• Sam Leveridge

Who are CVC Capital Partners and what is their deal with LaLiga?

Anyone who follows LaLiga closely will have been bombarded with “Comunicados Oficiales” and the letters CVC in recent weeks. But these aren’t referring to new signings or the three digits on the back of Florentino Pérez’s credit card, rather a landmark deal struck between LaLiga and an investment firm to establish a plan for LaLiga’s long-term growth.


But what does it all mean? Who are they key players? What benefits are there for clubs? Why were some against it? We explain all in detail here.


Who are CVC Capital Partners?


CVC Capital Partners are a private equity and investment advisory firm who have invested heavily in European and Asian markets. Based in Luxembourg, they’ve been keen to invest in football for some time and have previously invested in other sports across the globe.


In 1998, they bought Moto GP brand Dorna for €71.5 million, selling it in 2006 at 700% profit at €525 million. They also invested in Formula 1, selling their stake to Liberty Media in 2017 and while details have not been made public, reports suggest that there was a significant profit for the investors., with The Guardian labelling them "the biggest winners of Formula 1".


This led to them diversifying into other sports, including rugby. In 2020, they acquired a 27% holding in Premiership Rugby, the first division of English clubs, and then in 2021 added 14% of the rights for the Six Nations and 28% of the Pro14 tournament, taking their investment total in the sport to around €800 million. This is particularly important to remember for LaLiga fans, as these models have been built around the same model and strategy as has been used to strike a deal with LaLiga.


The arrival of Covid-19 opened a door to them. They saw that sports organisations, without fans and with sponsors and television companies cutting back, were desperate for income. Having already enjoyed immediate results in rugby, they looked to football as their next stop. They approached both Serie A and the Bundesliga, but talks were unsuccessful.


Talks with Javier Tebas, president of LaLiga, were more successful and a deal was struck.


What is the deal between LaLiga and CVC Partners?


The deal involves a four-step process.


1. LaLiga establishes a new company, called ‘LaLiga Impulso’, and transfers all of its business across. This is required in order to allow for other companies to invest.


2. CVC becomes a business partner. They invest €2.7 billion in return for 10% of the rights of the company in a 50-year agreement. CVC also brings skills and experience to the table, using previous investments in motorsports and rugby to help LaLiga to grow and improve its offering.


3. LaLiga takes 90% of this €2.7 billion and divides it among the recipient clubs from Primera and Segunda División. This will be given to clubs in the form of interest-free loans which would be repaid over the next 40 years. The amount that each club receives is determined according to the same formula used to calculate the division of television rights, effectively rewarding the biggest clubs who bring the most money into LaLiga and scaling down according to the size of the club.


However, there are strict rules on how that amount can be invested. This includes:

  • 70% of the amount received must be committed to the ‘growth’ of the club. This means investing in infrastructure and innovation. While the exact areas are not clearly defined, this means stadium development, training ground development, digitalisation and investment in business technology.

  • 15% can be committed to debts caused by the pandemic. This means that clubs can pay off short-term loans which they’ve taken to fill the gap in their books.

  • 15% can be spent on their squads. This could take the form of wage payments, transfer fees, or as each club sees fit.

This will also include clubs who are promoted to Segunda within the next 10 years, and those who have been present within the past seven years. Any club not in either of the top two divisions between 2015 and 2021 who is promoted by 2031 will receive €4 million, while clubs present between 2015 and 2021 will also be included in the formula, with Deportivo La Coruña earning €30 million, for example.


€50 million is also destined for the Spanish Football Federation (RFEF), who are expected to invest some of that amount into their new Primera RFEF, the third tier of Spanish football.


4. CVC will receive 10% of profits of the new company during the next 50 years. Unlike some have claimed, there is no loan or repayment to be made to CVC. They will recoup their investment through their percentage of LaLiga’s total profits. That means that if LaLiga were to fail to make a profit for the next 50 years, CVC would not take any money from this deal.


The deal is therefore a long-term project which will make an immediate impact, with the hope of growth for all parties over the next 50 years. It was ratified by clubs, with 38 votes in favour, four against, on Friday 12th August, 2021.



What’s in it for CVC Partners?


One factor which has been sidelined and forgotten in the conversation about this deal is that LaLiga is so much more than a football competition. The organisation has invested heavily in recent years in its diversification, expanding into other business areas, primarily to do with technology. Doing so has helped it to be ranked as the 12th most valuable Spanish brand by Kantar.


This has seen LaLiga innovate in augmented reality and anti-piracy technology, but also open up areas in streaming, such as LaLiga TV, education, and business intelligence, providing solutions which help and enable businesses to turn data into valuable insights into their performance. These areas have brought benefits which LaLiga have exploited for themselves, but have also allowed LaLiga to sell these products and services to companies and customers alike.


The biggest of these areas is the ‘Audiovisual Rights’ area of LaLiga. This is where LaLiga handles the television rights of all LaLiga clubs on their behalf. Whereas in the past, clubs used to manage this individually, but clubs came together to cede their rights to LaLiga, allowing them to negotiate on behalf of all clubs and achieve a greater deal which could be divided more fairly between clubs. It worked, leading to the biggest television rights contract in the history of Spanish football, worth over €3.4 billion, in 2018.


CVC are therefore confident that they will gain a profit from this operation. Their initial report suggests that they expect to recoup their investment within 10 years and would then look to be profiting from the following 40 years of the deal.


What’s more, they can expand into football and, if successful, could look to deploy the same strategy with other competitions, just as they have done in other sports. Such diversification of their portfolio is important.


What are the benefits for LaLiga?


After losses of €733 million in LaLiga for the 2019/20 campaign, this reflects an investment which will help to immediately paper over the cracks of the financial ruin of the pandemic and allow clubs to look to rebuild with funds for investment.


Some point to the fact that CVC would expect to make a profit as a sign that LaLiga is undervalued in this arrangement, but that is not the case. The plan between the partners is to increase LaLiga’s value, and take that rising value to make a profit. Reports from close to CVC and LaLiga believe that LaLiga can boost their income by an additional 50% over the next 15 years compared to if they do not enter into this agreement.


LaLiga also stands to benefit from clubs having increased budgets for investment and transfers. By funding new signings and improved stadiums, the profile of LaLiga can increase and also become more sustainable by allowing clubs to build their own long-term income sources through greater corporate income streams.


What are the benefits for LaLiga clubs?


The main one for many clubs is a quick fix to the financial pains of the pandemic. Being able to use some of the money received to pay off debts and to increase their wage caps has been essential for the likes of Alavés and Levante, who were unable to register several key players until the deal was passed.


A boost to transfer budgets is also more than welcome from many LaLiga clubs at a time when it is becoming harder than ever to compete in the international market. In 1996, the Premier League had 31% more income than LaLiga, which grew to 46% by 2011, but has now rocketed to 68% in the last 10 years. This summer in particular, LaLiga has spent €153 million, with a net spend of just €14 million, at the time of writing, compared to €1.08 billion spent by Premier League clubs, with a net spend of €569 million.


Beyond that, this deal will help clubs to invest in their long-term future. Improvements to training grounds and stadiums will provide new income streams, such as through corporate boxes or event spaces, and will also provide better facilities which will, in turn, improve the quality of football in LaLiga.


The RFEF also hope that such an investment plan could boost their 2030 World Cup bid alongside Portugal, with improved stadiums being invested in by clubs, rather than requiring public funding.



Why did Real Madrid, Barcelona, Athletic Club and Real Oviedo turn it down?


Each club has had their own stance, and some have their own hidden motivations too. The RFEF has expressed its own concerns, along the same lines as clubs, as part of their ongoing conflict with Tebas and LaLiga.


Real Madrid had the strongest reaction, stating that they will take legal action against LaLiga, CVC Capital Partners and the leaders of both organisations, Javier Tebas and Javier de Jaime. They claim that they illegally negotiated over rights belonging to Real Madrid and said that they would “take all kinds of legal action” in order to “annul and leave without effect” the agreement. Los Blancos also expressed concerns over the fact that it was a “negotiation without competitive proceedings”.


Critics of Florentino Pérez believe that he sees this deal as a threat to his European Super League project. Such long-term commitment to LaLiga will likely tie one hand behind his back when negotiating television rights for the Super League.


Barcelona backed Real Madrid’s stance, despite their desperation for a cash injection. President Joan Laporta likened it to “mortgaging” the club’s future, saying that he could not commit to a 50-year agreement which would have a significant impact on future club presidents.


Athletic Club also expressed their concerns. They believe that the timing, hours before the start of the season and with only two weeks to study the details, was inappropriate. They also criticised a lack of flexibility in how the funds could be invested and the fact that other investors had not been invited to make a proposal. They insist that there should be a stronger long-term vision and that this deal is merely a short-term fix.


All three clubs also pointed to the very limited time allowed to consider the deal. They said that any such deal would have to be ratified by a vote of their members, and that such a vote could not be organised in time ahead of the LaLiga vote. This is similar to Laporta’s approach with the Super League project, and has again been used in this debate.


In the case of both Real Madrid and Athletic Club, it is worth noting that they have already invested heavily in infrastructure in recent years. The new Bernabéu is already being worked on, with finance guaranteed, while San Mamés only opened as recently as 2013, and both Valdebebas and Lezama were recently renovated.


Real Oviedo, the only Segunda side to reject the deal, explained their motives in a statement made after the vote. They explained that they were not against the deal, but did not agree with the way in which it had been agreed. They called upon a more open and transparent process to fully understand the negotiations to ensure that the deal was “the most beneficial possible for all clubs”.


However, only 48 hours after the vote, El Comercio reported that they had performed a U-turn and, despite voting against the deal, would accept it. They claimed that this was in order to avoid being at a disadvantage to their Segunda rivals, having included in their statement that “the important competitive disadvantage that rejecting the funds corresponding to our entity [would result in] makes it necessary to have a profound reflection on the present and future consequences”.


What does the CVC deal have to do with Lionel Messi?


A major part of the controversy of this deal is that Laporta and Barcelona turned down the CVC deal while struggling to register their players for the new season. LaLiga’s wage caps are set in relation to income and Barcelona’s plummeting income in recent years meant that the club would be unable to register players under the current system.


This was the reason given as to why Lionel Messi could not remain at the club. CVC was seen by some as a solution. Given that Barcelona would receive €253 million, €38 million would have been added to their wage cap. That should have given Barcelona more room to manoeuvre, and is why Javier Tebas claimed that Barcelona were originally keen on the deal, before later backtracking and going against the agreement.


In truth, Barcelona’s struggles to meet their wage cap and Messi’s significant wages would likely have meant that even with the CVC deal, it would have been a challenge to register Messi. Even after registering summer signings Memphis Depay and Eric García thanks to a significant pay cut for Gerard Piqué, the club are still unable to register Sergio Agüero, and Messi’s wages would have been even more significant.



What does LaLiga have to say about this criticism?


Firstly, it’s important to highlight here that LaLiga backed down. Initially, the deal was to be implemented across the board if approved in the vote. However, shortly before the vote, the deal was amended to include a release clause meaning that clubs could reject the deal and would not receive any financial injection, though they would retain 100% of their audiovisual rights income.


Is LaLiga undervalued in the CVC deal? That depends entirely upon who you ask. Financial services company Rothschild & Co. conducted a report which suggested that the value was accurate, giving LaLiga Impulso a total value of €24.3 billion, meaning that the €2.7 billion invested by CVC Capital Partners would be equivalent to 11.13%.


They also insist that their approach was entirely legal and the best way to conduct such negotiations. They are adamant that CVC are a unique partner and no other investor could have matched what they could offer LaLiga, not only financially, but owing to their experience in the sports industry.


So, is LaLiga’s CVC deal a good deal, or a bad deal?


Again, that entirely depends upon who you ask. There can be little argument that it provides a solution to the immediate financial struggles of many LaLiga clubs, but some do argue that it involves a long-term compromise which could come to harm clubs more than it helps them.


The operation is a complete success, very well considered and very positive for LaLiga, clubs and the investor,” says Irene Aguiar, a legal adviser on sporting law, speaking to MARCA. “LaLiga is an entertainment product that competes against other new platforms like Netflix, HBO or Amazon Prime. To increase incomes through product sales, you have to improve it, and that can only come through investment. An investment on this scale will allow for significant improvements for all clubs and LaLiga.


Others disagree. “The CVC deal is a hasty and disheartening solution which reminds me of when clubs were forced to become Sports Anonymous Societies,” José Luis Llorente wrote in El Español. This government measure in the early 1990s forced many clubs to become privately-owned companies, having once belonged to their fans. It led the path to many clubs encountering significant financial troubles due to unreliable owners.


The truth is that only time will tell. On paper, the deal has all the hallmarks of a very promising agreement which should help both clubs and LaLiga itself to grow. Using the knowledge of CVC, who have led successful projects in other sports, could give LaLiga a platform to continue to grow at a time when international ambitions are struggling more than ever having lost the league’s superstar, Lionel Messi.