On May 2, 2021, thousands of English Manchester United supporters gathered in an anti-ownership demonstration outside Old Trafford ahead of a game against Liverpool.

Protests against the Glazer family (majority shareholders) were nothing new. But this time, the anger spilled over. Fans broke into Old Trafford, occupied the pitch, and forced the postponement of one of English football’s biggest games.

Two weeks earlier, Manchester United had announced it would join a breakaway competition intended to replace the Champions League, one where its 12 founding members would never face relegation.  

The commercial logic was obvious.

Guarantee regular fixtures between the world’s biggest clubs. Package every game as a premium global event. Sell the broadcast rights, sponsorships, and digital access to billions of supporters around the world.

It would turn volatile sporting income into something resembling recurring revenue, at a much higher baseline. A CFO’s dream.

But to the fans (the people coughing up that revenue), it violated the competitive, meritocratic, principles that had defined European football for over a century.

The Super League idea collapsed within days. Manchester United withdrew, and Joel Glazer publicly apologized, acknowledging the owners had failed to respect the game’s traditions.

But the episode exposed something fascinating about Manchester United as a business asset: most of the club’s value comes from supporters. They fill the stadium. Buy the shirts. Attract the sponsors. Pass their support from one generation to the next. That incredible loyalty is precisely what made Manchester United such an attractive asset.

It also came with strings attached; a reality the owners still hadn't grasped after more than 15 years. Owning Manchester United didn’t mean they could do whatever they wanted with it.

That raises an interesting question for us finance nerds. What is a business worth when its most valuable asset is an emotional relationship its owners can damage, but never truly control?

How do you value Manchester United’s history, global audience, sporting potential, stadium problem, volatile cash flows, and almost impossible scarcity?

And why, after two decades of protests, endless criticism, and deteriorating performance, have the Glazers still not sold control? And at what price could the Glazers be persuaded to sell?

Let’s put a number on it…

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Let me start by saying a quick ‘welcome’ to you if you are one of the thousands of new readers this week. You join us during a pause in normal programming while I take an August vacation. 

So, this month (for a bit of fun) we are doing a four-part financial deep dive into the business of English football team Manchester United, and I’ve invited my friend, and expert Sports CFO, Jason Hershman to help me (and to also offset my bias as an emotionally invested fan.)

In Part One we broke down the complex and over-levered capital structure of Manchester United.

In Part Two we dug into the  revenue line to understand how income of a soccer team correlates with on-field performance.

And last week we dissected one of global sport's largest capital expenditure projects and tackled the £2bn question: How does a CFO handle a 110-year-old, crumbling stadium that doubles as one of the most revered venues on Earth?

This week, in this fourth and final part, we round off by asking how you might value a football club like Manchester United…

Jason: Based on today’s share price alone, it implies an enterprise value of £3.8bn-£4.1bn ($5.2bn-$5.6bn) depending on how you treat deferred transfer fees:

Jason: They have not explicitly said what they think it’s worth (SCFO: Why would they, I guess?), but we can estimate a range based on what’s been reported in the press, what bids they have rejected, and what bids they have accepted at a point in time. When United was exploring a sale in FY’23, news outlets cited the family’s reservation price at £6bn ($8.2bn at current rates). 

We can assume that the price direction came either directly from the family or from their bankers. We know that they rejected a £5bn bid for the whole club by Sheikh Jassim in FY’23, so they must think it’s worth more than that. They were, however, prepared to sell a minority stake to Jim Ratcliffe at a similar level. But they clearly think there's more upside to come before they're prepared to cash in on their control of the club.

There were reports in early June of this year that some members of the Glazer family were looking to sell their stakes in the club and trying to convince other family members to do the same. There’s actually a lot of nuance to the equity stack at United with its dual class share structure:

This is why the quoted share price is a poor guide. The Glazers clearly see that their shareholding carries a significant control premium, and therefore are incentivized to vote as a single block (despite holdings distributed among the family.) Ultimately only the Glazers themselves know what price it would take to wrest control away. 

Jason: Yes, those two elements make a football club tough to model. It’s difficult for a traditional DCF model to yield a meaningful result. Just look at the last three years of unlevered FCF for a variety of clubs:

These are multi-billion pound assets which, at best, have cumulatively produced zero cashflow over the last three years. They’ve more likely burned through hundreds of millions of pounds. Any DCF becomes an exercise in projecting years of losses, then popping on an EBITDA exit multiple to the terminal value which will make up more than 100% of EV. In other words, DCF is a path to end up wrong in great detail.

However, using a reverse DCF is interesting. Because it does reveal what assumptions you’re implicitly buying into at a given valuation assumption. Over the Glazer years, revenue has grown at an average rate of 6% and the business has earned a cumulative 7% margin of free cash flow. To get the DCF to equate back to the current share price, you’d either need revenue to grow at 16% in perpetuity or you’d need persistent 20% FCF margins.

Well, if you’ve been following carefully over the last few weeks, you’ll know there is nothing currently to justify those assumptions (or anything near them). Even if the club can get back to delivering Champions League football consistently.

But more intriguing is backing into what United would have to do to justify the Glazers' whisper number. If the Glazers consider £6bn a floor to the club’s value, you’d have to believe that sales will grow 21% into perpetuity or that the club will earn persistent 33% FCF margins to justify the price on “fundamentals”.

Jason: Yes, you’re not really valuing the club on its cash flows at all. You are just trying to guess the terminal value, which in this market comes down to three things:

Naturally, these are all hard to value conventionally. So the sport tends to price these trophy assets on revenue multiples instead of earnings. And with a wide range too, with precedents running from 4.8x to 8.8x.

It’s a small sample size, so the multiple is not a precise science. The debate is over scarcity, brand, and how badly the buyer wants it. In the end, the club is worth whatever a deep-pocketed buyer will pay.

SCFO: It’s interesting because Leicester City are currently on the market for a reported £200m, roughly 1x revenue. And they won the Premier League 10 years ago, but are now languishing in the 3rd tier of English football. It shows that while no-one can take away the history (or the brand), success is not guaranteed in the short term.

Anyway, on the subject of live deals, there was recently a high profile investment into another football club from the Northwest of England. What does that transaction tell us about the comps for Manchester United?

Jason: I think you are referring to the recent acquisition of a reported 38% of arch-rival Liverpool (SCFO: never heard of them) by a consortium consisting of Jeff Bezos, Facebook co-founder Eduardo Severin, and Amit Bhatia (son-in-law of Lakshmi Mittal and former owner of QPR, another football club.)

The purchase purportedly values Liverpool at £5.0-6.0bn, or 7.1x-8.5x its FY’25 revenue of £703m, so you’d expect a controlling stake to have been at a premium to that.

The 2022 acquisition of Chelsea remains the largest control sale the sport has seen at £4.2bn. This was a forced sale, as owner Roman Abramovich was under sanctions from the UK government following the Russian invasion of Ukraine. The entire sale wrapped in 90 days. So, given those circumstances, it’s hard to draw much from that.

After that, the next biggest control sale of a soccer team was the sale of 55% of Atlético Madrid to Apollo (SCFO: yes, that one) in March for a club value of €2.2bn at around 6x revenue.

Ultimately, the precedent transaction EV/revenue range for top-level European football clubs varies between 4.8x-8.8x. If the Glazers remain committed to selling the club for £6bn, or ~41.34/share, this is a 9.1x revenue multiple, and nobody in the history of European football has paid that price. Or anywhere near it.

SCFO: That’s the first time I’ve seen a valuation football field for a football club. A nice little crossover….

Anyway, the real problem here is depressed revenue, with the club unable to consistently deliver Champions League football. It seems like a regular return to football’s top table is kinda priced into the Glazers’ price expectation.

But, at the same time, they haven’t invested consistently enough to deliver that level of on-field performance. The math doesn’t math. So tell me, given that…what exit options do the Glazers realistically have?

Jason: As I said, there are a handful of people on the planet with the money and appetite to own an asset like this, with no reliable long term stream of cashflow.

And, even then, the Premier League has strict ownership rules that are believed to have been put in place to prevent - among other things - a takeover like the Glazers in 2004 from happening again.

So realistically, I see three outcomes here:

Jason: As we saw in Part One, Malcolm Glazer wrote an equity check of £272m in 2005, about $503m at today’s rate, and borrowed the rest. According to our analysis, the family had taken ~$950m back out in dividends, share sales, and fees by 2023.

A year later, Ratcliffe's money for a quarter of the Class B shares handed them another $929m. That is $1.9bn out already on a $500m check, 3.74x their money. And they still hold nearly half the club and are firmly in control.

Mark the rest at today's price and the whole trade is 8.1x invested capital and a 13% IRR across twenty-one years. At their £6bn ask, it’s 11.2x invested capital and 14.3% IRR.

It’s been a glorious trade for them. Whether it’s been worth the death threats or not though… is a question only they can answer.

SCFO: Thank you, Jason. It’s been fascinating to get deeper into the financials of the club that I love. While I’ve followed the headlines closely over the last 20 years, this is the first time I’ve really gotten into the numbers in a meaningful way.

The fans want one thing more than anything else: the Glazers out, and ideally Ratcliffe with them. They want the club debt-free and in the hands of an owner who will protect its history, invest properly, and ultimately make Manchester United back into something to be proud of again.

If I had to guess, I think the stadium investment may be the forcing function to make something happen.

While I think it’s reasonable to expect Manchester United to trade at the top end of the revenue multiple range, the problem is that revenue has been so depressed. The Glazers’ don’t want to leave money on the table and buyers don’t want to pay for revenue that doesn’t currently exist.

But there are two big potential drivers of revenue uplift that could help bridge the gap between the bid and the ask.

The first is the team delivering regular Champions League football and on-field success again. The problem recently seems to be that the Glazers have priced in an assumption of that return, despite consistently poor on-field performance. Meanwhile, the market, understandably, will not.

The second driver is the potential for a huge uplift in revenue from a redevelopment of the stadium. As we saw last week, that is real money. And while fully realizing that potential is likely a decade or more, not to mention £2bn+ of investment, away, the Glazers will likely want some of that upside reflected in the price today.

It makes me wonder whether the flurry of PR activity around the new stadium development over the last 18 months is largely about improving that story. Develop the vision. Put together an oven-ready plan. And give a future buyer something much more tangible to underwrite. The Glazers won’t capture all the value if they sell before it’s built, but they might get some.

We know the Glazers are real estate people at heart. And there is a monster real estate play developing here. Maybe that’s what they’ve been waiting twenty years for…

I’d like to give a special shoutout to Daniel Moudy for his tireless analytical work to support this series.

Next week, we dive straight back into regular programming, with a new series: Inheriting a Shitshow Finance Function. I’ve been writing it over the last few weeks while in the Canadian wilderness on a long vacation. I CANNOT wait to share it.

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