Why the Gulf invests in football

European football has become a destination for investment from the Middle East in recent years. The list of teams that have received investment or been bought by Middle Eastern investors is long, and includes storied names such as Manchester City, Paris Saint-Germain, and Aston Villa.

Aymen Khoury, a dispute resolution lawyer and Middle East expert at international law firm Fieldfisher, believes that the ongoing investment into the world’s most popular sport has a lot to do with brand.

“By investing in European football, you are already tapping into the foremost market in sports,” said Khoury. “When you drill that down in terms of what football clubs offer through their brand, it effectively connects you to people across the globe.”

Football gives a significant advantage over other brand-focused investments because football club owners are well known. As such they present an excellent opportunity to promote a name, country or brand, says Khoury.

“Gulf countries are, compared to the rest of the world, relatively up-and-coming. As such, it’s quite important to shape reputations, especially with certain audiences. [Football] is a great way of engaging with these target audiences,” he added.

Financial return-on-investment (ROI) has been historically unimportant when considering football club investment. “Traditionally investing in football clubs was not about making money,” said Khoury, adding that clubs which broke even would be considered successful. However, English clubs have now reached the stage where they offer the prospect of financial returns.

Liverpool FC made significant monetary gains from their TV rights this year. Despite coming second in the Premier League, the club was able to make more money than the champions Manchester City, which shows that football clubs can still perform well financially without winning domestic titles.

Khoury notes that not only are English clubs now profitable for the first time, but they are among the most valuable brands in the world. The clubs therefore offer a potential of real ROI for investors if they are run in a way that maximizes financial gain.

However, Middle Eastern-owned Premier League teams have not typically presented a positive balance sheet. “The investments have outweighed their return, but that comparison doesn’t take into account everything that is generated indirectly,” said Khoury.

“Their ROI isn’t going to be through the football club immediately, although I would suggest that in a few years we are going see some real profits coming. The initial investment is huge and as such it will it takes time to earn that investment back.”

For Khoury, the huge initial investment required is partly offset by the brand recognition that football clubs create.

“These clubs are doing very well on the pitch and the investment is serving its purpose off the pitch as well. For example, Etihad [who sponsor Manchester City] is now a household name in the UK, and I would argue across Europe too, when maybe it wasn’t a few years ago. This can be directly attributed to football investments,” Khoury added.

Where are we in the investment cycle?

The Middle Eastern thirst for football investment is far from over, believes Khoury. UAE-based Sheikh Khaled Bin Zayed Al Nahyan said on Monday that he is still working diligently in his effort to take over the Premier League football club Newcastle United.

That being said, the largest investments in European football have likely already occurred, said Khoury. Middle Eastern-based billionaires and investors are still interested, but investments the size of Abu Dhabi's City Football Group takeover of Manchester City require even more capital than these institutions are likely able to manage.

“Only a few years ago Manchester City were playing in the second tier. Before the club was purchased … it was a middling football club in the Premier League, so there was an immediate need to pump huge amounts of investment to take the club to where the owners wanted,” said Khoury.

“Although they are still going to be spending every year, we won’t see an expenditure of hundreds of millions on new players for two reasons. First, there is less of a need for player investment once it has already been done. Second, the Premier League has financial fair play rules coming up which will limit the investment that owners can make,” added Khoury.

Football clubs receiving Middle Eastern investment

Manchester City – Purchased 2008 by City Football Group.
Paris Saint-Germain – Purchased 2011 by Qatar Sports Investments.
Aston Villa – 27.5 percent stake purchased 2018 by Nassef Sawiris and Wes Edens, giving the pair majority control.
Sheffield United – 50 percent stake purchased 2013 by Saudi Arabia's Prince Abdullah Bin Mosaad Bin Abdulaziz Al Saud.
Hull City – Purchased 2010 by Egyptian-British businessman Assem Allam.