KPMG “Football Clubs' Valuation: the European Elite 2017”

Football Clubs’ Valuation The European Elite 2017

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footballbenchmark.com Football Clubs’ Valuation: The European Elite 2017 3

Table of contents

Headline findings 6

A focus on broadcasting revenues and their impact on European clubs’ EV 10

The European Elite: Selection criteria 15

32 clubs’ Enterprise Value ranges 16

32 clubs’ Enterprise Value mid points 17

Our methodology 18

Basis of preparation 21

Limiting Conditions and Assumptions 22

Credits: Juventus FC/LaPresse

Some of the most striking fndings of our research: After having shared combined with their good first place with Real Madrid CF operating and fnancial results, last year, Manchester United FC allows London side Tottenham stand clearly at the top of our Hotspur FC to oust Paris Saint- 2017 ranking. Enjoying a 7% Germain FC from the 10th position, EV increase, the Red Devils thus increasing the number of outstrip Los Blancos (who had English teams in this top ranking a 2% growth) by more than to six, together with two Spanish, EUR 100 million. They are the one German and one Italian. frst club to surpass the EUR 3 While Les Parisiens show stable billion threshold; in fact, despite improvement in almost all the Dear Reader, missing UEFA Champions parameters taken into account in League qualifcation at the our valuation (which led to an 18% Following the success end of the 2015/16 campaign, EV increase), Spurs are displaying Manchester United FC continue a signifcant upward trend, of last year’s launch, let to achieve consistent off-the-pitch especially in terms of proftability me please introduce you performance. Also in this year’s and squad value, as demonstrated to our second edition edition, the top four are the only by a higher EV growth (26%). of KPMG's “Football clubs above the EUR 2 billion The future looks bright for Clubs’ Valuation: The landmark: in third position, Tottenham Hotspur FC, as they European Elite 2017”, an FC Barcelona have confrmed their plan to move to a new multi- ranking, showing no signifcant purpose stadium, and as they analysis undertaken by EV increase year-on-year, while FC have recently secured UEFA the Football Benchmark Bayern München’s 14% increase Champions League qualifcation team of the KPMG narrows the gap with the Catalans. for the second year in a row. Sports Advisory Practice, The Top 10 clubs comprise more Juventus FC remain the only Italian providing an indication of than two-thirds of the overall EV; club in the Top 10. Their signifcant the Enterprise Value (EV) within this group, Manchester City on-pitch performances, both of the 32 most prominent FC have overtaken Arsenal FC in 5th domestically and internationally, European football clubs position. Furthermore, the strength are mirrored in a 24% EV growth as at 1 January 2017. of the English Premier League, and in a growing share price. © 2017 KPMG Advisory Ltd., a Hungarian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Football Clubs’ Valuation: The European Elite 2017 5

In terms of growth per se, The proprietary algorithm developed If you would like to receive Olympique Lyonnais score the by KPMG and applied for the further information or discuss best result (+71%), followed suit purposes of this report is consistent our fndings, please contact us at by Galatasaray SK (+68%) and with the one applied last year. footballbenchmark.com, or me Sevilla FC (+44%). It is based on the Revenue Multiple directly. I would be delighted to approach, where each club’s discuss them with you. In this year’s edition we introduce revenues are multiplied by a specifc three new clubs: Leicester multiple which takes fve metrics into Yours sincerely, City FC, Athletic Club Bilbao account—each one with a specifc Andrea Sartori and Beşiktaş JK. As the lead weight—expressing differences Partner characters in what has been between clubs, the markets and the KPMG Global Head of Sports referred to as the greatest economies in which they operate. sporting fairy-tale of all time, [email protected] Leicester City FC’s journey to As the amount of broadcasting the English Premier League revenues and their distribution crown in 2015/16 has passed method play a crucial role in the into the annals of history, earning income generation potential of football them a remarkable 16th position clubs and has a signifcant impact on in our report. European clubs’ EV, this year we have incorporated in our report a chapter The foundation of this report is focused on this metric. an analysis of the latest publicly available fnancial statements for Despite some diffcult challenges— 39 European football clubs, of among others, differences in which the top 32 by EV are selected accounting practices across for the purpose of this publication. countries, differences in reporting Thus, it is important to note that currencies, fluctuation of exchange this analysis does not consider rates and differences in fnancial the business and sporting results year-ends—we trust our report achieved by each club in the 2016/17 provides an insightful overview of football season. some of the economic peculiarities of the European football landscape.

Headline Top 3 clubs by EV as at 1 January 2017 EUR

EUR 3,095 findings million EUR 2,976 % million +7 2,765 million Despite volatile economic conditions +2% and challenging international affairs, = the overall value of football, as an 1 industry, has grown. In this year’s edition, the 32 most prominent European football clubs’ EV 2 3 totalled approximately EUR 29.9 Operating billion, a 14% increase from the million million million previous season. This growth has Revenues 619 688 616 been sustained by almost all the Staff costs/ % % % actors in play, as only three clubs revenues 50 47 60 saw their EV decrease year-on- EBIT year, namely AFC Ajax (-8%), 41 million 92 million 68 million SS Lazio (-2%) and Olympique de Marseille (-1%). Source: KPMG Football Benchmark This year, the same number of countries (8) is represented among Strengthening and consolidating this dominant position will likely our top 32 clubs. However, while its position, the English Premier be more pronounced in next England (Leicester City FC), Spain League once again makes a year’s edition. However, the most (Athletic Club Bilbao) and Turkey strong showing in our report, significant increase year-on- (Beşiktaş JK) have gained one new accounting for approximately year is showcased by Turkey; team each, Italy (ACF Fiorentina), 40% of the aggregate value. thanks to increased revenues and Portugal (FC Porto) and France As a new broadcasting deal has signifcant improvements in terms (AS Monaco FC) have each started in the 2016/17 season, of cost control and proftability by dropped one.

Number of clubs, change in EV and aggregate value by country (EURm)

No. of Teams 2016 2017 % change EV ∑ 100% England 7 8 17% 11,888 40%

Spain 5 6 10% 7,331 25% Germany 3 3 14% 4,108 14% Italy 7 6 7% 3,284 11% France 4 3 6% 1,503 5% Turkey 2 3 97% 946 3% The Netherlands 2 2 2% 485 2% Portugal 2 1 -28% 340 1% Total 32 32 14% 02,000 4,000 6,0008,000 10,000 12,000

Source: KPMG Football Benchmark

both Galatasaray SK and Fenerbahçe an EV increase of 7%, topping Annual change in share price, SK, plus the addition of the 2015/16 this year’s table. In a few cases, 30 Dec 2015 — 30 Dec 2016 national champions Beşiktaş JK, the clubs’ on-pitch performances (local currency) the three Turkish giants achieve were mirrored by their share price. a 97% increase in EV. It is important As an example, Juventus FC won Club Annual to mention that both Galatasaray SK their fifth consecutive Serie A change and Fenerbahçe SK have faced UEFA title in 2015/16 and also saw their Financial Fair Play sanctions, which stock market performance improve Beşiktaş JK 85,2% have had a positive impact on their by 15.8%. improved sustainability. Two out of three Turkish clubs Galatasaray SK 82,8% Spain, also thanks to the new selected in our report—Beşiktaş JK Olympique Basque entry Athletic Club Bilbao, and Galatasaray SK—experienced 44,8% follows suit in second place, with the highest growth in share price in Lyonnais a 10% year-on-year increase, while local currency. These clubs’ stock Borussia Dortmund 31,1% Italy, despite dropping one club, prices seem to have been positively witnesses a 7% increase, carried impacted by various non-sporting predominantly by the signifcant events such as new sponsorship Juventus FC 15,8% performance of Juventus FC agreements, development of new (24% EV growth). The only country infrastructures and reforms in league SS Lazio 11,8% that saw an aggregate value governance, all of which are factors decrease is Portugal (-28%), due to that increase the commercial value FC Porto dropping out of the top 32. of the Turkish top-division clubs. Arsenal FC 5,4% Thirteen clubs out of the 32 are Alongside the above, Olympique Fenerbahçe SK 4,8% currently listed on a stock exchange. Lyonnais also experienced a Although in the 1990s many signifcant increase in share price. clubs, especially in England, Their performance was positively AFC Ajax 2,9% explored the public exchanges, impacted by key events such as most of them have since delisted the minority stake acquisition by SL Benfica -5,8% as their shares tended to be Chinese investment fund IDG illiquid and prices tended to be and the inauguration of the club’s stagnant. Indeed, listed football new stadium, the only privately- AS Roma -15,1% clubs recorded mixed share price owned venue in French Ligue 1. Manchester performances in 2016. Manchester Interestingly, Galatasaray SK -20,0% United FC United FC, despite experiencing a and Olympique Lyonnais are 20% decrease in their share price also two of the three clubs that Source: Thomson Reuters and failing to qualify for the 2016/17 experienced the highest EV UEFA Champions League, enjoyed increase year-on-year.

EV of the top groups as % of total (EURm)

Top 20 Top 32 Top 10 Top 3

8,837 20,374 26,584 29,883 30% 68% 89% 100%

Source: KPMG Football Benchmark

Best clubs by EV by country Unsurprisingly, the Top 10 by EV (EURm) is virtually replicated in the Top 10 by reported overall kit value, an indicator which shows how much a jersey is worth. The best example is provided by Manchester United FC the Red Devils, as they clearly EV: 3,095 7% stand out from all the other teams, representing the best club in this regard. The appeal Premier League enjoys for sponsors is confirmed AFC Ajax FC Bayern München by the fact that five clubs in the EV: 274 -8% EV: 2,445 14% top 10 by overall kit value are English. FC Barcelona, four-time UEFA Champions League winners in Paris Saint-Germain FC the past 11 seasons, sit comfortably EV: 998 18% in second position. The only club that is part of the Top 10 by EV, but SL Benﬁca is missing in this table, is Tottenham EV: 340 19% Juventus FC Hotspur FC, displaced by Paris Saint- EV: 1,218 24% Germain FC. Since Qatar Investment Galatasaray SK Authority took over the French team, EV: 377 68% Real Madrid CF they have exploited their commercial muscle. EV: 2,976 2% This is also demonstrated by a strong social media following of the French giant (40 million followers on Facebook, Twitter Source: KPMG Football Benchmark and Instagram), an impressive number when compared, for instance, to AC Milan (with 32 million followers) While the possibility to increase market, football clubs with although the Italian club lifted matchday and broadcasting revenues a strong brand position can the UEFA Champions League is respectively limited by stadium potentially leverage commercial trophy seven times. capacity and various economic income on a global scale. and regulatory aspects in each

Top 10 by overall reported kit value (2016/17) and EV ranking (EURm) EV ranking

1 3 4 7 2 6 8 11 9 5 200

150

100

0 Man. FC FC Bayern Chelsea Real Arsenal Liverpool Paris Saint- Juventus Man. United FC Barcelona München FC Madrid CF FC FC Germain FC FC City FC

Source: Club communications and media articles as reported in KPMG Football Benchmark

Credits: Pixabay.com

Return on Sales (ROS) measures the Top 10 by ROS (2015/16) and EV ranking proftability of the operating activities of a company which, for the purpose of this analysis, include clubs’ player SL Benﬁca 23 trading results. Tottenham Hotspur FC 10 For instance, in the case of SL Benfca (the best performer in Atlético de Madrid 13 this space), for every EUR 100 million of revenues, the club generated EUR Sevilla FC 27 30 million in Earnings Before Interest EV and Taxes (EBIT). FC Schalke 04 14 rankin The fnancial sustainability of our Athletic Club Bilbao 25 EV leader, Manchester United FC, g is also reflected in their ability to Olympique Lyonnais 24 generate a signifcant level of EBIT despite bearing one of the highest Leicester City FC 16 wage bills of all clubs examined here. Together with their peer English side, Manchester United FC 1 Tottenham Hotspur FC, they are the only two clubs of the top 10 Borussia Dortmund 12 by EV appearing in this ranking. 0% 5% 10% 15% 20% 25% 30% 35%

Note: ROS represents EBIT as a percentage of revenues Source: KPMG Football Benchmark

© 2017 KPMG Advisory Ltd., a Hungarian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 10 Football Clubs’ Valuation: The European Elite 20162017 A focus on broadcasting revenues and their impact on European clubs’ EV

The size and the impact of a –– league/product appeal; competition’s broadcasting –– market size (e.g. number of TV revenues and their distribution households); method are captured in KPMG’s proprietary algorithm, as they play –– consumers’ spending power; a fundamental role in the income –– level of competition amongst generation potential for Europe’s elite media rights holders; and football clubs. Indeed, the impact of broadcasting revenues on a club’s –– pay-tv penetration rate. enterprise value is very evident, Furthermore, the level of with only a handful of clubs being broadcasting revenues generated less dependent on this vital income by a club is also influenced by stream. the revenue distribution method Despite the existing correlation applied by its national league between broadcasting revenues as well as by UEFA. and enterprise value, an individual club's ability to influence this income is often limited, as the value of a league’s media rights is impacted by several market-specifc factors such as:

Aggregate EV and aggregate broadcasting revenues of top 32 clubs by country (2015/16) (EURm)

14,000 12,000 ng dependence 10,000 broadcasti wer e EV 8,000 Lo at eg 6,000

Aggr 4,000 asting dependence 2,000 broadc Higher 0 0200 400600 8001,000 1,2001,400

Aggregate broadcasting revenues

Source: KPMG Football Benchmark

© 2017 KPMG Advisory Ltd., a Hungarian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Credits: Leicester City FC/Plumb Images All rights reserved. Football Clubs’ Valuation: The European Elite 20162017 11

Domestic broadcasting rights

A high percentage of the total which currently accounts for more signifcant profts from next season broadcasting revenues of a league than 80% of its total broadcasting (EUR 1,160m/season for 2017-2021). is invariably generated from its revenues. However, Mediaset’s The landscape seems more domestic market. recently reported strategy, with a challenging for French and more “opportunistic approach” to Profting from a sizeable and Turkish clubs. Despite the growth football rights acquisition, seems relatively wealthy population, broad achieved by Ligue 1 and SüperLig’s to have cast some uncertainty over commercial appeal, a large and latest agreements, expiring future negotiations. mature pay TV market as well as the respectively in 2020 and 2022, ferce competition between Sky and With generally lower commercial both competitions are now even BT, the English Premier League and matchday income than their further away from the industry (at GBP 1.7 billion/season for European counterparts, the outcome leaders which may lead to an even 2016-2019) sits comfortably at will have a major impact on Italian wider gap in total revenues and EV the top, with the most valuable clubs’ mid-term ability to keep the in the medium-term. domestic media rights deal. pace with their European peers. Maximising media revenues The combination of this dominant In Germany, the Bundesliga’s domestically becomes more position with a relatively equitable expiring agreement, impacted by important for leagues that revenue distribution model (1.5:1 ratio Sky’s dominant position and the are less appealing to global between the frst and last club in country’s low penetration rate of audiences. However, in a weaker the 2015/16 season) partially explains pay TV, has historically kept the negotiating position, these leagues— the high number and position of German league (at EUR 628m/season or clubs, when rights are not sold English clubs in KPMG’s Enterprise for 2013-2017) behind its European collectively—often need to enter Value ranking. counterparts. However, benefting into long-term agreements, thus Behind the Premier League, albeit from the approval of the non-single struggling to maintain growth rates under very different scenarios, buyer rule by the German anti-trust comparable to the industry leaders. Spanish LaLiga and Italian authorities, the Bundesliga has Prime examples are the Dutch Serie A both stand to generate recently recorded an increase Eredivisie’s 12-year deal with Fox approximately EUR 1 billion of 85% in the value of its and the 10-year agreements signed in domestic broadcasting revenues domestic rights, from which by leading Portuguese clubs with in 2016/17. member clubs will potentially derive NOS and Portugal Telecom. In the case of LaLiga, this sum represents a 65% year-on-year Domestic broadcasting rights deals per season of major increase over the 2015/16 season, European leagues (EURm) the league’s frst season selling its media rights on a collective basis. 9 -1 Aiming for a distribution ratio 16

below 4:1 this season (5:1 ratio 20 in the 2015/16 season), LaLiga’s 2,500

new system equally distributes half 6 1 of the available funds and assigns 2,000 -1 -2 9 8 13 -1 the rest according to a club's 5 -1 17 0 20 -1 7

1,500 16 6 performance (25%) and popularity 6 15 20 -2 2 -1 12 -1 -1 7 20 -2 20

(25%). Therefore, while Real Madrid 16 13 20 -1 12 nd 15 17 CF (2 on KPMG’s EV ranking) and 1,000 20 5 20 15 20 rd 20 20 FC Barcelona (3 ) will still receive a -2 20 larger revenue share than their peers, 500 13 clubs with large fan bases, such as 20 th Atlético de Madrid (13 ) or Sevilla FC 0 (27th), are expected to proft from this

system in the coming seasons. 1 A ga Liga By contrast, Serie A’s next media rie gue emier La Se League Li edivisie Pr

cycle (2018-2021) will start soon. Superlig

Domestically, the league previously Er Bundesli benefted from intense competition (Sky/Mediaset) to strike a record deal, Note: Portugal is not represented as Primeira Liga does not sell broadcasting rights collectively. Source: KPMG analysis and research from various sources

Credits: Beşiktaş JK

International broadcasting rights

Besides the importance of of the table, clubs like Liverpool FC and does not have the linguistic ties the domestic market, in an (8th) or Everton FC (17th) could fnd with key growth areas that both the increasingly globalised sport and themselves further down KPMG’s Premier League and LaLiga enjoy. entertainment industry, a league's top 32 ranking. However, the Bundesliga is currently ability to generate revenues While LaLiga has recently restructuring its international internationally will be a key achieved significant growth in operations and has intensifed its differentiator in years to come. terms of international media efforts in foreign markets with Recognising this trend, rights holders revenues, it is still focused on the recently-reported fve year are investing signifcant resources to improving the way its product is agreement (USD 272 million consolidate their international brand. presented internationally, especially for 2018-2023) with Chinese Having promoted their product and outside of the markets it has broadcaster PPTV suggesting projected a consistent brand for traditionally dominated (e.g. Middle the league is starting to reap longer than any other football league, East and South America). some rewards. Under its motto the Premier League’s popularity “Football as it’s meant to be”, LaLiga already spreads kick-off on the global stage is unrivalled. the league’s international times and schedules major clashes The Premier League dominates key revenues are expected to to maximise international audiences markets in Asia and North America continue growing in the and will soon follow the Premier and its international media rights mid-term, albeit they are League in launching a 24/7 English are now more valuable than the likely to stay behind Premier channel for international licensees. domestic rights of any of its League and LaLiga. These efforts are expected to European counterparts. yield a further significant increase Despite the equitable distribution Unlike other leagues, the Premier in the league’s next broadcasting of Bundesliga’s domestic rights, League distributes international cycle (2019-2022) to keep Spanish revenues generated from revenues equally among its clubs as close to their English peers international rights are concentrated members, which helps to position as possible. among clubs participating in English clubs among Europe’s most European competitions. Therefore, Conquering foreign audiences will valuable ones. For example, if the the expected growth of the be a more challenging task for the distribution system was more biased Bundesliga’s global appeal is likely Bundesliga, which has traditionally towards clubs consistently at the top to assist FC Bayern München’s (4th) focused on its core domestic market

battle with the Spanish giants and Serie A’s international media revenues, Italy is still represented Manchester United FC for a place rights value, as the distribution by as many as six clubs in KPMG’s on the podium of Europe’s most system highly favours clubs EV ranking. valuable clubs in the years to come. finishing in the top half of the As Serie A and Bundesliga compete table. This circumstance partially Similarly, the best performing for third position on the global stage, explains why, despite being clubs in Italy may also beneft Ligue 1’s international media rights behind Premier League and from a potential increase in are likely to remain behind their LaLiga in terms of broadcasting competitors. Starting in 2018, Ligue 1’s 6-year deal with BeIN Sports is the longest term agreement Domestic and international broadcasting rights deals of European among the “Big Five” leagues. As a Big Five leagues (2016/17) (EURm) result, French clubs may see the competitive gap in international ts 50% revenues increase further before

righ the end of their upcoming media ld 40% rights cycle (2018-2024). y so

ll In a very competitive landscape, % 30 leagues require a well-defned strategy to present themselves in an 20%

ternationa attractive manner to global fans.

in Only those able to reach larger 10%

e of audiences and reinvest in improving the appeal of their product are likely Shar 0 to stay ahead of the curve. The same 0 900 1,800 2,700 3,600 4,500 can certainly be said of their clubs. Domestic and international broadcasting rights revenues of Big Five leagues

Source: www.sportbusiness.com, Media rights value in the top European Football leagues, 2016/17

Revenues from UEFA competitions

When considering the impact of Sharing Italy’s large Champions clubs. Indeed, in the last Champions broadcasting income on a clubs’ League’s market pool revenues with League edition, UEFA’s distribution fnancial results, revenues from a limited number of other Italian system “penalised” clubs from LaLiga international competitions should clubs, Juventus FC are an example as they had to share the market pool also be taken into consideration. of a team that has benefted from revenues among fve participants. In the 2015/16 season the UEFA the current distribution to secure a With the aim of rewarding Champions League and Europa place among Europe’s top 10 by EV. greater sporting performance, League’s media rights generated Indeed, in the last two seasons the from the 2018/19 season UEFA EUR 1.6 billion and EUR 312 million, Bianconeri have received EUR 165 will introduce a new four- respectively. These fgures are million from UEFA, EUR 111 million pillar financial distribution expected to increase signifcantly alone from the Italian market pool. system, including a fxed starting in the next broadcasting cycle. By contrast, it is interesting to note fee, bonuses according to the Whilst the largest share of how Manchester United FC have clubs' performance and individual funds available to participants maintained their position as the coeffcient and a reduction of the is distributed on the basis of most valuable club despite missing market pool’s weight. sporting performance, more European football in 2014/15 and However, the recently approved than 40% of funds is still allocated only qualifying for the UEFA Europa reform of the UEFA Champions according to the value of UEFA’s League at the end of the 2015/16 League will also guarantee each broadcasting agreements within clubs’ season, thus receiving lower income of the four top-ranked national domestic market (“market pool”). from international competitions. associations four spots in the group Therefore, due to lucrative deals In the last two seasons Spanish stage. While limiting the extent with BT (United Kingdom) and clubs have been the top earners to which some clubs beneft from Mediaset (Italy), the distribution in terms of revenues from UEFA the market pool, this new format system is currently most competitions. This result has been highlights once again the impact a beneficial for Premier League mainly driven by performance bonuses club’s underlying market can have and Serie A clubs. resulting from international on-pitch on operating revenues and, dominance rather than being due to ultimately, on its EV. the market share allocated to Spanish

UEFA Competitions – Revenue breakdown Top 10 by EV – UEFA revenue by association (2014/15 and 2015/16) (EURm) distribution (2014/15 and 2015/16) (EURm)

Market pool EV UEFA ranking revenue Performance Juventus FC 9th 165.4 bonus Real Madrid CF 2nd 132.6

39% Manchester City FC 5th 129.7 61% 476 40% 80 FC Barcelona 3rd 117.6 60% FC Bayern München 4th 114.3 Chelsea FC 7th 108.4 45% 354 55% Arsenal FC 6th 89.8 Liverpool FC 8th 71.9 271 39% Manchester United FC 1st 41.9 61% Tottenham Hotspur FC 10th 26.9 21%

141 33% 42% 79% 370 58% 91 % 67% 41 509 59%

Source: UEFA; KPMG Football Benchmark

© 2017 KPMG Advisory Ltd., a Hungarian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Football Clubs’ Valuation: The European Elite 2017 15 The European Elite: Selection criteria

Besides the availability of annual In case one of the above criteria Based on the pre-established fnancial statements of the is not fulflled, a club could still be selection criteria, 39 clubs from clubs, we set three parameters shortlisted if: 10 European associations have to be fulflled in order for a club met the requirements and 3. It is among the top 30 European to be included in our research. have been analysed by KPMG. teams by number of social media The two primary criteria that have The 32 clubs ranked according to followers (Facebook, Twitter and to be simultaneously fulflled are: EV which make this year’s edition Instagram) as at 31 March 2017. of KPMG’s Football Clubs’ Valuation 1. Clubs must be among the The rationale behind these report are provided below, while top 50 European teams by selection criteria is that the the seven “runners-up” ranked by total operating revenues; and chosen clubs are largely their EV, are: ACF Fiorentina (Italy), 2. Clubs must be among the successful on pitch, are not AS Monaco FC (France), FC Porto top 50 teams according to in danger of being relegated (Portugal), Villarreal CF (Spain), the 5-year UEFA coeffcient. and possess a brand with FC Basel (Switzerland), Sporting high international visibility. Clube de Portugal (Portugal), and Celtic FC (Scotland).

Number of clubs by country and difference from 2016

England Arsenal FC, Chelsea FC, Portugal SL Benfca 8 clubs Everton FC, Leicester City FC, 1 club (+1) Liverpool FC, Manchester City (-1) FC, Manchester United FC, Tottenham Hotspur FC Spain Athletic Club Bilbao, France Olympique Lyonnais, 6 clubs Atlético de Madrid, 3 clubs Olympique de Marseille, (+1) FC Barcelona, Real Madrid CF, (-1) Paris Saint-Germain FC Sevilla FC, Valencia CF The AFC Ajax, PSV Eindhoven Germany Borussia Dortmund, FC Bayern Netherlands 3 clubs Munich, FC Schalke 04 2 clubs (0) (0)

Italy AC Milan, AS Roma, FC Turkey Beşiktaş JK, Fenerbahçe SK, 6 clubs Internazionale Milano, Juventus 3 clubs Galatasaray SK (-1) FC, SS Lazio, SSC Napoli (+1)

Who is new in the top 32 Who is out of the top 32 –– Leicester City FC –– AFC Fiorentina –– Athletic Club Bilbao –– AS Monaco FC –– Beşiktaş JK –– FC Porto

© 2017 KPMG Advisory Ltd., a Hungarian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 16 Football Clubs’ Valuation: The European Elite 2017 32 clubs’ Enterprise Value range

Top 3 by EV growth Clubs Range – EUR Million Bottom Top  % 1 Manchester United FC 3 , 0 0 4 3,186 71 2  Real Madrid CF 2,895 3,057 3 = FC Barcelona 2,688 2,843 Olympique Lyonnais 4 = FC Bayern Munich 2,367 2,523 5  Manchester City FC 1,909 2,049 6  Arsenal FC 1,882 2,029 68% 7 = Chelsea FC 1,524 1,674 8 = Liverpool FC 1,260 1,400 9 = Juventus FC 1,158 1,277 Galatasaray SK 10  Tottenham Hotspur FC 978 1,044 11  Paris Saint-Germain FC 948 1,049 44% 12  Borussia Dortmund 917 1,025 13  Atlético de Madrid 771 815 Sevilla FC 14  FC Schalke 04 663 719 15 = AC Milan 504 590 16 NEW Leicester City FC 442 482 17  Everton FC 431 483 18  AS Roma 433 473 19  FC Internazionale Milano 407 451 20  SSC Napoli 388 431 Bottom 3 by EV decrease 21  Galatasaray SK 357 398 22 = Fenerbahçe SK 330 368 AFC Ajax % -8 23  SL Benfca 326 353 24  Olympique Lyonnais 301 334 25 NEW Athletic Club Bilbao 285 315 % SS Lazio -2 26  AFC Ajax 258 290 27  Sevilla FC 249 273 28  Valencia CF 225 246 % 29  SS Lazio 215 240 Olympique de Marseille -1 30 NEW Beşiktaş JK 207 231 31 = PSV Eindhoven 201 220 32  Olympique de Marseille 179 196 Source: KPMG Football Benchmark

© 2017 KPMG Advisory Ltd., a Hungarian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Football Clubs’ Valuation: The European Elite 2017 17 32 clubs’ Enterprise Value mid points

Clubs Mid point1 YoY increase Million EUR Million GBP Million USD 1 Manchester United FC +7% 3 , 0 9 5 2 , 6 3 5 3 , 2 3 9 2 Real Madrid CF +2% 2 , 9 7 6 2 , 5 3 4 3 , 1 1 4 3 FC Barcelona = 2 , 7 6 5 2 , 3 5 4 2 , 8 9 4 4 FC Bayern München +14% 2 , 4 4 5 2 , 0 8 2 2 , 5 5 9 5 Manchester City FC +22% 1 , 9 7 9 1 , 6 8 5 2 , 0 7 1 6 Arsenal FC +18% 1 , 9 5 6 1 , 6 6 5 2 , 0 4 7 7 Chelsea FC +10% 1 , 5 9 9 1 , 3 6 1 1 , 6 7 3 8 Liverpool FC +4% 1 , 3 3 0 1 , 1 3 2 1 , 3 9 2 9 Juventus FC +24% 1 , 2 1 8 1 , 0 3 7 1 , 2 7 5 10 Tottenham Hotspur FC +26% 1 , 0 1 1 861 1 , 0 5 8 11 Paris Saint-Germain FC +18% 998 850 1 , 0 4 4 12 Borussia Dortmund +17% 971 827 1 , 0 1 7 13 Atlético de Madrid +34% 793 675 830 14 FC Schalke 04 +11% 691 588 723 15 AC Milan = 5 4 7 4 6 6 573 16 Leicester City FC New 4 6 2 3 9 4 4 8 4 17 Everton FC = 4 5 7 389 4 7 8 18 AS Roma +17% 4 5 3 386 4 7 4 19 FC Internazionale Milano +7% 4 2 9 365 4 4 9 20 SSC Napoli +4% 4 0 9 3 4 8 4 2 8 21 Galatasaray SK +68% 377 321 395 22 Fenerbahçe SK +36% 3 4 9 297 366 23 SL Benfca +19% 3 4 0 289 356 24 Olympique Lyonnais +71% 317 270 332 25 Athletic Club Bilbao New 300 256 3 1 4 26 AFC Ajax -8% 2 7 4 233 287 27 Sevilla FC +44% 261 222 273 28 Valencia CF +16% 235 200 2 4 6 29 SS Lazio -2% 227 1 9 4 238 30 Beşiktaş JK New 219 187 229 31 PSV Eindhoven +20% 210 179 220 32 Olympique de Marseille -1% 187 160 196 TOTAL 29,883 25,443 31,273

1 Exchange rates as of 2 January 2017: 1 EUR = 0,8514 GBP, 1 EUR = 1,0465 USD

For the purposes of this study What KPMG professionals have Hereafter, we list the fve metrics we adopted the Revenue Multiple developed is a proprietary which express differences between approach, a method that measures algorithm that, starting from clubs, the markets and the the value of a company relative to the premises of the Revenue economies in which they operate. the revenues that it generates. Multiple used in corporate fnance These parameters, which bear This methodology is suitable and valuations, seeks to reduce risks different levels of signifcance and often applied for establishing an and shortcomings inherent in the therefore a different weight in our indicative value of football clubs methodology and provides an formula, are the most important for three main reasons: indication of the EV of the most factors that can influence the EV prominent European football clubs of a club. –– Revenue fgures are quite easy as at 1 January 2017 on the basis of to access and compare, as they a review of the fnancial statements are less distorted by accounting of the 2014/15 and 2015/16 football adjustments; Price vs. Value: seasons. two different concepts –– Unlike earnings, which can be In the simplest application of the negative for many clubs, revenue Revenue Multiple method, once multiples can be applied also to the multiplier is determined, it is Economic theory teaches us the most troubled clubs; applied uniformly to all clubs in that price is what a person –– Revenues are not as volatile our analysis. However, this overly pays for a given product or as earnings. simplistic approach is unsuitable service, whilst value is what for taking into account differences any given product or service Revenue fgures are then between football clubs in terms of is worth. It is important to multiplied by a multiplier derived the markets in which they operate, highlight that KPMG used from observations of similar their broadcasting revenue sharing consistent methodologies clubs which are publicly listed methods, operational effciency for the value analysis of (Comparable Companies and level of proftability, potential the subject football clubs. Methodology) and acquisitions of to succeed on-pitch at national Our approach, together with an similar companies (Comparable and international level, etc. understanding of the difference Transactions Methodology). between the concept of price Obviously, this approach also Therefore, in order to reflect and value, might explain presents some limitations. club-specific characteristics the possible discrepancies First, focusing on revenue could that influence clubs’ EV, our between the conclusion of lead to high EV for clubs generating proprietary formula takes our value analysis and the high volumes of revenues while into account five parameters— specifc price at which a making signifcant losses because each with their own specific transaction has taken place, of their inability to control costs. weight—so that the applied as well as any possible Second, it does not fully reflect revenue multiplier varies from difference with the share a club’s assets position. club to club. prices of listed football clubs.

What is The enterprise value (EV) of a company is calculated as the sum of the market value of the enterprise owners’ equity, plus total debt, less cash and cash equivalents. It indicates what the business value (EV)? is worth regardless of the capital structure used to fnance its operations.

Why do Because EV is a capital structure-neutral metric which allows to compare companies we use EV? (in our case football clubs) with different debt and equity structures.

1. Profitability In our formula, in order to consider the proftability dimension of a football club, the staff costs-to-revenue ratio of the last two fnancial years is taken into consideration. Wages of players, technical and other staff make up by far the largest part of all expenditures. A high ratio indicates a lower capability to generate bottom-line profts. Although with a lower weight, because of their higher volatility, clubs’ Proft before Player Trading and EBIT2 are also considered in our algorithm.

2. Popularity Undoubtedly, there is a strong correlation between on-feld success and social media engagement expressed, amongst others, by the number of Instagram, Twitter and Facebook followers. Therefore, in our formula the social media followers of a team are deemed to be a good indicator of popularity and fan engagement.

3. Sporting potential In order to take into account the potential of the on-feld success of a club, which in turn can generate signifcant matchday, commercial and broadcasting revenues, we assume that clubs with a more valuable squad (the key asset of any football club) have better chances to succeed on pitch. To capture this effect, the market value of the squad published by Transfermarkt has been adopted within our formula.

4. Broadcasting rights The impact of broadcasting rights already agreed upon at league level for the next seasons and the distribution method utilised are also captured in KPMG’s algorithm, as this metric plays a fundamental role in the revenue generation potential of football clubs.

5. Stadium ownership Beside players’ registrations, a club’s stadium is one of the most relevant assets of a football team. A club-owned stadium generally represents more opportunity to generate revenues. Therefore, ownership of the home ground is also considered in our formula.

2 Earnings Before Interest and Taxes.

Credits: SL Benfica

Credits: Valencia CF

Basis of preparation The objective of this report is to provide an As far as the team responsible for the currencies, fluctuation in exchange rates, indication of the EV of the most prominent production of this report is aware, the and differences in year-ends limit to a certain European football clubs as at 1 January 2017. Financial Statements for each professional extent the comparability of data and affect football club have been prepared on the basis the outcome of our analysis. The foundation of this study is an analysis of the accounting regulations and principles of the publicly available statutory fnancial We used consistent methodologies for the in their respective country or in compliance statements ("the Financial Statements") of value analysis of the subject football clubs. with International Financial Reporting the 32 professional football clubs selected This might explain the possible differences Standards ("IFRS"). In performing our for the purposes of this report. In respect of between the conclusion of our value analysis analysis we also relied upon information each professional football club, all fnancial and the share prices of publicly traded of a non-fnancial nature obtained from fgures have been extracted from the Financial entities. As share prices of listed football publicly available sources: national governing Statements of the 2014/15 and 2015/16 clubs are not necessarily an indication of the bodies, trade associations, international football seasons. Thus, this analysis does not intrinsic value of the club itself, due to the federations and social media. take into account the sporting results achieved fluctuations and the number of shares actually by the 32 clubs in the 2016/17 football season. The team responsible for the production of traded, the value conclusion of our analysis this report has relied on information included cannot be compared to the pricing of publicly Wherever we considered it necessary, in the published Financial Statements of each listed companies. KPMG member frms have consulted with of the clubs. KPMG professionals have not the management of the clubs in order to KPMG is aware that some professional performed any verifcation work or audited obtain additional information or clarifcations football clubs have diversifed their any of such fnancial information or any of the to support our value analysis. For the few businesses into other sports and/or into non- non-fnancial publicly available data obtained clubs having a fnancial year-end not aligned sport activities. Where the fnancial results of from other sources considered authoritative. with the European football season, we this diversifcation are evident in the Financial extrapolated fnancial fgures from their two Whilst every effort has been made by KPMG Statements, they have been excluded from latest publicly available Financial Statements. to make the analysis between professional the analysis. football clubs consistent and comparable, in The Financial Statements utilised for the For interpretation of fnancial terms used in undertaking this research we faced several purpose of KPMG's analysis were acquired this report, please refer to the methodology challenges which are diffcult to overcome. either from the relevant public sources section of the Data & Analytics tab of KPMG’s Differences of accounting practice in the in each country3 or other public sources www.footballbenchmark.com website. respective countries, differences in reporting (for example a club’s offcial website).

3 For example Companies House (England); Registro delle Imprese (Italy); Registre du Commerce et des Sociétés (France); Registro Mercantil (Spain); Unternehmens Register (Germany); etc.

Limiting Conditions and Assumptions This report, and all opinions formulated and or quoted on a stock exchange, on a specifc member frms make no representations nor conclusions stated regarding the football date, may be signifcantly different from provide any warranties regarding the accuracy clubs included in the survey are subject to, the indicative Enterprise Value presented or completeness of the information contained and contingent upon, all of the following in this report. Potential investors always in this report. KPMG International and KPMG general assumptions and limiting conditions need to perform their own investigation and member frms, their managers, directors, and any additional assumptions and limiting analysis, and are advised to seek their own partners and employees expressly disclaim conditions set out elsewhere in this report. professional legal, fnancial and taxation any and all liability for errors and omissions Acceptance and/or use of this report advice. Nothing in this report is, or should be from the report. The information contained in constitutes acceptance of the assumptions interpreted or relied upon as a warranty or it is selective and does not purport to contain and limiting conditions included therein. representation as to the future, nor should it all the information that a reader, including replace the due diligence investigations which potential investors, may require. Scope of Analysis—The pricing analysis a prudent investor would be expected to of any asset or business is a matter of make prior to investing. Prospective investors No Undisclosed Contingencies—Our informed judgment. The accompanying are not to construe the content of this report analysis: (i) is based on the past and present analysis has been prepared on the basis of as investment, legal or tax advice. In making fnancial condition of the entities as of the information and assumptions summarised an investment decision, investors must rely analysis date; and (ii) assumes that entities in the report and includes certain limitations on their own examination of the investment had no undisclosed real or contingent and exclusions. Amounts presented have and the terms of the investment, including assets or liabilities, no unusual obligations in some cases been rounded off from the the merits and risks involved. or substantial commitments other than in detailed underlying calculations. the ordinary course of business, no pledges Value Conclusions—While every effort or encumbrances on assets limiting their Nature of Opinion—Neither our opinion was made to be consistent in the tradability and had no litigation pending or nor our report are to be construed as an methodology applied, in order to arrive at threatened that would have a material effect opinion as to the fairness of an actual or our value range conclusions, in certain on our analyses. proposed transaction, a solvency opinion, or instances, we have applied professional an investment recommendation. Instead, they judgment to club-specifc factors that were Subsequent Events—This report is based are the expression of our determination of not addressed by the valuation methodology. on information available at the date we indicative Enterprise Values based on publicly wrote it. KPMG has no obligation to update available information and a consistently No Verification of Information Provided— this report or to revise the analysis if new applied methodology. For various reasons, We relied upon publicly available data from information becomes available or because of the price at which an entity might be sold in a recognised sources of fnancial and other events and transactions occurring subsequent specifc transaction between specifc parties, information. KPMG International and KPMG to the analysis date.

Picture:Credits: arsenalpics.com Leonardo S.

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