The recent takeover of Milan by the private company RedBird Capital Partners is another example of US companies investing in the European football market. What are the factors attracting capital from overseas to the top leagues of the Old Continent?
The acquisition of the Rossoneri does not follow years of continued financial success for the club, or for Serie A as a whole. The Italian league is clearly behind the Premier League, Bundesliga and LaLiga in the commercial rankings, and Milan is only just returning to international competition under the aegis of UEFA after being suspended in the 2019 season/ 20 for breaking FFP rules. Other Italian clubs have also published alarming balance sheets that have been strained by Covid-19. In the 2020/21 financial year, Inter and Juventus posted record losses of €245.6 million and €210 million.
RedBird’s contract with the Milan club is worth EUR 1.2 billion, which may contribute to an even greater (after the championship) resurgence of red and black. Elliott Management, the outgoing owner, took control of the club in a precarious financial situation and had to stabilize it, which was not an easy task. It is expected that such a significant contribution from RedBird will help to manage the team more efficiently and make important and significant financial decisions.
Leaving Italy aside for a moment, the sale of Chelsea to a consortium led by Todd Boehly at the end of May became the biggest deal ever by a European club with an American group, totaling around £4.25bn. Such international financial operations are not new to Europe, and US involvement in European football is nothing new, but rarely has such unprecedented amounts of money flowed from America.
Serie A’s relationship with the United States has improved dramatically over the last four years. The aforementioned Elliott Management took control of Milan in 2018 for around 400 million euros when the club’s former owner, Chinese businessman Yonghong Li, was unable to repay a loan to a New York hedge fund.
A year later, in 2019, Fiorentina was bought by Rocco B Commisso, the Italian-American owner of Mediacom, for €160 million, ending the 17-year reign of the Della Valle family. The Friedkin Group consortium has acquired AS Roma from James Pallotta, another American, in a deal worth €591 million. In the same year, Venezia, which was promoted and relegated from the previous season, was bought by VFC Newco and the former head of the New York Stock Exchange, Duncan Niederauer. In 2021, Robert Platek completed the acquisition of Spezia Calcio with a deal estimated by the Italian media at around €25 million. Genoa was purchased by a Miami-based private investment firm, 777 Partners, in November of the previous year. The league’s oldest team cost about $150 million. Even before the sale of Milan to RedBird, Stephen Pagliuca, co-owner of the Boston Celtics, acquired Atalanta in 2022, and last month Sportico said the Bergamo-based team had also sold a minority stake to Dallas-based joint-stock company Arctos Sports Partners. Even Inter now has ties to the US after its Chinese owners, Suning Holdings Group, took out a loan from Los Angeles-based Oaktree Capital worth €275 million last year. According to Calcio e Finanza, Suning will retain majority control of Inter with a 68.5 per cent stake, however Oaktree could take full control of the club if the loan is not repaid. In addition to the best teams in Italy, Parma, Ascoli, SPAL, Campobasso, Cesena and Reggiana also had American owners.
However, Italian clubs, despite a large number of teams in which US dollars are used, do not even come close to the Premier League, in which as many as 11 clubs are owned wholly or partly by US companies. Arsenal, Aston Villa, Chelsea, Crystal Palace, Fulham, Liverpool, Leeds United, Manchester United, Manchester City, West Ham United and Wolverhampton Wanderers, so by far the leading forces in the richest league in the world.
Often, those who own shares in these clubs are entire investment groups that also invest in their home country. The Glazer family, the longtime owners of Manchester United, also own the Tampa Bay Buccaneers of the NFL, while Arsenal owner Stan Kroenke owns the Los Angeles Rams (also NFL) as well as the Denver Nuggets of the NBA, the Colorado Avalanche of the National Hockey League of the NHL and football Colorado Rapids of the MLS. As a curiosity, it is also worth mentioning that last summer, the fourth tier club Wrexham was taken over by American actor Rob McElhenney and Canadian Hollywood star Ryan Reynolds.
Prior to the Milan investment, RedBird was already involved in Liverpool’s Fenway Sports Group (FSG), the group that also controls the Boston Red Sox and as of 2020 owns 85 percent of French club Toulouse. Speaking of France, Olympique de Marseille has been owned by Frank McCourt since 2016.
Atletico Madrid signed a capital increase agreement with Ares Management in June 2021 in the amount of EUR 181.8 million. Thus, the investment manager holds a 33.96% stake in the new holding company of the LaLiga giant. RCD Mallorca belongs to Robert Sarver, who is also the financial head of the NBA Phoenix Suns club.
An interesting case is the Bundesliga, which is the last of the “big five” leagues in Europe. There is a rule called 50+1 which states that clubs must be majority owned by local clubbers. This makes it difficult for one unit to gain control over the team, which effectively discourages foreign investors.
Why all these investments?
Companies investing in Serie A believe the clubs are underrated compared to other top European football leagues. The pandemic had a big impact on the prices of teams, and after all, football is by far the most important sport in the Apennine Peninsula.
777 Partners managing director Juan Arciniegas highlighted in an interview with Forbes why his company had come after Genoa, saying there was “a greater opportunity for growth because of the stage of development the club is in”. The $150 million for Genoa that fell this season is also considered an opportunity by other American investors looking to invest in foreign sports. Such investments are well explained by the purchase of Real Salt Lake from the MLS by David Blitzer and Ryan Smith, who bought the club for approximately $400 million at the beginning of the year, and today it is worth $550 million!
Returning to the main example, RedBird: the offer for Milan may turn out to be a shot in 10, due to the championship of this legendary team. After their first Scudetto in 11 years, Milan has been recognized as the world’s fastest growing football brand in the latest Brand Finances financial report. Investing in the Premier League is much more obvious and costly. Put simply, it is by far the most popular football league in the world, which stimulates competition to invest and thus financially unfavorable bidding (although some are afraid to invest in top clubs for fear that their club will fall out of the so-called “big 6”). Nevertheless, some investors see it as a risk worth taking. In February, The Times highlighted the Premier League’s international appeal, reporting that overseas partnerships will be worth more than domestic rights over the next three seasons – with international deals taking in £5.3bn from £10.5bn for the 2022-2025 period.
How directly will the ROI be generated?
Serie A and Ligue 1 clubs may be cheaper than Premier League or LaLiga clubs, but being able to add value to a club will not be an easy task for investors. In Italy, teams mostly play in aging city-owned stadiums. This makes it more difficult to generate more match day revenues, as well as new construction projects, as Roma has seen.
Clubs also have less money from sponsorship and media rights. Serie A had hoped for an 18 per cent increase in the last tender compared to the previous €973 million per year. However, none of the bidders reached the target minimum of EUR 1.15 billion. The main package of rights to show the Italian league from 2021 to 2024 was finally sold to the streaming service DAZN for around 850 million euros a year. Of the “big five” leagues in Europe, only Ligue 1 earns less from its domestic rights (after Mediapro terminated its contract in December 2020)
Although media rights may lose their important position, options for increasing the value of a sports enterprise still exist, for example through the possibility of renovating stadiums. There also seems to be a perception among investors that maximizing opportunities in the digital sector will also lead to revenue growth, which could be another way to increase the value of the club over time.
American investors have no problem issuing blank checks to increase the competitiveness of their teams in Europe. But once they do, UEFA and FFP rules come into play to limit clubs’ spending and reduce their debts. In theory, this means that it is difficult for smaller clubs to challenge the elite. The new FFP model is on its way, although the New York Times reports that many clubs outside of England will find it difficult to balance costs such as wages and transfer fees. The Premier League has the highest domestic broadcasting revenue in global football and its clubs are among the wealthiest owners in the sport. The new FFP is therefore supposed to stop clubs from wasting so much money, but low income means that smaller teams will probably never be able to reach the top, which can also reduce their value over time. Success takes time and ingenuity, but also money.
Are larger investments likely?
Yes definitely. Serie A and Ligue 1 remain the most obvious targets given the lower value of clubs in these leagues. In addition to the deal with Lyon, which is reportedly in the works, American investor David Blitzer, co-owner of Crystal Palace, has recently established partnerships with France’s Saint-Etienne and Italy’s Sampdoria.
Meanwhile, the Spanish giants of Barcelona are allegedly close to a $960 million deal with US investment bank Goldman Sachs to ease their financial woes. But beyond investing in individual clubs, funding for the league itself is becoming a valuable option for large private companies. The “Impulso” LaLiga deal with the Luxembourg company CVC Capital Partners for the amount of two billion euros, which will provide a private company with shares in another company with rights to league media. American organizations also stood guard. According to reports, New York investor KKR was aiming for a 25 percent share of the Bundesliga’s international media turnover. Such a block of shares costs around EUR 500 million. The clubs decided to stop talks in May 2021, although Bloomberg reported earlier in the month that the German Football League (DFL) was again thinking about a deal.
All of this additional US investment, however, raises a more important question for European football: are the leagues and clubs, rich in history and tradition, ready for a major overhaul of their commercial operations under the guidance of new players? Europe has often looked down on America’s attitude to “soccer” while boasting about “football.” Now the United States seems to be pulling the soccer strings more than ever.
This article is based on an analysis by Ed Dixon of Sports Pro Media As RedBird buys AC Milan, why are more US investors hedging their bets on European soccer?