Originally published in the December 20th edition of Transacted.

On offer is up to 8 percent of an entity holding broadcasting rights for the Bundesliga, Germany’s top-flight soccer league.

EQT’s initial proposal valued the asset at around €12.7 billion, edging out CVC’s €12.5 billion and Blackstone’s €11.9 billion, per Bloomberg.

Advent International also bid, though it fell short on valuation (€10.8 billion) and was not invited forward.

The current process follows two previously failed attempts by DFL to secure outside investment. Any deal requires approval of a two-thirds majority of the organization’s thirty-six members, some of whom have expressed reservations over both financial sponsor involvement and outside influence in their domestic league.

Part of the challenge is thanks to German enforcement of what’s known as a 50 + 1 ownership rule for soccer clubs, preventing majority ownership of teams by institutional investors. It’s a unique structure relative to Europe’s other domestic leagues, and, as a result, has largely insulated the Bundesliga from the influx of outside capital flowing into its counterparts in England, France, and Spain.

Part of the process of massaging member clubs’ support for the deal has included the addition of unique terms to any potential agreement. Bidders with a greater than 10 percent stake in a rival league are excluded from participation, as are any Middle East or Asia-based investors. Of note for the current group of sponsors, the successful purchaser is required to hold its stake for a minimum eight-year period.

With league approval secured just last Monday, bidding deal teams will be thankful that completed work on their already-submitted bid packages wasn’t rendered worthless for the third time—an added layer of competitiveness in an already tight sale process.

Though with the same parties participating in May’s attempt at a larger €4.5 billion stake sale, there were likely off-the-shelf resources to pull from this time around.

Use of Proceeds

The DFL plans to use the majority of proceeds to improve the league’s broadcast offering, with the end goal of growing its international presence.

Despite a level of on-field play that is comparable to other European leagues, Germany is desperately far behind its peers when it comes to international reach and monetization.

The €2.1 billion in annual international rights revenue brought in from England’s Premier League is more than ten times that of Germany. Despite member clubs’ deeply held reservations, there’s a growing consensus within the league that this disparity will ultimately make Bundesliga teams less competitive, lacking the resources and talent of European rivals.

“German football clubs and fans need to wake up and realize the league has to open up for investments, or else the gap to international rivals will widen,” said Gerhard Trosien, a professor emeritus for sports management at the Accadis University of Applied Sciences, in a comment provided to Bloomberg.

Private Equity’s Interest

Germany provides the latest opportunity to secure a foothold in live sports, a post-pandemic bright spot enjoying a prolonged bump in activity across both direct investments in teams as well as their leagues.

Should CVC prevail, it would add to its existing holdings across similar media deals with France’s Ligue 1 and Spain’s La Liga.

“We have witnessed significant demand for new and original content among fans, streaming platforms and networks, and this has driven sports-related businesses to require flexible and scalable capital to help fuel this secular growth,” says Ares Co-Head of U.S. Direct Lending Mark Affolter. His comments followed the firm’s 2022 launch of a dedicated $3.7 billion fund focused on debt and equity investments in sports, media, and entertainment.

Part of the increased interest is thanks to the emergence of lucrative streaming deals that have more favorable economics than legacy broadcasting. For streamers, there’s a greater willingness to pay up for what are highly sought-after sports assets in the fight for new customer acquisition.

“Our view is that there is incredible growth across these sectors. It’s really driven by valuations ascribed to original content,” Affolter said. The DFL hopes its on-field original content can secure a much-needed capital injection.