope for €10 million (who should be starting for England, by the way). Thus, a sale at €4 billion would represent a tidy 57X return on investment. Of course, there is the matter of  €1.6 billion being spent on players in the interim, which still pales next to a number of  €4 billion.

In comparing Manchester United to PSG, the English side is on a different level, however. Forbes valued them at $4.6 billion in May this year, with PSG coming in at $3.2 billion.

Looking at Manchester United’s share price, the equity is valued at $3.5 billion, with a $4 billion valuation if debt is included. However, this does not imply the club would be sold for that much – just ask Elon Musk whether he thinks Twitter is worth the $44 billion he paid for it.

Myself and the other investors are obviously overpaying for Twitter right now, the long-term potential for Twitter in my view is an order of magnitude greater than its current value

Elon Musk

Could Man United be sold for $8.5 billion?

Reports suggest insiders are targeting a £7 billion valuation for Manchester United, which equates to about $8.5 billion.

To me, this is fantasy talk. There is no way the club is worth over double what Chelsea is. My previous piece outlined the transfer spend, stadium refurbishment and academy investment that would also be required – this context means a £7 billion figure is even more far-fetched.

The issue here comes down to whether the new owners could monetise Man United’s extraordinarily large fanbase. This is a long-standing problem within football, as most clubs struggle to turn a profit despite immense support around the globe.

A £7 billion figure appears to assume that this mass monetisation will take place. If owners can leverage the immense brand value of the Manchester United name to spike merchandise sales, and create ancillary revenue streams such as collaborations, media production and countless other options, then a valuation like this could be made sense of. In a lot of ways, it is similar to the logic that Musk points to in his Twitter quote above.

Ultimately, however, that is not the base case. Nor is it where benchmarks are coming in, such as Chelsea and potentially PSG. If PSG succeeds in obtaining a $4.2 billion valuation, there is no reason to believe that Man United can not get 1.5X of that, which would place it at $6.2 billion. The 1.5X differential is roughly what Forbes assigned to the difference in value between the clubs per their above study, too.

Then again, football clubs are illiquid beasts – it is a challenge to value them. And when passion is involved, who knows? Manchester United remains the biggest club in the world, albeit without the on-field success in recent times to match that status.

After all, it only takes one buyer.