Home Private Equity Football, democracy and private equity

Football, democracy and private equity


Fans have prevailed over finance in the Bundesliga—which should lead to a rethink of private equity’s role in society.

FC Freiburg fans protesting at their first home game of the year against the DFL plan for private-equity investment in the Bundesliga and in defence of the ’50+1′ club ownership rule (nurderscf.de)

Energiewende has become a German word, like Schadenfreude, used the world over. Maybe Verein (association) is another word which those interested in democracy, football or finance—or all of these—should learn across Europe. For the Verein model of German football, even if still under threat, has just shown its power once more.

The German football league, DFL, tried last year to bring a private-equity investor on board for the global marketing of the Bundesliga. The original plan envisaged an investment of over €2 billion. Fans protested, fearing excessive influence by the investors over questions such as kick-off times. The plan failed to win the necessary two-thirds majority among the 36 clubs that make up the first and second Bundesliga.

Instead of giving up, however, only a few months later the DFL tried again. It narrowed the scope of the deal—to around €1 billion over 20 years—and claimed there were ‘red lines’, such as on kick-offs, which the investors would not be allowed to cross. Fans believed none of it—not least due to prior broken DFL promises.


Finance experts, such as the deputy chair of 1. FC Köln, Eckhard Sauren, a finance-industry professional, indicated that there were less perilous alternatives. And civil-society organisations such as Finanzwende pointed out that the nature of private equity is to demand influence. Together with other finance experts, Finanzwende argued that it was simply impossible for the DFL to promise that its ‘red lines’ would hold, come hell or high water, for two decades.

Shaky mandate

In a secret ballot in December the two-thirds majority of clubs was only just achieved: exactly 24 of the 36 gave their assent to the revised plan. Many of the clubs subsequently made public how they had voted—arguing that, as a Verein, they owed it to their members to be transparent. So it quickly became known which ten clubs had voted no (two abstained).

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The problem for the DFL leadership was that the members of Hannover 96 had instructed their representative, Martin Kind, to vote against. Not only, however, did Kind refuse to say in public how he had voted. Once the ten clubs voting no were known it was extremely likely his vote had been a yes—and therefore decisive to delivering the weighted majority needed.

The mandate for the DFL leadership to negotiate with the private-equity investors was thus shaky from the start and considered illegitimate by the vast majority of organised football fans in Germany. Kind´s behaviour, and the apparent reliance of the DFL on his vote, threatened one of the unique selling points of German football—that ultimately control over clubs remains with the members of the Verein.

This system is also known as the ‘50+1 rule’. To obtain a licence, a club must wholly or in the majority own its football team. The rule is designed to ensure that the club’s members retain overall control by owning at least 50 per cent + 1 of the club’s shares, protecting them from the influence of external investors. And here was the DFL potentially using an apparent breach of the rule by Kind as the basis for negotiating a contentious investment deal, already rejected by the fans in the months before!

Creative protests

As a result, since December, protests in the stadiums had escalated. Many games were interrupted and delayed, live on television. Some were held up for more than 30 minutes—and many times referees considered halting play altogether. Fans were incredibly creative in their protests: they threw lemons on the field, while holding banners saying ‘Private equity investors make us sour’. They managed to have remote-control cars with flares criss-cross the pitch—‘Why toy cars? Well, we won’t be remote-controlled’. And, again and again, they threw tennis balls to interrupt games.

The DFL tried to dismiss the protest as only supported by a militant minority. But polling showed that most football fans—two-thirds, as it happens—were fully supportive. And even beyond the fans, there was sympathy, especially once it was realised what kind of investors were behind the plans. The bidding process came down to Blackstone or CVC, which were thereby put under the public scrutiny private-equity firms try to avoid.

The fact that they were using money from Saudi Arabia’s sovereign-wealth fund for their investments was critically discussed. So too was their business model, aiming at extremely high profits, no matter whether the investment target be a risky start-up or healthcare or football. Suddenly, fanzines interviewed finance experts, the companies’ lobbying practices were discussed on major sports programmes, the 50+1 rule was explained on the news and fan representatives challenged the private-equity business model on talkshows.

Civil society won

Blackstone withdrew from the process and more and more clubs called for a new vote or withdrew their support from the deal. Hannover 96 itself questioned the legality of Kind´s December vote. The DFL leadership briefly floated the idea of another vote, with the threshold for success reduced to a simple majority of clubs. But when the fans made clear they would interpret this as a further escalation of the conflict, the DFL gave up.

Last Wednesday, a specially convened meeting of the DFL membership council voted to end the bidding process. In a statement issued afterwards, DFL members also reaffirmed their support for the 50+1 rule. Some of the richer clubs have however since made it clear that they see the rule as a competitive disadvantage, compared with clubs in England and Spain, so a challenge to the rule is expected to be the next big fight between fans and football’s governors.

What is certain, though, is that civil society won this round and their will be no private-equity investment in Bundesliga marketing in the near future. The protests worked—and the big private-equity players (CVC manages €388 billion), despite active lobbying, did not get their way. One journalist called it ‘the most successful social movement protest of recent years’.

It was successful, because it brought together people of very different political persuasions. Because the Verein base of German football governance gave fans a say—and made the attempted bulldozing through of a deal against their will so readily turn into uproar. And because, ultimately, this fight became one pitting community, democracy and other widely shared societal values against excessive profits and the power of a few elite football managers and finance giants.

Private equity or public good

As such, the win is not just for football fans but for all who want to prevent every aspect of daily life being financialised. That the interests of private equity overrule the public good, where they are in conflict, seemed inevitable to most only a few weeks ago. But the fans showed that even the biggest financial players can be stopped. There is nothing ‘natural’ about the ever-increasing financialisation of social and cultural goods such as football, health or housing.

The win in Germany should therefore give hope that, with the right governance, we can tame the financial system more broadly and make it serve people and the real economy rather than excess profiteering. Awareness of the danger of private-equity profit expectations in areas where they do not belong has been raised in Germany in recent weeks. That awareness now needs to lead to a rethinking of the role of private equity in society at large.

Daniel Mittler is a football fan, a Verein member of SC Freiburg and co-executive director of Finanzwende.

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