News broke last night that after 17 years, Manchester United may be changing its ownership. It was announced on Tuesday evening that the Glazer family are willing to entertain offers to sell one of the worlds largest and most prestigious football clubs. Already a figure of between £5bn - £9bn is being reported by some media outlets with speculation around various suitors.
In May of this year Brand Finance published our annual most valuable football brands study, in which we place a monetary value on the brands (intangible asset) of various football clubs. To contextualise the value of the brands, we also calculate the value of the entire business which is also referred to as the enterprise value:
The €3.4bn calculated by Brand Finance in May is some distance from the range being widely reported by the media and therefore, we have decided to dissect exactly what a potential buyer would be getting if they purchased Manchester United.
In our view the primary asset of the football club is the value of its brand, which we valued at €1.3bn (Manchester United has had the most valuable brand in sports 8 times over the previous 22 years):
Manchester United Business Value Breakdown
Given that Manchester United’s share price has climbed 17% on the back of the news of a potential sale, we have taken data from the beginning of November to illustrate the asset breakdown of Manchester United:
As of 1 November, Man Utd’s market cap (total value of the clubs’ shares was $2.2bn, with net debt of $700m. This means that the total Enterprise Value of the club (the amount an acquirer would have to pay) is $2.9bn.
As with any business, Manchester United is made up of assets and liabilities, the net of which (assets minus liabilities) represents the book value of the shares (book value of the ownership of the Glazer family). There is a substantial difference between Man Utd’s enterprise value and the book value of its assets. This difference represents a market premium placed on the value of Manchester United. Brand Finance have calculated that most of that premium placed on Manchester United by the market is in fact made up of the value of the Man Utd brand ($1.45bn). Whoever intends to purchase Man Utd needs to both invest in and leverage the strength and value of the Man Utd brand to generate on-field and off-field success for the club.
Manchester United’s lagging financial performance
Despite Man Utd’s well documented struggles on the field in recent years, the club still generates huge amounts of revenue, and until very recently, relatively large profits:
New ownership, with appropriate funding could alleviate Man Utd’s considerable debt burden and interest expenses on that debt – which reduces the club’s profits annually. In addition, fans would hope that new owners would not draw as much money out of the club (in the form of dividends) as the Glazers have over the last 15 years.
What drives Manchester United’s Brand Value and therefore Business Value?
Manchester United is without a doubt one of the most followed teams in world football, the statement released by the Glazers on Monday referenced the often quoted 1.1bn global followers – which they claim makes Manchester United the most popular sporting team on the planet. However, this estimate does not give much clarity on the number of engaged fans that are likely to contribute either directly or indirectly to revenue generation at the club. Brand Finance’s 2022 Football Fan Study provides deeper insight into the levels of engagement among football fans of a specific club, enabling a greater understanding of revenue growth drivers that would so interest a potential acquirer of the club.
According to Brand Finance’s 2022 Football Fan research, Manchester United is the 2nd most followed team in the Premier League with a total following of 41% of all Premier League Fans[1]. Out of United’s Total Following (41%), 11% said Manchester Utd was their favourite team and 30% said that they followed the club somewhat closely.
A key region for growth for football brands that is often quoted is China. In additional to shear market size, the country has a rapidly growing middle class who are interested in football and willing to spend to engage with the sport. If we look at research respondents from China only, we can see that Manchester United is in fact the most popular Premier League football club in the country.
Further indication regarded its fans love for the club from Brand Finances football market research revealed that Manchester United was recorded as having the most passionate fans globally.
In summary, Manchester United have struggled to live up expectations since Sir Alex Ferguson left the club back in 2012-13 after winning the league. From 2002-2013 they won the league six times but have failed to do so since. Rivals Manchester City on the other hand have triumphed 5 times between 2013 and 2022. Many Manchester United fans have pointed to the Glazers ownership as a key reason behind the club’s lack of recent success and more recently, Cristiano Ronaldo has also left Manchester United after publicly criticising both owners and the club in an interview with Piers Morgan. News of the potential sale will no doubt be music to the ears for many Manchester United fans around the world as they will be hoping that the new ownership will be the catalyst to set the club on the right trajectory and return it to its former glory.
[1] (Respondents that say the premier league is their favourite league).