Alex Ferguson Created $385M In Value For Manchester United

10 years, 10 months ago - May 10, 2013
Alex Ferguson Created $385M In Value For MU
Sir Alex Ferguson, who has announced his retirement as manager of Manchester United, created more value for the team he led than any other head coach in history I can think of.

By my estimation Ferguson is responsible for $385 million, or 11%, of the publicly traded English soccer team’s current enterprise value of $3.5 billion.

Ferguson accomplished this feat by consistently winning on the pitch and leading with class, which enabled Manchester United to build one of the most valuable brands in sports. The strong brand, in turn, has fueled revenue growth superior to Manchester United’s English rivals.

Although the Red Devils won the FA Cup in 1985, it had been 19 seasons since the team captured the English league title by the time Ferguson took the helm in 1986, and 18 years since Manchester United had last won the European championship. During Ferguson’s 26 seasons as manager, Manchester United won 13 Premier League titles, five FA Cups, two Champions League crowns and one FIFA Club World Cup.

From 1992-93 (the first season of the Premier League) to 2012, revenues have increased from $39 million to $502 million, or 13-fold, and have averaged 15% of the league’s total revenue, or 10 percentage points more than the average team.

That growth is reflected in the team’s valuation or, more precisely, its revenue multiple. When  Manchester United floated shares on the London Stock Exchange in 1991 the valuation was $74 million, or three times revenue. By the time Malcolm Glazer bought the team for $1.47 billion in 2005, the revenue multiple had almost doubled, to 5.6. The market currently affords Manchester United an enterprise value of $3.5 billion, or 6.5 times trailing 12-month revenue.

Yes, revenue for many Premier League teams has been increasing at a fast clip thanks mainly to escalating domestic and international television deals. But thanks to deals like the $559 million, seven-year shirts sponsorship Manchester United signed with General Motors Co.’s Chevrolet division, the Red Devils have grown disproportionately faster than any of its rivals under Ferguson.

Key Fact:  Aggregate revenue for the 20 Premier League teams in 1993 was $314 million, of which Manchester United contributed 12.5%. Last season the Premier League’s total revenue was $3.76 billion, of which 13.4% came from the Red Devils. That means the revenue premium grew by 11% under Ferguson.

That 11% premium–which comes to $385 million based on Manchester United’s enterprise value–is due to Ferguson. If anything, $385 million may be too conservative. After all, the entire Premier League has benefited from Manchester United’s success as a global brand.

 

Text by Forbes

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