Tuesday, January 18, 2022

“Sports capitalism” is sweeping Europe’s clubs… and hedge funds are mobilizing to grab deals

Just as the match that took place, last Tuesday, between AC Milan and Atletico de Madrid in the Champions League, was highly competitive between the most successful Italian team in the Champions League and the team that won the Spanish League title last year, the competitive match Similar others swirl in the financial sector between a New York-based hedge fund and a Los Angeles-based trust.

Elliott Management Corp. took control of AC Milan in 2018 after Chinese owner Li Yonghong defaulted on debt obligations. In contrast, the funds, managed by Ares Management Corporation, acquired a 34% stake in La Liga champions Atlético in June.

Both companies are highly wealthy alternative investment firms that have gradually gained a foothold in the world’s most popular sport. Companies specializing in private equity, credit, and hedge funds represent the latest wave of investors in sports, after a buying spree among billionaire soccer fans, Middle Eastern petrodollars, and Chinese buyers over the past two decades.

The most recent example of this is the announcement by Miami-based 777 Partners, on September 23, of its purchase of Italian club Genoa.

Some lent money to keep Europe’s most popular clubs alive, while others bought media rights, stable small teams, or took stakes in clubs as high-risk assets. The biggest investment venture has been across the entire league, such as CVC Capital Partners’ deal with La Liga, announced last month.

European football has always been in desperate need of money, but the matter has become even more urgent after the pandemic has kept the crowds off the pitch, leaving some of the continent’s biggest and most successful clubs saddled with huge debts, and that was the catalyst behind the failed European Premier League in April. , which JPMorgan planned to support.

The cascade risk is that football is based on a somewhat unpleasant business model, with many investors failing in an industry riddled with debt and bloated player salaries, and at the mercy of politics and overheated fans.

There are no guarantees in the returns associated with that industry, as a result of the threat of downgrading the team in the league if it fails to perform well enough. This raises a big question mark for US investors about whether European football will be able to reach the US sports ratings.

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