In a surprise, but arguably long overdue development, an Irish soccer club – Dundalk FC – was taken over by a major US investor –the Chicago based hedge fund Peak6 – this past January.
It was a surprise of course as few would have ever considered an Irish club as being a typical takeover target for a hedge fund. Hedge funds are of course entirely driven by the bottom line, with no scope for entertaining investments long on romance and aspirations and short on the prospect of serious cash flow. Basically the precise opposite of most football teams, but particularly those operating in the League of Ireland.
But I also say that the acquisition of an Irish club by an overseas investor is past due. We have seen investors and sovereign wealth funds acquire clubs right, left and centre across Europe in recent years. And it’s actually hard to think of a country as affluent, with so large a potential support base, and critically, a league that could allow for qualification to European competitions with minimal investment. So it was probably only a matter of time.
The figures aren’t readily available, but most clubs in the Premier Division of the League of Ireland have annual turnovers in the region of $500,000 to $1,500,000. With even a modest investment it should theoretically be possible to win the league or at least finish in a qualifying spot for the Europa League.
In Dundalk’s case, the deal with Peak6 was completed for a sum said to be in “7 figures” (again, as is so often the case with matters pertaining to Irish domestic soccer exact figures aren’t available.) Given that they are historically one of the most successful clubs in the country, and have vied with Cork for most domestic titles over the last 3-4 years, continued success on the field seems assured. Highly rated manager Stephen Kenny can presumably compete for the signatures of talented players and invest in coaching to maintain standards in the near to medium term. Players like midfielder Krisztián Adorján, on loan from serie B side Novara, striker Sam Byrne on loan from Everton, and Lithuanian international Karolis Chvedukas are plying their trade at Oriel Park this season. The future looks secure for the Co. Louth club. That is quite the turnaround for a club that was playing in the neglected wastelands of the Irish second tier just 10 years ago.
It does seem like a dream come true for fans of the Lilywhites, but there has to be a catch surely? The investment in the club is almost as puzzling as it was unexpected. Once the dewey-eyed optimism has faded, the deal will be viewed in a harsher light.
At first glance of course, Dundalk seems like an obvious target for investors looking to acquire a club in Ireland, given its pedigree and current dominant position domestically. But given the size of the local market, it’s actually a curious candidate. The club has a ground with a capacity of just 4,500 and even if that is extended – as is planned – the town has but 35,000 inhabitants making it a very small market indeed.
If match day revenues factor into Peak6’s calculations, wouldn’t a Dublin club – with a vastly larger potential market – have fit the bill better? There are one or two clubs in the capital that could have been bought for less than Dundalk, and with a relatively small investment, quickly brought up to a highly competitive level in the league.
So let’s say that that Peak6 don’t intend to recoup their investment through takings at the turnstiles, and they certainly won’t make any money through the television rights to league games (state broadcaster RTÉ compensates clubs to the tune of EUR 1,000 for televising games). That leaves profits from player transfers. Normally, that would be a reasonable enough business model to build upon. The club has a track record of developing good players and selling them on. Daryl Horgan and Andy Boyle, now on the books at Preston North End are the most prominent examples. But the problem of course is that traditionally, Irish clubs have not been in a position to command significant transfer fees for the best players. Case in point – Seán Maguire is currently burning up the scoring charts in the English Championship for the aforementioned Preston, just as he did for Cork City last year in Ireland. Cork got a risable EUR 250,000 from his move to England. So while Dundalk may well endeavor to put more realistic price tags on their best properties, but other clubs in the league – operating on a different model –may still offer similar caliber players for a fraction of that. That would undercut Dundalk considerably.
The third main issue that Dundalk’s new owners will have to face is that while they may well ease through the league and qualify for the initial qualifying rounds of either the Europa or Champions League – and they’ll pick up a nice wad of cash for each round they navigate – qualifying for the group stages, where the real money is, will be a completely different matter. Apart from Dundalk themselves in 20-16, only one other Irish club has made it to the group stages. Shamrock Rovers also competed in the Europa League group stage back in 2011 and lost every game.
We can expect that the new proprietors will invest sufficiently in the club to provide them with personnel better equipped to deal with the rigours of European soccer than previous Irish clubs, but the real sticking point here is that they will be based in the Irish domestic scene. The league is currently ranked 39th out of 55 associations in Europe. Matches against the likes of Bray Wanderers or Sligo Rovers may not be enough to keep the squad sharp enough to compete against better seasoned continental sides. The corollary here though is that Dundalk will be better able to focus on their European exploits, but it may be challenging for the coaching staff to prepare the squad on a consistent basis when they are facing opponents of wildly different levels every few weeks.
Peak6 have already said they are aware of the realities and constraints Dundalk currently face. That’s to be expected as one would not expect a group that has already invested in clubs in England and Italy to fail to do their due diligence when investing in an Irish club. They clearly know the obstacles they face better than anyone, and for that reason it will be fascinating to see how they deal with the environment they operate in. Their approach could become a template for other clubs who wish to progress to the next level.
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