Fierce ambition puts China at the top of the league
Posted on June 13, 2017
CHINESE outbound corporate mergers and acquisitions (M&A) may be set to cool this year but in the football world, China has the fattest wallet when it comes to buying into clubs.
As another English club – Southampton – is poised to be bought by a Chinese company, ThinkingLinking, a UK-based cross-border M&A company reveals that between 2012 and 2014, China was involved in over EUR 2bn of football M&A activity, around half of all football takeovers.
China’s appetite for investing in football seems insatiable – the second most active country in the timeframe under review was the US, with just EUR 313m.
Furthermore, momentum shows no sign of easing up. The deal involving AC Milan, which started in 2016, closed in April 2017 and in May, Chinese investors bought 75% of Reading and others clubs moved into the spotlight, including Southampton, Parma and Crystal Palace.
China’s football strategy is bold and has an end game in view. China targets top league clubs and their investors get a kick out of attaining the prestige of owning top level football institutions. Chinese companies have even competed against each other to get a piece of the action, and it is not traditional football investors that are driving activity, almost ever industrial sector in China has been eyeing football investments.
So they tend to pay more than western investors for their assets – that’s not entirely surprising given the economic growth in China over the past decade, versus the tepid environment that Europe has become. In short, there’s money in the far east.
Chinese investors have spent over a billion euros in Italy, primarily in deals involving the two Milan clubs. But in deal volume terms, the UK has been the most active market, with deals involving Manchester City, Aston Villa, West Bromwich Albion and Wolves.
What’s evident is that Chinese investors have paid an average of 1.8 times the total revenues of the target club, compared to 1.4 times paid by buyers from the rest of the world. This is partly due to the Chinese penchant for buying absolute control of the asset (club).
Will the current trend continue? It has been widely publicised that China’s President Xi is a football fan and has encouraged commitment from the country’s corporates and they have, in turn, invested in areas of “patriotic priority”. Moreover, while the government has to approve any expenditure of foreign exchange, Xi’s administration has made money for football readily available. There’s a very clear agenda.
China is ambitious on every front and it would seem likely that the interest in football will continue and that means further investment in European football. After all, they want to host and win the World Cup. The timing may be uncertain, but don’t rule it out.