Chelsea news as Clearlake Capital release major business report after third quarter with interesting results for the Blues co-owners to ponder
Chelsea co-owners Clearlake Capital have revealed their third quarter investment activity after recently announcing a new deal for one of their assets, Discovery Education. Led by Behdad Eghbali and Jose E. Feliciano, the Santa Monica based private equity firm continue to go from strength to strength.
After making nine deals in the second quarter of 2023, Clearlake write: “In the third quarter of 2023, Clearlake announced one platform and three add-on transactions. We believe our all weather investment strategy grants us agility across transaction types and M&A landscapes, enabling us to stay flexible in our approach to seeking new opportunities and deploying new capital, and the recapitalization of LEARFIELD demonstrates our ability to navigate and exacta in complex situations.”
Also included in the third quarter review was BBB Industries acquiring Hydrualex and Crash Champions acquiring Terry Autobody and Towne Auto.
It comes as the first quarter after the European football transfer market closed with Chelsea having spent big once more. Between Eghbali, Feliciano and fellow American businessman Todd Boehly the club is being led in a new direction by their consortium. Over 15 months into the project though and things haven’t gone smoothly.
Boehly-Clearlake have struggled to stabilise a hectic club that, in Eghbali’s words, hadn’t been well managed previously despite the success on the field and unprecedented level of trophy winning under Roman Abramovich. After a period of mass turnover that has seen almost everything at the club change, Boehly-Clearlake now have their hopes pinned on Mauricio Pochettino and a newlook recruitment team to see them out of danger.
Speaking at a conference during the last quarter, something recognised in the 2023 summer review, Feliciano said: “We’re taking a little bit of pain upfront. We have bought an asset that is very coveted by many other potential buyers.
Ultimately, we are extremely aligned with that supporter and fan base because the best way to make our club more valuable is to win.” He also added: “It’s more scrutiny than we expected. You could definitely rationalise that there’s a lot more focus on a sports team than an obscure packaging company, but sometimes you have a conversation with somebody that immediately gets leaked to the press, and that was something that was very new to us.”
Feliciano also defended the club’s spending power after more than £1billion ($1.2bn) was forked out on new players. He said: “We also sold half a billion dollars of players and reduced the salaries, and essentially the opex [operating expenses] of the business, by over $100million (£81.5million) a year.”
It was also not lost on the Clearlake co-founder that Chelsea, despite the fandom, are not the biggest company that the pair have bought. “We own probably about a dozen businesses at Clearlake that are larger than Chelsea, and many of those are actually undergoing even more significant transformations,” he explained.
“They tend to be enterprise software businesses, packaging companies. But you don’t ask me about those because you don’t care about those, and they don’t get reported by the Telegraph and Daily Mail every day.”
It is something that tends to go under the radar with footballing fans as Clearlake have over 400 companies under their bracket and with their investment worth over £57.5billion ($70bn). Clearlake have no previous experience in sport but Boehly does.
The public facing figure for the BlueCo ownership group has had immense success in turning around the fortunes of LA Dodgers in MLB as well as LA Lakers in NBA. He has also been through stadium moves and development which is a key part of the next stages for the Blues at Stamford Bridge.
In order to increase the revenue at the club there is a desire to expand the current capacity of the ground, something that has proved tricky to advance with over a number of years.
That is just one part of the financial goals for Boehly-Clearlake. There are also plans to grow revenue via other avenues including sponsorship deals. Although it took longer than most had expected for a primary shirt partner to be agreed and announced, the £40million ($51m) deal with Infinite Athlete is the next step in a longer road towards improving the commercial leg of the club.
Infinite Athlete, who were formed when Tempus Ex Machina acquired Biocore earlier this year, are a new company but CEO Charlie Ebersol has nothing but positive words to say of the Chelsea owners. “These guys are, from a batting average perspective, to use a baseball analogy in case I haven’t mixed enough sports metaphors, they just don’t miss,” he said shortly after the deal with Chelsea was announced.
They are playing on a timeline and a quantum of money that allows them to use it. I think the funniest misconception about Chelsea in the press is that these guys are spending money willy-nilly. When you actually look at how they’ve structured the deals, they’ve the largest academy of any team, when you look at how they’ve structure the deals from an asset perspective of the value of the players etc, they are running this at a level of proficiency that is unbelievable.
“I have spent my entire life around professional sports and I have seen new owners, Todd is certainly not a new owner, but I’ve see new owners come in and they have a learning curve. Like ‘oh we have to figure out how to own a professional club because it’s really difficult.’
This is the first group that I’ve ever spent time around, again I’ve been around this since I was five years old, my entire education was around ownership groups and league leadership groups, this is the first group that fundamentally understand their asset better than anyone else. And I have never had a conversation with them that didn’t start and end with a lot of focus on the supporters of Chelsea.
“The relationship and the marriage of the Chelsea supporters and the ownership is unlike any I have ever seen in sports. First of all the sheer amount of power that the supporters have in terms of what they control. I don’t mean that – people are like ‘we’re here because of the fans’, sure – at Chelsea that is an actual partnership between the two groups and they are interlocked.
The understanding of that just the advisory committee they put together, you get a clear picture that this is a really special brand and the team they are building internally, Chris Jurasek, Claire Cronin and the people they are putting together. These are heavyweight people.
“When you look at most clubs, usually people they don’t appreciate a club is a $5billion (£4.1bn) entity that they’re building. I’m sure it’s not clear based on what I am saying but I am a very big believer and my chips are definitely in on what they’re building there. It’s really special.”
. The quarterly report includes a snippet from the Inc. 5000 list which recognises the fastest growing companies in America and there are two Clearlake-backed names picked out. Both Diligent and Ivanti have been recognised for their success, extra evidence for Eghbali and Feliciano that results at Chelsea could change over time.
For now there is still some way to go to win over fans that are doubting the strategies and plans being put in place but if they can replicate a fraction of the work done in the private equity sector then it might prove to be a healthy relationship in time.