Brazilian Football's New Era: Investigating Acquisition Value and Governance Improvements in newly-created SAFs

Abstract

This master's thesis investigates the consequences of Brazil's Football Limited Company (SAF) law on the valuation and governance of Brazilian football clubs. The study focuses on six clubs that transitioned from non-profit associations to SAFs and were acquired by external investors. The research aims to determine whether these clubs were acquired at a price below fair value, given their historical governance issues, and whether governance improved after becoming a SAF. The findings indicate that, initially, investors appeared to overpay for the clubs, as acquisition enterprise values were higher than those derived from common valuation methods, suggesting the presence of unexploited value creation opportunities. However, a comparison of post-acquisition performance between SAFs and non-SAF association clubs reveals mixed evidence. While SAFs exhibited significantly higher revenue growth, leading to increased relative valuations, results from other models (MMM and Sports Value) did not show consistently superior growth for SAFs. This makes it inconclusive whether investors over- or underpaid, as data supports arguments for both the existence and non-existence of unexploited opportunities. Regarding governance, the thesis assumes that improvements would be reflected in enhanced financial or on-field performance due to the lack of direct metrics and contradictory academic literature. The analysis shows no clear improvement in financial efficiency or a consistent reduction in financial risk for SAFs compared to associations. Both SAFs and associations increased revenue by expanding their asset bases, often at the cost of efficiency and profitability. On-field performance also yielded inconsistent results, preventing a definitive conclusion about governance improvements. In conclusion, while the SAF law has spurred investment and revenue growth in Brazilian football, the study cannot definitively ascertain the fairness of acquisition prices or confirm consistent governance improvements in the analyzed SAFs. The limitations of the research include the opacity of acquisition deals and the relatively short post-acquisition period.