Knighthead Capital on ownership of Birmingham City FC: 'The buck stops with us from here forward'

Knighthead Capital this week completed its acquisition of a nearly 46% stake in Birmingham City Football Club, kicking off an era of investment, according to Knighthead co-founder Thomas Wagner, who spoke to Yahoo Finance in a US exclusive (video above).

From here, Wagner and Knighthead – which oversees about $9.5 billion in assets under management – are taking the reins operationally at the club, which last season finished 17th in the English Football League (EFL) Championship. (For the uninitiated stateside, the EFL Championship is the second-highest-ranked league in English football, after the Premier League.)

"The way that the transaction has been structured, we will assume full operational control over the team from today forward," he said. "So, we'll be setting the strategic vision for the club, and, ultimately, we'll be the ones who are responsible for achieving the goals that we set. I think it's fair to say that the buck stops with us from here forward."

This investment on Wagner and Knighthead's part comes at a time when sports teams have never been more visible as an asset for the ultra-wealthy. Actors Ryan Reynolds and Rob McElhenney are co-owners of Wrexham A.F.C., while a bidding war is in full swing for Manchester United.

For Wagner, Birmingham City F.C. isn't his first foray into sports – in 2022, he invested in a Major League Pickleball team with recently retired NFL legend Tom Brady. In many ways, he said, buying a sports team involves the same type of assessment that he would do for any other deal.

"I think at the end of the day, it's like any other investment – we're looking at a relative opportunity and we're looking for investments that have a lot of asymmetric risk where especially when we can play a role in the transformation or re-imagination of a particular situation," Wagner told Yahoo Finance. "So, with pickleball, we saw something where there was an incredible amount of enthusiasm across the country... and certainly to do it with someone of Tom's stature and his incredible level of success in one of the most difficult sports in the world made him a prime partner to think about embarking on the pickleball venture with."

'Sports investments can be largely immune to macroeconomic cycles'

It's no secret that the broader macroeconomic environment Wagner is operating in is a difficult one. Interest rates are high in the US as is the case in the UK, where mortgages recently hit a 15-year high. However, Wagner believes in the resilience of sports teams and their value even in tough times.

"I think sports investments can be largely immune to macroeconomic cycles," said Wagner. "Fans often turn to sport in periods of difficult times economically as something that's not overwhelmingly expensive and can provide them with a great deal of enjoyment. Engagement with the team can come in many forms, it doesn't necessarily have to be on match day at the pitch. It can be digitally. It can be through the purchase of products. So that connection, if we deliver a good product, can be one that really endures through economic cycles."

The existing strength of Birmingham City's fanbase is a great place to start, but to make the team more valuable and successful, it'll require investment and elbow grease, said Wagner.

"This support within the franchise and the community allows us a base of fans to really build upon, and what we need to do now is put our fans and stakeholders first by creating a product that they can enjoy and feel proud to support," he told Yahoo Finance. "So what this means is bringing in the best talent we can within EFL guidelines. It means investing in the stadium and the fan experience. It means investing in the women's team. It means investing in the training facilities in our academy. So when I say the buck stops here, ultimately, we've got to make an investment... we knew that going in. It was part of what made this attractive, that there was so much opportunity."

Allie Garfinkle is a Senior Tech Reporter at Yahoo Finance. Follow her on Twitter at @agarfinks and on LinkedIn.

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