Why U.S. Investors Are Pouring Money Into Italy’s Serie A — And Why It’s Actually A Risky Play
Italy’s Serie A, almost universally recognized as the world’s top soccer league in the 1990s, these days sits well behind England’s Premier League and Spain’s La Liga in the European pecking order. A growing number of American investors, however, believe that better management and stabilized finances can lead Italian soccer back to glory—and pump up team valuations.
The latest is 777 Partners, a Miami-based private investment firm that last week announced it was buying Genoa C.F.C. in a deal that, according to a person with knowledge of the transaction, is for 99.9% of the club at a valuation of €150 million ($175 million) including debt. Six of Serie A’s 20 teams, plus two other clubs in the second-division Serie B, will now be controlled by American investors or investment groups, all eight of them taking control within the last three and a half years. Three come from the world of private equity and hedge funds, part of a broader trend that has seen financiers more familiar with distressed assets than sports teams nevertheless push into European soccer.
The investors believe that Italian teams are undervalued relative to other leagues, particularly with a dip in prices during the pandemic. “We just see a higher opportunity for growth here because of the stage of development,” Juan Arciniegas, managing director at 777 Partners, tells Forbes. But there is real risk, too, with European soccer generally and Italy in particular.
The upside is obvious. Soccer is a global game, and getting even bigger. New companies are entering the battle for media rights, which could drive up broadcast fees, and new business opportunities—like non-fungible tokens, or NFTs—are creating new revenue streams. And Serie A has certain advantages even within the soccer world.
Italy’s teams get four lucrative berths in the Champions League each season, the same number as the Premier League and La Liga and one more than France’s Ligue 1, and the league has little domestic competition for eyeballs, with soccer firmly entrenched as the country’s No. 1 sport—more so than in, say, England, where it competes with cricket, tennis and rugby. Then there is the history. Genoa, for instance, was founded in 1893. A.C. Milan, owned by the West Palm Beach, Florida-based fund Elliott Management, has won the Champions League (or its predecessor) seven times—second only to La Liga’s Real Madrid.
Still, the current demand for Italian clubs largely comes down to two factors, investors say. The first is scarcity: There are simply not that many top-tier clubs around Europe, and ownership rules in Germany further limit the potential investment targets by requiring Bundesliga clubs to be controlled by fans. Meanwhile, recent financial problems in Italian soccer, exacerbated by the pandemic, have put many teams up for sale.
The other big factor is price. According to the Financial Times, Elliott acquired Milan in 2018 effectively for about €400 million ($470 million at today’s exchange rate), and the pandemic is driving down price tags at some clubs; the more financially mature Premier League, by contrast, has eight teams valued at more than $500 million, and six over $2 billion, according to Forbes’ 2021 list of the most valuable soccer teams.
But even with that lower starting point, bringing up Italy’s team values won’t be easy. Even successful Serie A clubs have struggled to attract major global brands as sponsors, and the vast majority play in decades-old stadiums that would appear decrepit by American standards, hampering game-day revenue from concessions and merchandise sales and luxury suites and deterring clubs from raising ticket prices beyond the low levels that are common throughout Europe.
The kinds of upgrades that are common in U.S. cities are tougher to execute in Italy, where most teams operate as tenants in city-owned stadiums and proposals for new stadiums become bureaucratic nightmares. Over the last ten years, only three new stadiums have been built in Italy, compared with 153 in Europe overall, according to a recent report by the Federazione Italiana Giuoco Calcio, Italian soccer’s governing body. U.S. billionaire Rocco Commisso says he began an effort to replace the 90-year-old Stadio Artemio Franchi in Florence immediately after buying A.C.F. Fiorentina in June 2019; the city’s process for approval means actually building it will take at least another five years, he says.
“It’s the perfect time, hopefully, for the political system in Italy to understand that things need to change if they want to have a Serie A that fully competes with English, Spanish and German soccer,” Commisso tells Forbes.
Those sorts of drawbacks force Italian teams to be more reliant on media revenues than clubs in rival leagues, and even there, Italy is lagging in its monetization efforts. Serie A was targeting a 20% increase with its domestic TV rights this year but ended up agreeing to a three-year deal with DAZN worth $995 million annually, down 13% from the $1.14 billion under its previous deal with Sky. It was also substantially less than the $1.29 billion the Bundesliga got from DAZN and Sky in an agreement last year, or the Premier League’s $2.3 billion fee from its domestic package. (Serie A did soften the blow by bagging $75 million annually in a recent three-year deal with ViacomCBS for its U.S. rights.)
The revenue problems are compounded by European soccer’s Financial Fair Play Regulations, which are meant to keep clubs out of financial trouble and essentially require them to spend no more than they generate. In practice, however, the rules compel teams with low revenue to keep their payrolls down, which hinders their on-field performance—which in turn ensures revenues will stay low and starts the cycle all over.
“At the end of the day, without revenue, we cannot compete,” says Commisso, the founder of U.S. cable provider Mediacom, whose logo adorns Fiorentina’s jerseys. “Like our situation, without the Mediacom sponsorship revenue, we generated last year because of Covid and otherwise 72 million euro—that’s lower than it was ten years ago. And we’re competing in Europe with clubs that generate 3, 4, 5, 6, 700 million euro.”
That doesn’t mean Commisso, who notes that his personal history of being born in Italy and playing soccer at Columbia University differentiates him from the other American owners and who has said he is not in the sport to make money, is giving up. He just recognizes success will take time—and money. He is starting with a €70 million training center called Viola Park, currently under construction.
Will the private-equity firms and hedge funds that have entered the league alongside him have the same kind of patience? Arciniegas, at least, says 777 is up for the challenge at Genoa, adding: “We’re going to do the work … and I think that the opportunities are there for the picking. The fact that the club has underperformed in recent years just made it even more appealing for us to be able to make a difference.”
We may get another test case soon, however. Under financial duress, Inter Milan’s Chinese ownership group, Suning Holdings, agreed to a $336 million financing deal in May. The lender, poised to take over the club if Suning defaults: Los Angeles-based Oaktree Capital.