M-C-O OR M-C NO? MULTI-CLUB OWNERSHIP IN ENGLISH FOOTBALL AND ITS DRIVERS - DIVA

M-C-O or M-C…No?
Multi-Club Ownership in English
 Football and Its Drivers
 Joakim Lundgren, Oskar Heljeberg

 Department of Business Administration
 Civilekonomprogrammet; International Business Program
 Degree Project, 30 Credits, Spring 2021
 Supervisor: Lars Lindbergh

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Abstract

Multi-club ownership [MCO] is a concept within the football industry which entails that an
owner holds significant stakes in multiple teams. This ownership strategy is not new,
however, what are the driving forces of this type of ownership structure and what are the
outcomes? The purpose of this study was to explore potential drivers of MCO, to irradiate
the concept and determine whether traditional business administration theories can be applied
to explain its existence. The main theoretical framework is based upon the shareholder theory
and resource-based view of the firm with supplementary reasoning collected from other
relevant theories.

The study encompasses five seasons and consisted of the teams competing in the top two
divisions in the English Football League system. The quantitative study covered six
hypotheses and deployed both Two sample t-tests and regression models which sought to
measure international player trading activity, sporting performance and financial
performance. The results of the study show that multi-club portfolio members [MCPMs] tend
to trade a larger share of players internationally compared to Non-MCPMs. However, the
other models yielded no significant results in regard to MCPMs, although, value creation
through the strategy cannot be disregarded as it may be present through other channels.

The wider footballing industry has been studied extensively in previous literature. However,
this study is focused on MCO, a topic that lacks a previous body of research. By filling this
research gap the authors hope to illuminate the concept and increase transparency for both
decision makers (owners of clubs) and supporters of clubs. In addition, a survey which is not
empirically tested was conducted in order to help guide the proceedings of the research.

Keywords: Multi-club ownership, Multi-club portfolio member, Professional football,
Premier League, Championship, Sporting performance, Financial performance, Player
trading, Shareholder theory, Resource-based view

Acknowledgements

We would like to extend our gratitude to our supervisor Lars Lindbergh who has provided
invaluable inputs and suggestions on how to produce the highest possible quality of work.
We would also like to thank our colleagues from the work in progress seminars that offered
indispensable feedback throughout the writing process.

Joakim Lundgren & Oskar Heljeberg
Umeå, Sweden, 2nd of June 2021

Table of Contents
Definitions .............................................................................................................................. 1
1. Introduction ....................................................................................................................... 2
 1.1 Problem Background and Research Problem ....................................................................... 2
 1.2 Thesis Purpose and Research Question ................................................................................. 4
 1.3 Intended Audience ................................................................................................................... 5
 1.4 Choice of Subject and Preconceptions.............................................................................. 5
 1.5 Delimitations and Considerations .................................................................................... 6
2. Theory ....................................................................................................................... 7
 2.1 Reasoning Behind the Theoretical Framework ................................................................. 7
 2.2 Core Theoretical Framework ........................................................................................... 7
 2.2.1 Shareholder Theory ........................................................................................................................... 7
 2.2.2 Critique of Shareholder Theory ......................................................................................................... 8
 2.2.3 Discussion of Shareholder Theory’s Relevance ................................................................................. 9
 2.2.4 Resource-based View [RBV] .............................................................................................................. 9
 2.2.5 Critique of RBV ................................................................................................................................ 10
 2.2.6 Discussion of RBV’s Relevance ........................................................................................................ 11
 2.3 Supporting Theoretical Framework ................................................................................ 11
 2.3.1 Stakeholder Theory ......................................................................................................................... 11
 2.3.2 Agency Theory ................................................................................................................................. 12
 2.3.3 Resource Dependence Theory [RDT] .............................................................................................. 13
 2.4 Relevant Previous Literature ......................................................................................... 14
 2.4.1 Mergers and Acquisitions [M&A] .................................................................................................... 14
 2.4.2 Benefits of Horizontal M&As ........................................................................................................... 16
 2.4.3 Collusive Synergies .......................................................................................................................... 16
 2.4.4 Financial Synergies .......................................................................................................................... 16
 2.4.5 Operational Synergies ..................................................................................................................... 17
 2.4.6 Diversity ........................................................................................................................................... 17
 2.4.7 Multinational Enterprise [MNE] Affiliation ..................................................................................... 18
 2.5 Development of Hypotheses ......................................................................................... 18
3. Method.................................................................................................................... 21
 3.1 Scientific Method .......................................................................................................... 21
 3.1.1 Philosophical Paradigms .................................................................................................................. 21
 3.1.2 Ontological Assumptions ................................................................................................................. 23
 3.1.3 Epistemology ................................................................................................................................... 23
 3.1.4 Rhetorical Assumption .................................................................................................................... 24
 3.1.5 Research Design .............................................................................................................................. 24
 3.1.6 Methodological Choice.................................................................................................................... 25
 3.1.7 Research Approach ......................................................................................................................... 26
 3.1.8 Literature Search ............................................................................................................................. 26
 3.1.9 Literature Criticism .......................................................................................................................... 27
 3.1.10 Ethical and Societal Considerations .............................................................................................. 27

3.2 Research Method .......................................................................................................... 28
 3.2.1 Choice of Population and Sample ................................................................................................... 28
 3.2.2 Statistical Hypotheses ..................................................................................................................... 28
 3.2.3 Two Sample T-Test .......................................................................................................................... 29
 3.2.4 Multiple Regression ......................................................................................................................... 29
 3.2.5 Variables .......................................................................................................................................... 30
 3.2.6 Dependent Variables ....................................................................................................................... 30
 3.2.7 Independent Variable ...................................................................................................................... 33
 3.2.8 Control Variables ............................................................................................................................. 33
 3.2.9 Initial Regression Models ................................................................................................................ 35
 3.3 Data Collection and Analysis.......................................................................................... 36
 3.3.1 Supporting Survey ........................................................................................................................... 36
 3.3.2 Data Collection and Source Criticism .............................................................................................. 36
 3.3.3 Population and Sample ................................................................................................................... 38
 3.3.4 Processing Tool................................................................................................................................ 38
 3.3.5 Descriptive Statistics ....................................................................................................................... 38
 3.3.6 Two Sample T-Test Assumptions and Remedies............................................................................. 39
 3.3.7 OLS Assumptions ............................................................................................................................. 40
 3.3.8 Remedies for Issues with OLS.......................................................................................................... 43
 3.3.9 Final Regression Models .................................................................................................................. 43

4. Results ..................................................................................................................... 45
 4.1 H1A-B (International Player Trading Inclination) .............................................................. 45
 4.2 H2 (Sporting.Perf) ......................................................................................................... 45
 4.3 H3 (Profitability) ........................................................................................................... 46
 4.3.1 H3 (ROA.PBT) ................................................................................................................................... 46
 4.3.2 H3 (ROA.EBIT) .................................................................................................................................. 47
 4.4 H3A (Ln.Revenue) .......................................................................................................... 47
 4.5 H3B (Ln.Cost) ................................................................................................................. 48
 4.6 Regressions Excluding International Trading Activity Variables ....................................... 48
 4.7 Truth Criteria ................................................................................................................ 49
 4.7.1 Validity ............................................................................................................................................. 49
 4.7.2 Generalisability ................................................................................................................................ 49
 4.7.3 Reliability ......................................................................................................................................... 49
 4.7.4 Robustness of Models ..................................................................................................................... 50

5. Discussion ................................................................................................................ 51
6. Limitations and Considerations for Future Research .................................................. 54
7. Conclusions .............................................................................................................. 56
 7.1 Theoretical Contributions .............................................................................................. 56
 7.2 Practical Recommendations .......................................................................................... 57
8. Reference List .......................................................................................................... 58
Appendix ..................................................................................................................... 75
 Appendix 1 – Significant Interest Holders and MCO ............................................................. 75

Appendix 2 – Supporting Survey.......................................................................................... 81
Appendix 3 – Instagram Account ......................................................................................... 82
Appendix 4 – Variance Ratio Tests....................................................................................... 83
Appendix 5 – Error Term Correlation ................................................................................... 83
Appendix 6 – Serial Correlation ........................................................................................... 83
Appendix 7 – Homoskedasticity .......................................................................................... 84
Appendix 8 – Variance Inflation Factor [VIF] ........................................................................ 84
Appendix 9 – Random vs. Fixed Effects ................................................................................ 84
Appendix 10 – Regressions Without International Trading Variables .................................... 85

Definitions

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1. Introduction

This part will act as a foundational pillar to the study. Aspects covered are problem
background, research purpose, research question, choice of topic, intended audience and
delimitations of the study. The discussion provided will subsequently guide the future
unravelling of the paper.

1.1 Problem Background and Research Problem
“I’m absolutely disgusted …. Give the title to Burnley, let Fulham stay up. Relegate
Man[chester] United, Liverpool and Arsenal.” uttered Manchester United FC icon and
Salford City FC co-owner Gary Neville (2021) in a Sky Sports interview. This was in
response to the abruptly unveiled plans of a consortium of top European football club
executives and owners to instigate a so-called Super League. The proposed competition
guaranteed the founding members a place in the competition regardless of sporting merit
which outraged the football community. Antagonists shouted corporate greed whereas
proponents argued for the ensured survival of the football industry as a whole.

Football is considered to be the most popular sport in the world according to Boudway (2018)
and amasses staggering financial sums and audiences in its operation. According to Deloitte
(2020, pp. 8-9), the European football scene generated €28,9B whereas the Premier League
alone stood for approximately 20% of that sum in the 18/19 season. Consequently, it is
evident that football clubs carry significant financial firepower and thus have an impact on
the communities in which they operate. Football also carries a great deal of social value
which is more difficult to quantify then its pecuniary impact. Fans often feel a deep-rooted
connection to their club with some willing to travel abroad to support their team in away
games. Fans discuss their club as if it is “theirs” and often proclaim insurmountable love for
the club. This unwavering support for a “business” is rare and serves as testament to the
unique position that the football industry holds.

Football clubs are undoubtedly unique businesses in many facets and have undergone major
changes over the years. It has traditionally been seen as loss-making and merely a
philanthropic hobby of its directors, but with an increased profit orientation its fans can now
rather be considered customers according to King (1997, pp. 228, 231). After extensive
backlash resulting from the Super League plans, the “Super League” consisting of the self-
proclaimed elite has been shut down. However, the initiative has eroded the relationship
between owners and fans, yielding undisputable levels of animosity towards football club
ownership.

An array of various ownership structures exist, such as stock-listed, fan owned and private
[foreign] majority owned, where the surge of varied ownership has developed in increments
over time according to Rohde and Breuer (2017, pp. 268-269). Business logics have
subsequently penetrated the industry where the ENIC group, an investment company, were
amongst the first to implement the related diversification activity of owning multiple football
clubs (Breuer, 2018, p. 119). This activity, commonly referred to as multi-club ownership
[MCO] (Breuer, 2018, pp. 115, 118), has been scrutinized mainly due to its potential ability

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to harm the sporting integrity. Clubs with the same owner could collude when facing each
other to serve an ulterior motive, such as fixing a match outcome in a cup-competition to
hedge the odds of one club proceeding to the subsequent knock-out stage. Consequently,
preventative precautions have been formulated which was prompted by the Court of
Arbitration for Sports (CAS 98/200) which investigated ENIC-owned AEK Athens and SK
Slavia Prague in the 98/99’s edition of UEFA’s Cup. As a result, UEFA concluded that clubs
with the same owner were not allowed to compete in the same competition unless the owner
does not hold “significant influence” over both clubs. The rule of significant interest has also
been adopted by the English Football League [EFL] (n.d.-a). These rulings have had
monumental implications for the MCO concept, where Macinnes (2017) posited it to prompt
ENIC to reduce their multi-club portfolio [MCP] from six clubs to solely focusing on
Tottenham Hotspur.

Despite ENIC’s disinvestment, many owners have gone the opposite direction by expanding
their MCPs over time. Most prominent example of this is Red Bull who began their
investment raid by setting up a base in Salzburg and thereafter expanded through FC
Liefering, New York Red Bulls, RassenBallsport Leipzig, Red Bull Ghana (now defunct),
Red Bull Brasil (Fürwerger, 2017) and Red Bull Bragantino (Welbirg, 2019). Another well-
known example is that of City Football Group (n.d.) who initially acquired Manchester City
and currently hold direct stakes in a total of ten clubs on all continents except Africa and
Antarctica. Many other examples exist but are lesser known by the public. For instance,
Super-League antagonist Gary Neville’s Salford City FC (n.d.) is included in an MCP with
both David Beckham’s Inter Miami (Kaufman, 2019) and Peter Lim’s Valencia CF (Bhas,
2014).

In practice, MCO activities generally entail foreign direct investments where acquisitions
expand the network internationally. Furthermore, these foreign acquisitions seemingly
consider the anti-collusion legislation, which might explain why MCPs rarely include
multiple top-performers who likely would compete internationally. Red Bull is a notable
exception in this regard as both their Salzburg and Leipzig teams have made a habit of
qualifying for the international competition UEFA Champions League. In turn, this propelled
further investigations to the significant interest clause established by CAS 98/200, and
surprisingly resulted in both clubs being allowed to compete as no decisive common control
of the clubs could be proven by the UEFA Club Financial Control Body (AC-01/2017).
Notwithstanding the decision, the consensus of what constitutes significant interest has been
set at a minimum of 10% voting rights, directly or indirectly, in the clubs but each case is
reviewed separately (EFL, n.d.-a, n.d.-b; AC-01/2017; CAS 98/200) which Red Bull’s case
is a testament of.

Prior to the recent widespread protests caused by the Super League, no consensus on attitudes
towards MCO was apparent amongst fans of top English football league system [EFLS] clubs
(see Figure 1). Many fans seem to not be aware if their club is a multi-club portfolio member
[MCPM] or simply do not mind. Other fans are more hostile towards the concept with a select
few considering discontinuing their support if their beloved team became an MCPM.
Nevertheless, the surveyed respondents seemed to envision a slight increase in the prevalence
of the concept in the future. However, these responses might have been severely altered by
the recent events.

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Figure 1: Results from survey

This thesis will focus on the Premier League and Championship, which are the two highest
divisions in the EFLS (Plumley et al., 2018, p. 358) consisting mainly of clubs from England
and Wales. The population of choice has been a common research target regarding
professional football club ownership (see Rohde & Breuer, 2017). This choice is further
motivated by the EFL’s (n.d.-b) enforcement of clubs disclosing their owners with significant
interests and thus makes ownership information readily available. With that said,
distinguishing direct or indirect connections with other clubs through a specific owner might
still prove to be difficult. However, due to the highly scrutinised nature of top EFLS clubs
conceivably renders this population to be the safest bet in accurately locating MCO
connections.

The ownership of football clubs is a trending topic which has caused heated debates in recent
weeks as alluded to in the previous section. Supporters of Arsenal FC gathered in their
thousands to voice their opinion that the club should be sold by their American billionaire
owner Stan Kroenke (Goal, 2021). Similarly, the much-anticipated clash between
Manchester United and Liverpool on May 3rd was postponed after United fans invaded the
pitch and demanded an end to the current owners’ reigns (The Financial Times, 2021). With
the tense environment encompassing football club ownership, MCO deserves to be
illuminated to the general public.

Quite astonishingly, as far as the authors are concerned, no business administration- nor
economics related article has covered this concept despite it being over 20 years old. The
only scholarly attention it has gathered was from Bauer and Hovemann (2019), but this was
within the field of law and ethics which makes the research gap evident. Furthermore, the
studies most closely related to this specific research area explored diversification activities
of football clubs, although, these did not look into MCO (e.g. Holzmayer & Schmidt, 2020a,
2020b; Fühner et al., 2021).

1.2 Thesis Purpose and Research Question
With the rapid expansion of MCPs such as the Red Bull empire, the MCO structure has
garnered noticeable attention and thus might entice investors to consider a similar business
model. However, since there is a lack of previous research on MCO, there is an opportunity

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to contribute to the discussion. Some may argue that the success of a football club is solely
measured by their performance on the pitch, however, clubs are also businesses with many
stakeholders with interests in the company. Football clubs need to ensure that their financial
performance can support their investments just like any other business. This is additionally
governed by Financial Fair Play which prohibits clubs from financing operations through
extensive deficits (Franck & Lang, 2014, pp. 433-434). Therefore, it is pertinent to study
clubs as you would another business and see whether improved efficacy can be attained.

By investigating whether there is a difference between MCPMs and Non-MCPMs, the
authors hope to unveil possible outcomes of the concept. Consequently, the purpose of the
study is to explore potential drivers behind this type of ownership structure by applying
business administration theories and to shed light upon the concept. To fulfil the purpose of
the study the concluding research question is presented below. This question will guide the
development of hypotheses which subsequently will serve as a roadmap for the empirical
study and ultimately result in enlightened conclusions being made.

RQ: Is a football club affected operationally (financially and/or sporting-wise) by being
included in an MCP?

1.3 Intended Audience
This seminal work will hopefully enrichen the discussion of football club ownership and
thereby also promote improved transparency which the Super League outrage has called for.
In addition, by realising the previously disclosed purpose, clubs and owners will hopefully
be provided with a better understanding of the MCO phenomenon which potentially can
guide future decisions regarding football club investments. This leads to the conclusion that
anyone that is either financially or emotionally invested in the EFLS is regarded to be part of
the targeted audience.

1.4 Choice of Subject and Preconceptions
This project is the concluding chapter of a four-year stint at Umeå University School of
Business, Economics and Statistics. The authors are in the final year of their respective
Master of Science Degrees within Finance and Entrepreneurship. As they have studied
different majors, the theoretical choice of departure required delicate consideration in order
to be suitable to both fields. Consequently, exposure to contrasting modules between the
authors proved beneficial in distinguishing a decisive path throughout the project. As such,
the theories discussed are present in both fields of literature and the writing process was
enriched by the authors having complementary perspectives on the application of these.

The choice to look at the football industry was a straightforward one, as football has played
a significant role in the authors’ leisure activities throughout their lives. For instance, both
support football clubs in the EFLS. One of the authors supports Crystal Palace FC which is
an MCPM (see Appendix 1) with Belgian side Waasland-Beveren and AD Alcorcon, who
currently compete in the Spanish second division. The other author is a Fulham FC supporter
which is not included in an MCP. Thus, supporting these distinctive clubs and their
contrasting ownership structures conceivably helps mitigate biased interpretation of data.

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1.5 Delimitations and Considerations
• The concept itself is rather ambiguous as it is difficult to delineate where to draw the
 line between multi-club ownership or not. For instance, Wolverhampton Wanderer’s
 owner, the FOSUN group, does not own other football clubs whereas one of their
 significant interest holder’s wife does, in Grasshoppers Zurich (see Appendix 1). These
 indirect connections might be difficult to identify which could serve as another potential
 weakness of the study.

• The study will focus on the MCPM and not the owner even though it is the investor and
 not the MCPM that holds the portfolio. However, as the debate is on club-level the
 personal benefits of the owner is secondary and conceivably less researchable.
 Furthermore, football clubs historically tend to be run at a deficit (King, 1997, p. 231;
 Hamil & Walters, 2010, p. 354) and is therefore counterintuitive to approach in an
 attempt to hedge the odds of losing money in a normative diversification fashion. The
 football club itself is therefore the most suitable subject of analysis considering the
 surrounding circumstances, in which synergistic effects garners the focal attention.

• MCO regards the influence over football clubs and not other types of sports. Many
 owners of the clubs in the sample have a significant influence in clubs of other sporting
 industries such as baseball, hockey, basketball et cetera. Synergistic effects are
 conceivably not present in connection to other sports since their scouting networks,
 player transfers, general sports knowledge and so on widely differs. These connections
 are undeniably misleading in investigating the research purpose and are therefore
 excluded.

• Football clubs are unique businesses whose operational structures also lack
 homogeneity. Many clubs are registered as their own entity under which all their assets
 are listed whereas other clubs separate their operations into different entities
 consolidated under a larger holding company according to Guzmán and Morrow (2007,
 pp. 316-317). For example, a holding company may own the football club under a
 corporate entity while owning the stadium in which it plays via a second entity. This
 may complicate the analysis and will therefore be accounted for by utilising a central
 directory over each club’s registered corporate entity. Unfortunately, this might entail
 some aspects being unjustly compared, although, this is deemed the most appropriate
 objective approach.

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2. Theory

This section will encompass the theoretical background of the research area. It will cover a
core theoretical framework, a supplementary one and previous studies on specific concepts
that are deemed relevant. Concludingly, hypotheses are built which subsequently will form
the proceedings of the data gathering process.

2.1 Reasoning Behind the Theoretical Framework
In order to structure this study, the circumstances are integral to consider. An objective
analysis of data available to the public is the only feasible approach to answer the research
question and purpose. This idea is fuelled by the notion of access to the participating parties
being non-existent. Therefore, the core theoretical framework is guided by what can be
objectively measured which inadvertently results in utilising simple data. Conversely, the
supplementary theoretical framework consists of theories that are relevant but are not suitable
to test according to the previously mentioned limitations. Nonetheless, fruitful inputs can be
gathered from these supplementary theories to usher arguments and interpretations in order
to accommodate nuanced discussions. In conclusion, the theoretical framework does not only
need to make sense theoretically but are also required to circumvent the limitations affecting
this study.

2.2 Core Theoretical Framework
In this section the primary theories’ historical developments are outlined and notable critique
of them are disclosed as well. These theories’ applicability will subsequently be argued for
and will ultimately foster future hypotheses in an attempt to understand the nature of the
MCO concept. The first suitable theory is shareholder theory which is subsequently followed
by the resource-based view of the firm. In tandem these are intended to complement one
another and are both deployable from an objective standpoint as will be further elaborated
upon in their respective sections.

2.2.1 Shareholder Theory
Milton Friedman was a Nobel prize winning American economist who strongly advocated
for laissez-faire (Ramrattan & Szenberg, 2008, pp. 24, 29). Laissez-faire denotes minimum
government intervention and advocates for free markets, where the individual’s freedom of
choice is central according to Waller (2006, p. 71). Friedman (1962, p. 133) believed that
businesses’ sole responsibility is to create value for its shareholders, and he argued that
business leaders who focus on things outside of value creation for shareholders are inferior.
Furthermore, Friedman (1970) suggested that initiatives taken that are not in the interest of
profit maximisation are social responsibilities, which should be approached on the individual
level and not when acting as a principal of a shareholder. Instead, corporate stewards have a
sole responsibility to work in the interest of its owners, which gave way to shareholder theory.

As proposed by Brown et al. (2006 p. 856), managers might consider investing in social
causes for altruistic reasons, but this comes as an opportunity cost for shareholders. Jensen
and Meckling (1976, pp. 308-309) coined this clash of interests as “agency cost” where the

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principal of the owner does not act in accordance with the shareholders’ wishes, and thus at
their expense. This goes against Friedman's (1962, p. 133) beliefs of how businesses should
be run in a free market. In addition, Jensen (2002, p. 235) suggests that multiple missions
lead to inefficiency of execution since competing interests make it impossible for managers
to make appropriate trade-offs between objectives which will lead to poor overall
performance. This idea was corroborated by Sundaram and Inkpen (2004, pp. 354-355), who
stated that the bureaucracy and complexity of having to consider and prioritise many different
stakeholders leads to inefficiencies and decreased competitive advantage.

Kacperczyk (2009, p. 264) voiced that shareholder theory proponents say that by maximising
shareholder value, corporations also boost their performances, something that is beneficial
for all its stakeholders. Shareholders claim on the company are the cash flows that are
remaining after all the other obligations relating to stakeholders of the corporation have been
met (Sundaram & Inkpen, 2004, p. 353). Alchian and Demsetz (1972, p. 781) also propose
that the performance of a firm is maximised when shareholders are able to make decisions
since it is in the best interest of the shareholders to grow the business and increase cash flows.
As a result, shareholder theory suggests that a shareholder value focus in decision making
warrants the optimal outcome (Macey, 1989, p. 201; Rausch, 2011, pp. 139-140).

2.2.2 Critique of Shareholder Theory
The purpose of a firm and whose interests it should serve is a topic that has been widely
discussed. Opponents to Friedman question whether the sole purpose of a firm is to create
value for shareholders. Sundaram and Inkpen (2004, p. 356) argue that the quest for
shareholder value maximisation through increases in efficiency can lead to poor management
of stakeholders. They illustrate this by explaining how some shareholder value increasing
activities come at the expense of stakeholders, which arguably is problematic when
competing for stakeholder capital in global markets according to Denis (2019, pp. 82-83).

Phillips (2003, pp. 3-4) challenges shareholder theory and argues that businesses are reliant
upon stakeholders to function and therefore have an ethical responsibility to consider their
interests when making decisions. In addition, Agle et al. (2008, p. 166) argue that value is
maximised when shareholder and stakeholder interests are aligned which thus urges
executives to adopt a dual focus. Furthermore, shareholder theory has received criticism for
having the view that only shareholders have a legitimate claim on a company (e.g. Post, 2003,
p. 30). Instead, Phillips (2003, pp. 19-21) proclaims that directors have a duty towards the
organisation and not only the shareholders. These arguments are all strongly rooted in the
stakeholder theory which urges the consideration of all stakeholders in its business operations
and therefore directly juxtaposes shareholder theory (Mitchell et al., 1997, p. 855; Wijnberg,
2000, p. 329).

Lastly, the constituents of shareholder value have been critiqued where Hart and Zingales
(2017, pp. 270-271) refutes Friedman’s narrow-mindedness. Instead of solely focusing on
retrievable monetary value, Hart and Zingales (2017, p. 263) counter with advocating for
“shareholder welfare” and illustrates this by an example of a company solely consisting of
one shareholder. This shareholder’s utility might not be maximised through profits as it could
negatively impact other subjective values, for instance, valuing ethics to a high degree would

 8

be counteracted by cost savings on safety investments for the workforce. Similarly, Farrell
(1985, p. 306) proposed that a shareholder can favour lower prices of products ahead of
higher profits if they are consumers of that good. Although, profits as a measurement can
still be defended as the residual rights is a shared denominator amongst all shareholders, as
emphasised by Sundaram and Inkpen (2004, p. 353), regarding retrievable value.

2.2.3 Discussion of Shareholder Theory’s Relevance
In European sports, utility output has garnered the primary attention which essentially
translates into win-maximisation (e.g. Sloane, 1971, p. 145; Garcia-del-Barrio & Szymanski,
2009, p. 64). While European clubs have a strong focus on boosting performances on the
pitch, American sports teams on the other hand tend to lend themselves more toward profit-
maximisation (e.g. Késenne & Pauwels, 2006, p. 549; Rottenberg, 1956). Consequently,
shareholder theory is arguably more salient in the American sports scene and thus, serves as
an opposing view of shareholder theory’s applicability. However, there are multiple factors
suggesting shareholder theory to be appropriate in the current ownership context of European
football which will be further elaborated.

Lang et al. (2011, pp. 558-559) highlight that there has been an influx of so-called “sugar
daddies” as club owners in the last two decades. This has resulted in astronomical financial
injections into player recruitments to become commonplace as perpetual attempts to enhance
on-pitch performance. Such investments distorted the balance within the leagues according
to Dima (2015, p. 1250) as it created a larger gap between top-performers and the others. As
a consequence, Financial Fair Play regulations were implemented, which essentially makes
spending a function of the club’s revenues (Franck & Lang, 2014, pp. 433-434). The new
regulations entailed that player recruitments could not be financed through operational
deficits which resulted in operational profitability being imperative (Franck & Lang, 2014,
pp. 430-431). Moreover, Rohde and Breuer (2017, p. 282) illuminate that foreign investors
have taken a noticeable stand in top English football club ownership in recent time. A
considerable proportion of these are American (see Appendix 1) which would suggest profit
maximisation to be more relevant than it has been previously. Lastly, King (1997, p. 228)
argued that as a consequence of football being commercialised, the fan culture has
deteriorated lending supporters to be more consumer-esque. Consequently, external
stakeholder focus has partially been substituted by shareholder logics through directors being
more profit oriented which the Super League initiative is a testament of. Drawing from all of
this, shareholder theory’s suitability in this context is far from farfetched as it directly serves
to illuminate the driving forces behind the concept.

2.2.4 Resource-based View [RBV]
Accredited by many RBV scholars (e.g. Locket & Wild, 2014, p. 384; Rugman & Verbeke,
2002, pp. 769, 773; Takahashi, 2015, p. 128), this theory has its foundation in the reasoning
formulated by Penrose (1959). As posited by the name of the theory, Penrose (1959, pp. 5,
135-136, 235-236) argued that a firm’s growth is dependent on its resources, how they are
utilised and continually revised to ascertain sustained value creation. In turn, Wernerfelt
(1984, pp. 179-180) elaborated upon Penrose’s ideas by advocating the importance of
balancing resource exploitation and exploration while constructing entry barriers for

 9

nonincumbents. Although Penrose (1959) and Wernerfelt (1984) are commonly
acknowledged to be the antecedents of the practiced theory, it was not until Barney (1991)
formulated the constituent of a sustainable resource-based competitive advantage that RBV
took flight (Barney et al., 2001, p. 625; Fereira et al., 2016, pp. 137, 140).

According to Barney (1991, p. 115) a resource needs to fulfil four criteria in order to pose a
sustainable competitive advantage. Firstly, Barney (1991, p. 106) postulates that the resource
needs to be valuable in terms of yielding a net-benefit, if the accompanied costs exceed or
equals the retrieved value then the resource will pose a competitive disadvantage. Secondly,
Barney (1991, pp. 106-107) notes that the resource needs to be rare in relation to current or
potential competitors’ resource stocks, if not then the resource in question solely produces a
competitive parity. Thirdly, this rarity must be protected over time which requires the
resource to be inimitable. This can, as far as Barney (1991, pp. 107-110) is concerned only
be achieved through three underlying functions, namely being historically imbedded,
causally ambiguous (i.e. cause and effect of competitive advantage is difficult to disentangle)
or socially complex (e.g. enabled through socially constructed interactions such as culture).
Lastly, Barney (1991, p. 111) stresses the importance of similar value-bringing substitutes
not existing on the market.

A few years thereafter, Barney (1995, p. 53) revised the four criteria and opted to consider
inimitability (3:rd criterion) and non-substitutability (4:th criterion) as the same criterion. In
filling the now vacant fourth slot, Barney (1995, p. 56) emphasised the imperativeness of
organisational support. If not reinforced by the organisation, the resource would remain
unexploited and subsequently it would not be a source of competitive advantage according
to Lockett et all (2009, p. 13). All in all and in line with Locket et al. (2009, p.18), RBV aims
to explain how financial performance can be improved by utilising a company’s resource
stock.

2.2.5 Critique of RBV
RBV is widely criticised for not stating anything constructive and simply denoting the
creation of competitive advantage as summarised by Locket et al. (2009, p. 16).
Kraaijenbrink et al. (2010, pp, 356-357) state that its opponents argue that RBV is built upon
statements that are tautological. For example, Barney (1991, p. 102) proposes that “a firm is
said to have competitive advantage when it is implementing a value creating strategy not
simultaneously being implemented by any current or potential competitors”. This statement
is true by virtue of its own logic and therefore does not contribute to any new lines of
reasoning. Furthermore, Barney (1991, p. 101) describes how a firm’s intangible assets can
increase its efficiency. However, intangible assets are difficult to measure and therefore it
makes the theory difficult to test (Kraaijenbrink et al., 2010, p. 356; Lockett et al., 2009, p.
17). Despite its downfalls in methodological and empirical testability, Locket et al. (2009,
pp. 23-25) emphasise that RBV still poses a fundamental role within strategic management
literature and can gladly be used to reinforce other theories.

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2.2.6 Discussion of RBV’s Relevance
The football industry is heavily dependent on its resources, both on and off the pitch.
According to Lechner and Gudmundsson (2012, p. 286) the human resources are the most
salient one in this discussion. However, Baroncelli and Lago (2006, pp. 25-26) also posit
brand names, diversification activities and financial firepower are all relevant in staying
competitive. As a result, it is not surprising to find RBV being adopted in sports management
research (e.g. Gerrard, 2003, p. 143). When focusing on MCPMs, they could be argued for
having a sustainable competitive advantage in their network connection assuming the
portfolio connections are in fact exploited. When combining two (or more) clubs’ resource
pools, the new combinations of the clubs’ resource bundles can act as sources for competitive
advantage, especially if they are complementary (Harrison et al., 1991, pp. 186-187; Harrison
et al., 2001, pp. 686-687). For instance, scouting staff can exchange practices and cooperate
to cover a wider geographical area, medical expertise can be streamlined, and players can be
temporarily transferred between MCPMs to develop. As a result, RBV can act as the
foundational theory as to how potential benefits can be realised and is consequently well
suited to help answer the research question and fulfil the purpose of the study.

2.3 Supporting Theoretical Framework
In this section additional theories are introduced, however, they are deemed less suitable for
this frame of research. Nonetheless, they could provide valuable input for future discussions
of findings depending on the study’s outcome. This is not to say that the theories are inferior,
rather, the circumstances render them difficult to investigate and will therefore not be
empirically tested. This primarily boils down to the challenge of finding an appropriate
measure that is also retrievable considering the underlying limitations of the study.

2.3.1 Stakeholder Theory
As previously introduced stakeholder theory stands in contrast to shareholder theory and
advocates for the need to consider all stakeholders that are affected by a firm's operations
(Mitchell et al., 1997 p. 855; Wijnberg, 2000, p. 329). A stakeholder is defined by Freeman
(1984, p. 54) as an individual who has an impact, or is impacted, by an organisation’s
operations. According to Hamil et al. (2004, p. 45), football supporters are the key
stakeholders for clubs, where Cleand (2010, p. 538) suggests that fans portray varying levels
of team affiliation and engagement. However, there are other important stakeholders such as
the EFL, employees, and the city in which the club operates whose interests might diverge.
For instance, fans’ sense of value is likely to be closely derived from sporting performance,
thus their main objective for the team is to win as many matches as possible (Garcia-del-
Barrio & Szymanski, 2009, p. 54). Similairly employees, the EFLS and the city will likely
also derive value from sporting performance, but also financial stability due to job security
and marketability (Ramchandani, 2012, pp. 354-355; Hamil et al., 2004 p. 45), which fans
might be less concerned about.

Provided the fact that a football club’s stakeholders’ perceived value is heterogenous, an
overarching proxy would be needed to express a tangible measure of stakeholder value. Since
some stakeholders’ preferred output contradicts others, which once again is demonstrated by
the Super League debate, a true measure of stakeholder value would be arbitrarily determined

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at best. Conversely, shareholder value could be argued to be a relatively representative proxy
of all stakeholders’ combined view of value, since owners are concerned with both financial
viability and sporting performance (e.g. Scafarto & Dimitropoulos, 2018, p. 290; Garcia-del-
Barrio & Szymanski, 2009, pp. 64-65). As such and in light of the previous discussion of
shareholder theory’s relevance, shareholder theory is deemed the most appropriate
foundational theory for this specific study.

2.3.2 Agency Theory
Agency theory is now a widely researched theory within corporate governance which has its
roots in agency problems between two parties as originally problematised by Ross (1973, pp.
134, 138). Jensen and Meckling (1976, p. 308) outline that the agency problem is founded in
diverging wishes, where the parties might seek different outcomes from the undertaken
actions. For instance, if both shareholders and executives are assumed utility-maximisers, the
former will advocate for shareholder value maximisation (e.g. profits and market value)
whereas the latter’s utility function will be derived from a fictive outcome-to-effort function
(Jensen & Meckling, 1976, pp. 308-309). The executive’s outcome might differ from that of
the shareholder, where in an extreme case the executive might not do anything at all provided
total job security and guaranteed salary. Jensen and Meckling (1976, p. 308) denote that
losses of shareholder value attributed to varied interests are called “agency costs”. In order
to combat these issues, Denis (2001, pp. 196-197) proposes two approaches; either
implementing “carrots” in terms of realigning performance incentives, or “sticks” through
monitoring and/or contractual obligations.

These types of costs regularly occur in football, but arguably in a non-normative fashion in
comparison to other industries. For instance, agents hold a robust function in negotiations
regarding player contracts where both players and clubs appoint intermediaries to garner
better deals. Such fees from international transfers alone annually amass to hundreds of
millions of dollars (FIFA, 2020, pp. 3, 6). Agency costs could also be deterred from the
appointment of on-field managers but due to the public scrutiny of these managers they are
generally considered good stewards according to McLeod et al. (2021, pp. 46-47). Another
area where agency costs are circumvented is the common practice of owners retaining
executive positions (managerial ownership) which Jensen and Meckling (1976, p. 312)
suggests renders the agent-principal-relationship issues obsolete.

In a similar vein to the critique Hart and Zingales (2017, p. 263) offered on shareholder
theory, managerial ownership also illustrates the relevance of shareholders’ self-interests in
the value discussion. To further elaborate, Agarwal and Singh (2020, p. 36) argue that
managerial ownership has produced two hypotheses of outcomes, namely alignment and
entrenchment. Alignment is the sought-after effect of managerial ownership, where the
interests of the manager and shareholders are intended to converge, which Guay (1999, pp.
65-66) proposes can be achieved by awarding the managers with stakes in the company.
Conversely representing the entrenchment hypothesis, Joseph and Richardson (2002, p. 95)
suggest that managerial owners might promote their subjective agenda at the expense of other
shareholders. Examples of this could be value-deteriorating expenditures on luxurious items
and activities such as trips and paintings that solely the executives experience (Agarwal and
Singh, 2020, p. 36). Some studies (e.g. Morck et al., 1988, p. 311-313; Short & Keasey, 1999,

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p. 98-99) have also found that the alignment- and entrenchment effects are salient depending
on the given managerial ownership percentage. Regardless, the managers’ perceived utility
depends on whether they are shareholders or not.

Agency theory’s suitability to understand the emergence of MCO is not apparent. Although,
KPMG (2017) theorise that MCP-internal player trades can reduce player acquisition related
costs, which conceivably includes intermediary/agent fees. This is an example of where
agency costs can potentially be reduced, but it also requires that transfers between MCPMs
occur and that these concern high-valued players to yield striking benefits. Provided by
objective glances of MCPMs’ transfer activities, such scenarios rarely occur which implies
that deploying agency theory at the infant (present) stage of MCO-research would be
somewhat careless. Before applying agency theory to greater extent, a qualitative study is
pertinent to be conducted in this field to induce hypotheses, as no explicit indication of
agency-related effects have currently been identified. Agency theory is thus not irrelevant,
rather, the authors deem that it lacks a necessary background and will therefore solely be
used in discussions where it appears relevant.

2.3.3 Resource Dependence Theory [RDT]
The seminal work by Pfeffer and Salancik (1978) marked the beginning of the RDT states
Hillman et al. (2009, p. 1404). As opposed to RBV’s focus on internal resources, RDT
emphasises the importance of resources that are external to the organisation (Hillman et al.,
2009, p. 1417). In essence, the theory suggests that organisations are dependent on resources
where these resources are to a certain degree in the hands of other organisations (Pfeffer &
Salancik, 1978, p. 19). Consequently, Pfeffer and Salancik (1978, pp. 37, 59-60) conclude
that actors on the market are interdependent which entails certain mutual power over the
others’ success.

When RDT has been deployed in the professional football research field, it has primarily
been used in understanding board roles and in tandem with other theories (e.g. McLeod et
al., 2021; Ruta et al., 2019). These studies are rather inapplicable to this thesis, although,
RDT could still provide sound input as to why MCPs are set up. RDT proposes three
explanatory motives for why business entities merge; reduce competitive interdependency
through horizontal mergers, reducing uncertainty through vertical mergers, and diluting the
overall interdependence through diversifying into other activities (Pfeffer, 1972, pp. 390-
392; Pfeffer, 1976, pp. 39-40). These motives are relevant on a case-specific level in MCO,
which will become apparent in the upcoming section.Unfortunately, concluding a tangible
measure relating to RDT that is subsequently retrievable is deemed unfeasible by the authors.
Similar to the issue regarding agency theory’s applicability, RDT needs to be investigated in
a qualitative study prior to being tested, which is rendered unsuitable for this thesis
considering its limitations. To once again reiterate, RDT is postulated by the authors to add
value regarding reasonings behind MCP structures but cannot be motivated to garner a central
position at this stage. Concludingly, the reasoning behind placing this theory in the
supplementary theoretical framework is more or less identical to the arguments of agency
theory.

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2.4 Relevant Previous Literature
As there is a lack of academic coverage of MCOs/MCPs/MCPMs the authors’ hands are
forced to adapt literature from other spheres. MCPs are, as previously mentioned, essentially
driven by foreign direct investments [FDI] since portfolio expansions covered in this report
are prohibited from being made domestically. Furthermore, both FDI and MCO are governed
by the principal of significant influence which entail 10% ownership (OECD, n.d., p. 1;
United States Department of Commerce, n.d). In defiance of this, FDI literature is deemed
inapplicable to this specific project as the unit of analysis, the football club itself, does not
expand. This stands in contrast to FDI which is denoted by firms purchasing foreign
companies to improve the value chain (Paul & Singh, 2017, p. 2513; Faeth, 2009, pp. 187-
188). Instead, it is the owner of the club who makes investments abroad to expand their
portfolio.

It is pertinent to initially explore the reasonings and effects of generic M&A literature. This
is due to the synergies that can be created through cross company collaboration.
Subsequently, international affiliations are explored in order to understand the implications
of being able to tap international networks. Concludingly hypotheses will be developed as
the outcome of this theory section.

2.4.1 Mergers and Acquisitions [M&A]
The M&A literature is very broad and there are plenty of suggested motives behind them
taking place. Within economics it has been found that these often occur as a response to
external shocks (e.g. deregulation and technological disruptions) which ultimately coalesce
in “merger waves” as posited by Mitchell & Mulherin (1996, pp. 193-194). Furthermore,
Maksimovic & Phillips (2001, p. 2058) note that these merger waves tend to coincide with
economic booms when managers have an excess of disposable funds. Another explanation
of merger waves was suggested by Shleifer and Vishny (2003, pp. 296-297) who proposed
them to be caused by rational investors exploiting markets that have become inefficiently
valued.

Focusing on individual M&A motives, Brouthers et al. (1998, p. 348) suggested there are
three core motives, namely economic, personal and strategic ones. Economic M&A motives,
or commonly referred to as the neoclassical theory of mergers (Yaghoubi et al., 2016, p. 151),
denotes any takeover activity that creates value for shareholders. This could be for a wide
range of reasons where Brouther et al. (1998, p. 348) list increasing profitability, minimising
risk or simply acquiring an undervalued asset as examples. M&As driven by personal reasons
have to do with the egocentricity of the manager, which has garnered the term “agency cost
hypothesis of mergers” (Yaghoubi et al., 2016, pp. 151-152). In line with this hypothesis,
Berkowitch and Narayanan (1993, p. 350) suggest that managers might opt to acquire
companies to gain media attention, increase short term profits leading to clout or simply seek
a challenge in integrating two disparate entities. Thirdly, strategic takeover activity might be
ensued in order to ensure the capture of competitive advantages though solidifying one’s
market presence or acquiring beneficial resources (Brouthers et al., 1998, p. 348; Ingham et
al., 1992, pp. 196-197). Whereas salient motives do exist, it must be added that multiple

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