American investor Joseph DaGrosa is well-positioned for his next investment in football, and he’s thinking very big.
DaGrosa exited Ligue 1 outfit Bordeaux and says he passed on buying Newcastle in recent months, also making a pair of big real estate moves just before the pandemic hit.
Had he purchased Newcastle or stayed with Bordeaux, he’d be amongst the many European club owners weathering a terrible climate while waiting out a pandemic.
Instead, DaGrosa sees an opportunity to build around a massive club in the Premier League or La Liga. He’s made his money in turning around companies, and believes that wisdom can be applied here on a broad scale.
“In this environment, given what’s going on with the coronavirus pandemic, we believe there’s an opportunity to recreate City Football Group at a fraction of the cost,” DaGrosa told ProSoccerTalk this week. “Club valuations are already coming down. In many cases, clubs are going to be effectively taken over by their lenders. There’s going to be some great opportunities in the next 12 months, and great opportunities to get world-class players at a fraction of the cost. This is the time to capitalize it.”
Here’s how it would work for his project, which he’s calling Kapital Football Group, “a new soccer platform holding company, to acquire controlling and influential minority stakes in world-class football clubs and academies at deep valuation discounts.”
DaGrosa aims to buy “an anchor club, most likely in the Premier League,” and then invest in three to five satellite clubs in Europe and South America. He’d also invest in nine academies, three in Asia, three in Africa, and three between North and South America. He didn’t rule out investing in MLS if the valuation proves fruitful, but DaGrosa is also “taking a real hard look” at USL clubs.
“If we can put that together we’ll have a formidable group that can rival City Football Group,” he said.
The CEO and co-founder of GACP Sports, DaGrosa starting eyeballing clubs, including Spanish outfit Getafe a couple of years ago. That didn’t work out during the due diligence stage, which led him to Bordeaux.
He calls running the Ligue 1 club “a fantastic learning experience for the world of European football.”
“Today we have a better appreciation for the importance of legacy of the clubs as well as the importance of the fans contributing to that success,” he said. “And thanks to that experience, we now look for those same qualities in the clubs we are looking to acquire next.”
A rumored 2019 deal to buy Newcastle didn’t work out, but DaGrosa is still laser-focused on making his impact on the global game.
What kind of club is he eyeing? Is it strictly about the best bang for his buck, or does the appeal and history of the club carry significant weight?
“Legacy is a big part out of it,” he said. “I’m even more sensitive today given our experience at Bordeaux. We always understood the legacy and passion of the fans, but all clubs have a special place in the history of the cities and communities in which they are located. In some cases, they are the lifeblood. In the U.S. you think of the Green Bay Packers. I have a much better appreciation for legacy in the history of the clubs we are looking to require, particularly in the Premier League. It’s less important in the U.S. where you don’t have multi-generational ties to one club, but it’s still important.”
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There’s keen interest in the United States, as DaGrosa stresses what many investors have noted: The 2026 World Cup is going to drive interest in the potential of this country both here and abroad.
We asked DaGrosa why, given that, he wouldn’t dive into Major League Soccer? He’s not ruling it out, but expressed concerns with the franchise fees and revenues in the short-term. Building a club here takes a lot more investment, risk, and patience than, say, a century-old club that holds sway in its region.
“You can build a club (in MLS) that’s going to cost 500 or 600 million bucks,” he said. “At the end of the day, you’re paying 10 times revenues. Or you can buy a club like Bordeaux established in 1881 that has a remarkable history, pedigree, and is a brand known around the world, for 1.6 times revenue. When you look at the metrics it’s hard, not impossible to make a compelling case for MLS over the short-term. If you have a lot of staying power, there’s money to be made but clubs in general are going to trade as a function of their broadcasting rights revenue, and we’re just not seeing that in the U.S. at a rate required to justify the valuation.”
DaGrosa believes in the American soccer market and says the system is on the verge of becoming an elite talent exporter, comparing its potential to that of a current font further south.
“Other markets are going to open up,” he said. “Most of the great clubs in Brazil were insolvent before the effects of the coronavirus. There’s a movement to privatize clubs and we feel there’s going to be an opportunity to get the really top names in Brazil. Those satellite clubs are designed to be good investments in their own right but the name of the game is to secure world class players and Brazil is one of those markets that can immediately supply world class players. The U.S. is a market that can do that in five to seven years.”
DaGrosa’s interest in the Premier League is deep-seated, and has only grown given his expectations for how well the league is equipped to deal with the COVID-19 pandemic.
“The PL will emerge as the strongest league and there may be some good deals to be had,” he said. “There are going to be financially distressed owners throughout football globally. There will be some lenders that are going to be scared to death who’d love to create a win-win with someone with capital. If the market is down 20-30 percent, segments of the public market that will be down 30-40 percent, football could be down 50-75 percent. It’s a great time to buy with dry powder so after the acquisitions you can build up a world-class team at a fraction of what it would otherwise cost. In our discussion with investors, we can essentially buy today and invest 25-40 cents on the dollar relative to what we would’ve paid six months ago.”
That’s when he was in “mid-to-late stage discussions” with Newcastle United owner Mike Ashley and his partners about the northeast outfit.
DaGrosa insists that Ashley was “first-class” in negotiations despite many reports about his combustible nature.
“It’s unfortunate in one respect that the deal didn’t go forward,” he said. “With a guy like Mike Ashley you might get punched in the face but you’ll never get knifed in the back. At the time it was disappointing the deal didn’t go forward. It was on our side that a major backer pulled out at the last minute but hindsight is 20-20. Better to be lucky than smart because we probably dodged a short-term bullet.”
Now that twist of fate and timing may launch a wildly ambitious project in the next 12 months.