WRegardless, Fenway Sports Group has expanded its extensive global portfolio of sports franchises, now valued at over $10 billion, the story it has told about its intentions is the same: respect tradition, build the brand, leave the team on a more sustainable footing for future growth, and above all, win. Reflecting on the two-year anniversary of the group’s acquisition of the Pittsburgh Penguins ice hockey team late last year in 2021, FSG Chairman Tom Werner said told The Pittsburgh Post-Gazette: “We feel some responsibility as stewards to ensure that we not only preserve the legacy of the Penguins, but that we try to bring more Stanley Cups to Pittsburgh.”
In the mouth of any other sports investor, words like this seem like standard corporate smarts. But FSG has the track record, built up over more than twenty years, to back them up: from Boston to Liverpool and beyond, FSG’s arrival has heralded success on the pitch and innovation off it, bringing trophies and a new sense of connection between the players delivered. teams it has acquired and the communities those teams represent.
At Liverpool in particular, FSG has offered perhaps the best model of what sustainable institutional investment in the Premier League can look like, creating happy memories on the pitch without burning the balance sheet: in the year ending May 2022, the most recent financial results of Liverpool, the club generated record turnover of £594m, with pre-tax profits of £7.5m. Of all the American investors to enter European football over the past two decades, FSG is by far the smartest and most successful – and while that distinction seems easily deserved when the main competitor is the Glazer family, it has taken time to win . It.
But what now? Jurgen Klopp’s announcement that he will leave his position at the end of the season is as big a blow to FSG as it is to Liverpool. The Red Sox and Liverpool, acquired in 2002 and 2010 respectively, have long been the two jewels in FSG’s crown, and for much of the past fifteen years the two teams have helped turn the investment group into a kind of hedge fund with to make a reputation. , where success in one team helps offset failures in the other. The Red Sox broke the ‘The Curse of the Bambino‘ and claimed their first World Series in 86 years in 2004, with three more titles in the years that followed. The success in Boston helped burnish FSG’s prestige as a shrewd sports investor and buy some patience with Liverpool fans during the lean early years of the group’s time at Anfield, when the Reds seemed at once a misstep and an eternity away of winning their first championship since 1990.
However, over the past five years, the teams’ fortunes have turned around. Liverpool have enjoyed their most sustained period of post-Boot Room success – claiming new Premier League and Champions League trophies – while the Red Sox have slumped to the bottom three in the (admittedly highly competitive) ) American League East division. a terrible feat for one of baseball’s most storied franchises. Despite promises from a “Pedal to the metal” winter and the budget for major signings, the Red Sox have remained relatively inactive on the player market in recent months. Apathy has grown among fans due to the owners’ perception fatigue in chronic failure. Does FSG matter anymore? Can it handle a larger portfolio of clubs? Soon it may be Liverpool fans asking these questions too.
John W. Henry, FSG’s principal owner, is known as an obsessive data and detailer, the type of figure profilers like to describe as a “shy quant” or a “walking algorithm”: he made his fortune trading soybean futures . to help his family’s farming business; he read more than sixty books on football to educate himself about the sport after buying Liverpool with relatively little football knowledge; And one of his first instructions as a Red Sox owner had to order new clay for the infield at Fenway Park because the existing clay was “not the right color” for him.
The group Henry leads has built a similar reputation for focus and technical mastery, but for all the talk of data ‘revolutionizing’ football, FSG’s success at Liverpool is ultimately down to a single, inspired decision to hire Klopp in October 2015. the early wins came through similarly smart hiring decisions, but the core group – Henry, Werner and FSG president Mike Gordon – are all baseball fans, which has given a different texture and depth to their involvement in on-field operations. At Liverpool they have been much more reliant on Klopp’s charisma and energy to take the club forward – and they have been extremely lucky to have him.
No Premier League manager other than Klopp has managed to take a team to a point of sustainable competitiveness in the face of Manchester City’s football and financial tsunami. And even more impressively, he has done so at a club whose principal owner is an American bean counter from the Midwest rather than a headless spender in the Boehly or Saudi mould. Klopp’s departure will leave a football and cultural vacuum at the heart of Liverpool that FSG will struggle to fill: there is no Klopp-like figure waiting in the wings to take over, no veneer glinting in the dark, and whoever comes in will invariably do so. need time to reshape the club in their image. At a time when the group’s other golden asset is also suffering, with Henry and Werner now in their mid-70s, these challenges raise the real question of whether the group is up to the task of its own expansion.
And make no mistake: expansion is the order of the day for FSG. The group has long presented itself as a bulwark against the corporate orthodoxy of growth for growth’s sake (“We’re leery of the idea of ’we have to be bigger,'” Gordon once said), and in some respects FSG is unlike other major investors active in European football: the country cares more than most about fiscal sustainability, and it has not embraced the multi-club ownership model popularized by City Football Group and Red Bull , but prefers to invest in different sports and markets . FSG’s investment style is heavily skewed towards established names: it would be difficult to see Henry and Werner looking for value in the Italian third tier or hanging out a shingle in the Brazilian savannah.
But in other ways, FSG is an investor like any other, looking to make money wherever it can: the whole impetus for the group to look for investment opportunities outside the US, which ultimately led to the Liverpool takeover, was Henry’s frustration with MLB’s restrictions on franchise owners freedom to maximize income.
FSG may still be suspicious of the need to get bigger, but bigger is undoubtedly what it is becoming. In addition to the Penguins, the group now owns a Nascar team, a franchise in Tiger Woods and Rory McIlroy’s planned TMRW Golf League, and two regional US sports networks; Last week the news broke that a new investment consortium would be led by FSG inject $3 billion has been invested in the PGA Tour’s commercial operations, potentially creating a new point of contention in the endless merger negotiations between the PGA and LIV Golf. While Henry remains FSG’s principal owner and largest shareholder, the group has also recently moved to bring in a variety of new investors, from LeBron James to RedBird Capital Partners.
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Investors love to talk about synergies – and it’s not hard to see how an investor like RedBird for example, which has a well-regarded data analytics business, can support teams across the FSG portfolio. But synergies can multiply to the point of distraction. FSG has always been a somewhat unusual investor in European football, in that it does not look for returns that are not correlated with the broader market, like many institutional investors: its interest is in sport and sport alone, not in sport as protection against non-sporting losses. . This gives focus to the group’s activities, but the exclusive concentration in the sport requires total dedication to the task, which is now difficult to maintain given all the new demands on the attention of the core of the ownership.
Following the recent squad renovation, Klopp will leave Liverpool in good form. But any decline in the team’s post-Klopp fortunes would push FSG into uncharted waters, leaving both of its key assets in trouble as the group works to manage and raise new ventures and investors.
Downsizing the group’s assets to take advantage of the increase in the value of its most visible assets may start to seem attractive at that point. Both the Red Sox and Liverpool are ready Edition fly-on-the-wall documentaries in the coming year (the latter despite Klopp’s longstanding resistance to the idea), which could usefully serve as marketing material for the sale. It seems unlikely that FSG will leave the Red Sox anytime soon, given the historic and emotional nature of his attachment to the franchise. Henry also owns The Boston Globe, where his wife Linda is CEO; the family is entrenched in New England. In old England it’s a different story. Henry & Co explored putting Liverpool up for sale in late 2022 and were quick toit a search for ‘new investment’, which ended with the sale of a minority stake in the club to US private equity firm Dynasty Equity late last year. The ferocity of Liverpool fans’ reaction in 2021 to the club’s announced entry into the Super League – for which Henry ultimately took personal responsibility and apologized to supporters – gave the owners an idea of how things were going could look ahead of them if results were to begin. too sour.
With Liverpool on the verge of losing their beloved beerfister, FSG may have even more reason to reconsider their position. The club’s prestige, which was never in doubt off the field, has subsequently been restored; the balance is the envy of the European super clubs; Anfield is well on its way to 61,000 seats. As Liverpool prepare for the agony of a Kloppless future, their owners are racing towards a reckoning – a reckoning that could ultimately see them decide the time has finally come to say goodbye to Merseyside.