Increased revenue, improved governance, and innovative financing in Serie A are drawing interest from overseas investors.

By Giancarlo D’Ambrosio

In the 1980s and 1990s, Italian football dominated the European football industry, achieving consistent success on the field and attracting a vast global audience. Italy’s top division, Serie A, is still among the best in the world, but the English Premier League and Spain’s La Liga have overtaken Serie A as a financial force. The Premier League and La Liga have developed and commercialised their products in the overseas market in recent years, creating a gap between them and rival European leagues. Yet a shift is underway, and — due to more stable revenues, improved governance, and innovative financing structures — Italian football is ready to re-join Europe’s financial elite.

Italian football investment is ready to kick–off. Increased revenue from TV rights deals will drive improved financial performance and present opportunities for investors. This past summer, broadcasters Sky and Perform sealed a deal to screen Serie A fixtures for €973 million per season until 2021, following a competitive auction process. The domestic rights deal followed an agreement to sell international rights to IMG for €371 million, at nearly double the rate of the previous cycle. Changes to Champions League regulations, allowing four Serie A clubs to qualify for Europe’s elite tournament, will further boost revenue in 2019.

The increased revenue is likely to stabilise Serie A’s finances and attract international investors, a trend that has already emerged in England and Spain. Increased investment will drive additional revenue and sponsorship opportunities during the next few years, enabling Italian football to rebuild its international audience as clubs spend more on marquee players. Juventus’ deal to sign Real Madrid star Cristiano Ronaldo demonstrated the ambition of Italian clubs in this new era.

Improved governance will also make Italian football a more attractive investment proposition. UEFA Financial Fair Play rules and financial regulation introduced by the Italian league have had a stabilising effect on club finances, increasing sustainability, reducing debt ratios, and preventing reckless spending. According to Deloitte, Serie A’s wages-to-revenue ratio decreased from 70% to 67% in 2016/17, its lowest level since the 2005/06 season. Serie A rules are set to become even tighter in the coming years, which will further improve the league’s financial health.

Historically, most Italian football clubs have been family owned. As more international investors enter the market, a period of transition is inevitable. Investors are likely to seize the opportunity to transform clubs into international brands, boosting financial resources while improving processes and management models.

Overseas interest in Serie A is growing, as demonstrated by a US investment in AS Roma, the acquisition of a controlling stake in FC Internazionale (Inter Milan) by the Suning Group in 2016, and the ill-fated takeover of AC Milan by a Chinese-led consortium in 2017, followed by the acquisition of control by Elliott.

Innovative financing structures will also strengthen Italian clubs and allow investments in infrastructure, such as renovating or building new stadiums, training facilities, and commercial buildings. Club owners have begun to look at new forms of financing, including accessing international capital markets. In December 2017, FC Internazionale issued a bond to global investors after reorganising and forming a separate company to hold sponsorship and media rights. In a first for Italian football, the media company launched a bond to the international market, and the club secured financing at a favourable rate. The bond will enable the team to pursue its goals on and off the pitch. Similar financing arrangements are likely to emerge in the coming years as European and Italian football becomes an increasingly attractive market for global investors.

Giancarlo D’Ambrosio, a partner in Latham’s Milan office, discussed European and Italian football and related topics on new investment and financing opportunities in sports at the annual Sport & Business Forum held on November 14, 2018, at the Il Sole 24 Ore School of Management in Milan. Latham will continue to monitor legal and business trends involving European and Italian football as the sport prepares for a new wave of investments and innovative financings.