Sanctions imposed on the Russian owner of English Premier League club Chelsea FC have added a layer of complexity to one of the highest profile M&A deals of the year, and created a stern test for the US merchant bank running the auction.
US advisory firm The Raine Group has a low profile but is one of the top names in sports and entertainment deals, selling dozens of clubs and with connections to potential buyers around the world. It has been close to Chelsea FC for five years, its co-founder has known club director Eugene Tenenbaum since working with him in Moscow in the early 1990s, and the firm’s roster of deals includes several for City Football Group, the purchase of the LA Clippers basketball team and the sales of the LA Dodgers baseball team and the Brooklyn Nets basketball team.
The Raine Group was founded in 2009 by former Goldman Sachs banker Joe Ravitch and former UBS and Morgan Stanley banker Jeff Sine. It has about 120 staff in seven offices around the world, including 10 people in London. The group’s name is a portmanteau of Ravitch and Sine.
It is coming off its best year ever in M&A and strategic advisory after bringing in US$61.2m in fees, according to Refinitiv data. That was up from US$57.4m in 2020, its previous best year.
Raine made US$28.5m in fees from media and entertainment M&A advisory in 2021, ranking 14th globally, in a sector led by Goldman and JP Morgan, which can call on big balance sheets to help on deals, plus the likes of Moelis.
Raine does not disclose financial results, but in the past decade it has pulled in US$338m in fees from M&A advisory, according to Refinitiv estimates. As well as media and entertainment, it is strong in telecoms and high technology. It describes itself as a merchant bank, advises on capital raising and has an investment arm that has invested more than US$4bn.
Baseball to football
Raine was hired to sell Chelsea by Roman Abramovich, the multi-billionaire Russian owner for the past 19 years who was sanctioned on March 10 by the UK government after Russia’s invasion of Ukraine on February 24.
The UK government has granted a general licence to allow Chelsea to continue operating and for the sale to go ahead. No proceeds can go to Abramovich and will mostly go to charities, but some is needed for running operations and to pay lawyers, accountants and advisers.
When Raine picks a winner, the UK government needs to sign off on the deal and its structure, and where proceeds will go. The government also wants a good long-term owner for the club.
But Raine is still running the show. It is expected to put forward a shortlist of bidders on Wednesday or Thursday, which will require more specific details in purchase agreements, and will push towards selling the club by the end of April.
Interest in the club has been high, and it could be sold for about £3bn, or US$4bn, according to reports.
The process is being led at Raine by Ravitch and Colin Neville, a partner who leads the sports practice and has worked at the firm since it was formed after working in M&A at Bank of America. There are about 10 more people working on the deal, including Jason Schretter, head of London operations.
Ravitch was a senior partner at Goldman and spent 16 years there, based in London, Hong Kong and New York. He helped create and build Goldman’s sports practice and entertainment finance group.
His first involvement in English football was working with BSkyB on its attempt to buy Manchester United in 1998, a deal that was ultimately blocked by the UK government on competition grounds. That was an early warning that passions can run high in sports deals, including death threats on social media.
Ravitch has worked on the purchase or sale of more than 50 teams, ranging from European football clubs to US major league franchises to Indian cricket and Japanese baseball. He said there are a lot of similarities in selling a US baseball team and a European football team.
“In many respects it’s extremely comparable. The globalisation of sports and the recognition of the valuable IP in sports enterprises has made sports teams valuable to a global buyer group,” Ravitch told IFR. The difference is the European football club owns the team, its trademark and intellectual property assets, whereas in baseball it is a franchise of Major League Baseball where the use of rights is limited.
“The attractions of buying a sports team at present are many,” Ravitch said. “With the shift in media to streaming, people want to pay more for live sports than they do for library, film and television content. And there are all sorts of new revenues, from sports wagering to digital applications, like NFTs, that make sports even more attractive as a business enterprise.”
Ravitch declined to discuss the Chelsea sale and the bidding process.
Before banking, Ravitch was an attorney for Cleary Gottlieb Steen & Hamilton, where he helped found its Russian practice and worked with the Yeltsin government on reforms from 1990–1993. There he met Tenenbaum, who worked in corporate finance for Salomon Brothers, and who has been close to Abramovich for years and been on the Chelsea board since 2003.
Beckham, Clippers and Nets
Raine’s work with Chelsea started about five years ago when a buyer approached Abramovich, and the firm was asked to evaluate the club and options for its future, including development of Stamford Bridge stadium and a strategy for Asia and US markets.
Raine has previously worked with City Football Group, which owns Manchester City FC and clubs in New York, Melbourne and Mumbai, on the investment by Silver Lake in 2019, a capital raise four years earlier, and its global strategy. In has also advised Inter Miami, the new US team backed by David Beckham; DC United; and FC Cincinnati. In 2020 it was hired by world football body FIFA to search for potential backers for a Club World Cup tournament, The New York Times reported.
It has worked on some of the biggest deals in US sports: it advised former Microsoft executive Steve Ballmer on his purchase of the LA Clippers in 2014; Jamie McCourt on the 2012 sale of the LA Dodgers to Magic Johnson and Guggenheim; and the sales of the Texas Rangers and the New Jersey Nets in 2010, which later became the Brooklyn Nets.
It has big-name repeat clients in other areas too, including sports betting firm Draft Kings, Warner Music and Japanese conglomerate SoftBank Group. It worked with SoftBank on the US$20bn partial sale of its stake in T-Mobile in 2020 and its US$32bn purchase of UK chip designer ARM Holdings in 2016.
Sine, the co-founder alongside Ravitch, is reported to have close ties to SoftBank. He was previously vice chairman and global head of TMT at UBS and ran media investment banking at Morgan Stanley. He also has a sideline in theatre, and has produced plays and musicals on Broadway and in London’s West End – including Spring Awakening, Frozen and La Boheme – and is a three-time Tony Award winner.
Bankers and hedge funds
Back on the sports field, Chelsea are reigning European and World champions. Big clubs do not come up for sale often, so a winning bidder is expected to dig deep even though the club is loss-making and Abramovich has bankrolled its success for almost two decades. Abramovich has written off more than £1.5bn in loans to the club, which is good news for a buyer, although a similar amount may have to be spent on redeveloping Stamford Bridge.
More than 20 potential buyers are reported to have been interested in buying the club, but that is close to being whittled down to a handful of serious bidders or consortia.
There are four frontrunners, according to sports website The Athletic, and some big names from finance are involved, including Todd Boehly, co-owner of the LA Dodgers who made his money at Citigroup, Credit Suisse, JH Whitney and Guggenheim Partners; a consortium that includes Ken Griffin, the billionaire founder and CEO of hedge fund Citadel, and the Ricketts family, which founded the Ameritrade brokerage business; and David Blitzer and Josh Harris, who made fortunes working for US private equity firms Blackstone and Apollo Asset Management, respectively.