Chelsea FC’s cute profit trick? Selling its own team to itself: Matthew Brooker

Key topics:.Chelsea FC reports profit after selling its women's team to itselfPrivate equity firms use self-dealing to manipulate financialsPremier League's financial rules are increasingly under scrutiny.Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here..Support South Africa's bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here..If you prefer WhatsApp for updates, sign up to the BizNews channel here..By Matthew Brooker___STEADY_PAYWALL___.Kicking a round ball around a field is a popular game in Britain. Selling things to yourself is a popular sport in private equity. When a group of private equity investors owns a Premier League soccer club, what do you expect?.Chelsea FC, controlled by Clearlake Capital and US investor Todd Boehly, reported a £128.4 million ($166.5 million) pretax profit this week — after selling the women's team to itself. The "repositioning" of Chelsea Football Club Women Ltd. within parent company BlueCo 22 Midco Ltd. will ensure the women's team has its own dedicated resources, management and commercial leadership, the club said in a statement. It didn't give a price for the transaction, but recorded a £198.7 million profit on disposal of subsidiaries..Sometimes, whatever your tribal sympathies, you just have to sit back and admire the play. The deal means Chelsea returns to profitability after posting a £90.1 million deficit a year earlier — and so averts possible regulatory sanctions for losing too much money. The club, which the US investors bought for £2.5 billion in 2022, pulled a similar maneuver in the previous financial year, selling two hotels next to its stadium to a sister company for £76.5 million. But it's one thing to sell ancillary assets to pad the bottom line of a football club. It's quite another to sell the football team. This takes the art of financial engineering to a higher level of abstraction. It's the accounting equivalent of the Cruyff turn or the Scorpion kick, a move so audacious that it appears to defy the laws of physics..Selling stuff to themselves has become a trend for private equity firms in recent years, for various reasons. Money has flooded into the industry, and the initial public offering market has dwindled, limiting opportunities to take profits by selling assets to other investors. Offloading them to so-called continuation funds run by the same private equity outfit is the next best thing. That's because firms get paid an annual management fee that's typically a percentage of the historic investment cost. Say a private equity company buys a business for £100 million and runs it so well that it's now worth £1 billion. Sell the asset to another fund under the same group and the investment cost resets to the current market value. The nimble investment manager now pockets, say, 2% of £1 billion instead of 2% of £100 million. .Read more: 🔒 FT: Power struggle looms at Chelsea FC as US co-owners' relationship sours.None of this applies to Chelsea. But self-dealing is part of the private equity toolkit, so we shouldn't be surprised to see it turning up in another context. The club needs to show profits to stay out of trouble with football's governing bodies after spending hundreds of millions of pounds on players. Chelsea's women's team is very successful, having won seven of the past nine Women's Super League championships, so its value has surely increased. But the only way to get that gain recorded in the books is with a transaction — and could the club really sell its women's team to an outside party?.The pretext of giving the team its own resources looks flimsy. You don't need to transfer it to a different corporate entity to do that; a separate business unit could be carved out within Chelsea FC, whose job, after all, is being a football club. The absurdity hasn't gone unnoticed in British media. "Next year we're selling ourselves the lawnmower for £90 million" was one quip reported from an unidentified Chelsea fan, who may have a future as a private equity strategist..The more serious issue here is that the Premier League's financial rules are a mess. Clubs are engaged in an arms race of accounting games to sustain the spending needed to remain competitive on the field without falling foul of regulators. All kinds of stratagems can be employed to accomplish that objective, spanning (to name just a few) player sales and purchases; contract lengths; stadium sale and leaseback transactions; shuffling of assets between related parties; and sponsorship deals with friendly companies. The Premier League has brought in associated party transaction rules to limit the potential for abuse, but these were declared "void and unenforceable" by a tribunal in February after being challenged by Abu Dhabi-owned Manchester City, which separately faces 115 charges of breaking the league's profit and sustainability rules..The risk is that these tactics create the impression of a rigged game, undermining the appeal of a competition that contributes £8 billion to the UK economy. Premier League clubs have grumbled at the prospect of an independent football regulator, a proposal that is currently working its way through parliament. but transactions like the Chelsea women's team hardly help to make the case for continued self-governance. Sometimes you can be too clever for your own good..Read also:.UK sanctions Chelsea FC owner Roman Abramovich – with insight from The Wall Street JournalJose Mourinho fined for "improper conduct" – Chelsea FCEPL: Ultimate weekend wrap-up; Chelsea go clear, ManU lose, Bony to City.© 2025 Bloomberg L.P.

Chelsea FC’s cute profit trick? Selling its own team to itself: Matthew Brooker

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