Over the years Germany’s 50+1 rule has prevented investors from taking a keen interest into purchasing shares in Bundesliga clubs. However, on June 27th Hertha Berlin made headlines all around the world when investor Lars Windhorst purchased 37.5% of the Hertha BSC Kommanditgeseellschaft auf Aktien (KGaA) that operates the membership club’s football operations for €125 million through his company Tennor Holding B.V.
The move came shortly after Hertha had bought out the American investment firm KKR which owned 36.3% of the club’s shares. Traditionally the Old Lady from Germany’s capital has had its share of financial troubles and chaos within the boardroom. KKR had streamlined the club’s accounting and gotten the club into a good financial standing. However, the officials at Hertha thought there was room for improvement.
At the end of 2018 the club decided to take up 10 million Euro bank loan and a loan of 40 million Euros on the international capital market in order to bring together the funds necessary to buy out the American investment firm. In the contract with their former part-owners Hertha had installed a clause that allowed the club to buy back its shares at 71.2 million Euros. The reason behind that move were simple: Hertha believed that they could re-sell those shares at a higher value.
Enter Lars Windhorst – The man with a vision
The move paid off as Windhorst’s Tennor Holding arrived with coffers filled with cash. Whilst KKR had taken a back seat role, solely focusing on dreary financial streamlining, Hertha were suddenly swooped up by a man who has made his name by selling big visions. Throughout his public life he has never been known to be a big fan of football; however, his reasons behind the purchase are solely financial, Windhorst told German magazine Der Spiegel.
Football’s earnings are currently outgrowing the rest of the economy at eight times the rate of the average economic growth, according to Windhorst. The numbers simply add up, but at Hertha “there’s still a lot of low hanging fruits” the investor told Der Spiegel.
Right now the club generates an income of 50 million Euros from ads, fan merchandise and the sale of food and drinks at their home matches. Compare that to the 200 million Euros that PSG, another club from a capitol city, generates from the same activities and you see why there is a lot of potential for growth. There’s no reason why Hertha shouldn’t be a big city club according to Windhorst.
More merchandise sales, better sponsorship agreements and marketing aimed at the VIP segment is Windhorst’s answer of how the club can generate more money in order to take a step forward. In a few months the investor is going to increase his share in the club by another 12.4%, meaning that Hertha, no matter what, can look forward to another big pay day in the not too distant future.
More involvement from the outside?
Given his visions and the way Windhorst has portrayed his move within the German press, it seems like he is going to take a more active role within the club than former investors KKR. His move has bought him two seats on the Hertha board (KKR had one).
But, this isn’t a vanity project for the investor. “We want to make money”, Windhorst exclaimed when asked about his motifs behind the purchase. And while the American investors never really interfered with the daily decision making at the club, one has to wonder if a gambler who makes his wealth on the global financial markets might be a tad more impatient when results suddenly start turning against the team he has invested in.
Competing with iconic clubs such as Real Madrid, PSG or Manchester City is not going to happen over night. However, Hertha sporting director Michael Preetz believes that Windhorst’s investment is a step in the right direction, telling Der Spiegel:
“It increases our chances to get into the reach of the qualifying spots for a European competition in the not too distant future.”
So far the club’s biggest ever investment has been the purchase of David Selke for 8 million Euros. With the millions coming in right now the club can invest more freely into bigger names. During the current transfer window the club hasn’t made any big signings, though, with former 1.FC Nürnberg midfielder Eduard Löwen, who joined Hertha on a 7 million Euros transfer, being this summer’s most expensive transfer. As things stand former Fortuna Düsseldorf player Dodi Lukebakio could still arrive at the club from English side Watford, making him one of the first players bought with the Windhorst millions.
The man of nine lives
All the things Windhorst is talking about might sound fantastic at first. But, who is the man behind all those millions that have been pumped into Hertha?
Lars Windhorst has been an ambitious individual from his early childhood and onwards. When asked in art class at the age of nine to draw what he wanted to do as an adult, he produced a skyscraper surrounded by trucks and boats emblazoned with his name. At the age of 14 Windhorst started making his own computers, selling them at his dad’s stationary store.
Things quickly developed from there on out. The 42 year-old German entrepreneur finished school at the age of 16 and two years later on he ran a company that employed 80 workers. German chancellor Helmut Kohl took a keen interest in the youngster, even taking him on international trips abroad. When he was 20 Windhorst was featured as one of the future global leaders at the annual Davos conference.
The number of employees at his company grew to 800 employees the mid 90s. At the height of his early success Windhorst even planned on building a skyscraper featuring his name in Ho Chi Minh City. There was seemingly no limit to what the young man could accomplish it seemed.
However, the dotcom bubble burst and Windhorst went bust for the first time in his life in 2003, as his gambles on the stock market failed to make up for his company’s losses. At that point the investors credit was so low that he couldn’t even get a cell phone contract.
However, despite his failings Windhorst managed to pursue to investors of handing him several new millions in order to get back on track. With one of them, the South African Rob Hersov, he launched the investment firm Sapinda (the firm was rebranded as Tennor back in May 2019).
The investments made at first paid off and Sapinda became hugely successful at an early stage. However, the financial crisis of 2009 almost wiped out the company. Windhorst on his end faced legal troubles at the time, as Berlin prosecutors charged him with 35 counts of fraud, embezzlement and breach of trust.
In the end the investor got off lightly as a plea bargain was reached. The fraud charges were dropped on condition he paid an £850,000 fine, gave £2.1million back to his alleged victim and admitted a breach of trust offence for which he was given a one-year suspended prison sentence.
Over the years Windhorst as an investor the 42-year-old has divided opinion according to the Financial Times, that wrote:
“Mr Windhorst divides opinion among those know him well. Some loathe him, saying they have been burnt in business transactions. Others extol his ability to forge relationships, his boundless energy and unabated optimism. He also has an uncanny ability to win back those he has previously alienated.”
Some have described Lars Windhorst as a man of nine lives. Even after going bankrupt and losing out on bets that he needed to pay off, he still finds a way to get back. Over the years the man has been involved in loads of business dealings that have made investors worried. Some have even pulled out of contracts when they learned that Windhorst’s name was attached to a project.
Recently reports became public that financial controllers Deloitte had rested their mandate to work with the holding as they thought that they were deceived by Windhorst’s company. The German investor claims on his side that business is better than ever, maintaining that his holding is worth more than 3 billion Euros.
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