Derby County investment explained as David Clowes prepares for next step after £55m purchase
Derby County owner David Clowes could find the timing is right to seek investment into the club.
A report in the Telegraph last week claimed that Clowes, had held talks with a number of interested parties from around the world over the potential sale of up to 80% of his shareholding in the Rams in a bid to give the club a firmer financial footing to stabilise and compete in the Championship.
While the club are reportedly not engaged in active discussions with any would-be investors, or those who would be seeking to acquire a controlling interest in the club, macroeconomic factors in financial markets at present, alongside the return of the club to the Championship and a more enticed investment profile, could prove good timing for Clowes to welcome expressions of interest.
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The Telegraph report claims that Clowes, who spent £55m to take the Rams out of administration in 2022 after they had been dangerously close to the financial cliff edge, would be willing to sell up to 80% of his current shareholding but would want to remain as chairman, with any investment said to have to align with the club’s ‘existing business models and principles’.
There has been significant economic turmoil over the past two years, with the cost of capital having been significantly higher than it had been for a number of years as interest rates rose.
While valuations for the so-called ‘big six’ in the Premier League have continued to rise year on year based on a multiple of revenue model, valuations for clubs in the middle to lower end of the Premier League haven’t moved forward a great deal, with club valuations falling significantly when teams go into the Championship, with that fall continuing through the leagues.
Derby are one of English football’s famous names and have a fan base size that eclipses many Championship sides and a number of teams in the Premier League. The view from the outside among some investors would be that it offers a potential to kick on, and having had a custodian in Clowes, a Derby fan, who has done much leg work in trying to clean up the financial picture, is now a far more attractive prospect for some.
Interest rates are falling and the amount of liquidity in markets is starting to increase, with the knock-on effect of that being more money to spend on investing and acquiring, meaning asset prices rise.
While the Premier League is the holy grail when it comes to the ultimate goal of investment, with the broadcast monies on offer meaning that the Championship play-off final is the most lucrative one-off domestic game in world club football, the cost of acquiring Premier League assets can be expensive.
Ipswich Town had new American owners in recent years and have climbed to reach the Premier League again, while Birmingham City, under the ownership of US billionaire Tom Wagner and NFL legend Tom Brady, may have fallen into League One but are very much targeting the top tier long-term.
The EFL interest has been helped in no small part by the Wrexham story, where Hollywood actors Ryan Reynolds and Rob McElhenney acquired the club in 2020 and set about raising their profile on both sides of the Atlantic through the creation of a Disney+ documentary, ‘Welcome to Wrexham’. It is a plan that has worked thus far, with Wrexham having risen from the National League to League One, where they currently sit second, two points behind leaders Birmingham.
Some US investors believe that there is a continued road ahead left to travel in terms of value creation, and success stories such as Brentford, Bournemouth, and Brighton & Hove Albion, where strategy and a better, more focused use of resource and scouting has allowed for overperformance from a financial point of view, have only served to underline that returns can be made in the longer term.
As to who is out there and willing to spend, there is a seemingly endless stream of sports-focused investment funds and private equity that is ready to dip into European football, seeing some positives in the promotion and relegation system that exists on the continent but is absent from North American sport. The ability to acquire assets more cheaply, invest over time and then move through the pyramid is enticing to some, albeit with plenty of jeopardy involved.
US billionaire John Textor, who holds a 45% stake in Crystal Palace but who had been in the running to acquire Everton before a deal was agreed with The Friedkin Group, is reported to be eyeing a move for a Championship side, with two on his radar. Textor, who also owns Olympique Lyonnais, Botafogo, and RWD Molenbeek, is likely to want a controlling stake in a club as he seeks to add full ownership of an English team to his Eagle Football Holdings portfolio ahead of potentially floating it on the New York Stock Exchange.
But Clowes will likely find more interest now than there was a few months ago, and that means that he will be able to be more selective when finding the right people to come on board, if that is the direction he is to pursue.