European football clubs invest in emerging markets

Europe’s increasingly foreign-owned football clubs are becoming top players in outward direct investment.

In March, a delegation from Real Madrid CF met Iraq’s prime minister in Baghdad to talk about setting up a Real Madrid Academy and plans for schools that feature football training as part of a general education. The $23.6m project is one example of an unprecedented wave of investment by European clubs into emerging markets, especially in Asia.

Last year, Inter Milan, Bayern Munich, PSG, AFC Ajax, FC Dynamo Brest, City Football Group and Bundesliga International made 18 separate investments worldwide for a total of $380m, according to fDi Markets, an FT data service that has monitored cross-border greenfield investment since 2003.

Three projects went to the US and the remainder to EMs: China, Hong Kong, India, Singapore, Malaysia, Belarus and Slovakia, for a total of $364m.

European clubs have funnelled roughly $500m to EMs in greenfield projects since 2013, and about $100m to the US.

Investment started slowly, at an average of three projects totalling $27m a year between 2013 and 2017. There was a sharp pick-up last year and early data for 2019 suggest the money has continued to flow, with six investments into EMs between January and April.

One reason is the recent rise of football academies. Until last year, European clubs focused on sales and marketing projects abroad, with the aim of building fan bases overseas and developing commercial activities, the data from fDi Markets show.

From last year, however, the type of investment has changed categorically, to focus on training and education in the form of football schools and academies. The biggest force for change has been China.

Chinese tycoons shook the football world with a $2.5bn spending spree on European clubs between 2015 and 2017. Today, several dozen European clubs across the continent’s top leagues are partly or wholly owned by Chinese businessmen, including Atlético Madrid and Manchester City.

Under President Xi Jinping, who professes a love for the beautiful game, the government has led the growth of football in China, providing financial and policy support with the stated aim of qualifying for, hosting and winning the Fifa World Cup in the coming decades.

However, the flow of Chinese money into European football has been curbed since late 2017, with a shift of investment to the development of Chinese players through improved youth coaching and training facilities. The government aims to set up 50,000 football academies by 2025.

European clubs have responded.

Inter Milan took a lead in conjunction with its Chinese parent Suning Sports Group, building football academies in seven Chinese cities in 2018, according to fDi Markets. The club also runs at least 59 school programmes for players aged four to 18.

Toulouse FC is also advancing quickly into this space, while Bayern Munich and Real Betis Balompié set up academies in China in 2019, showing that non-Chinese owned European clubs have spotted the opportunity, too.

In 2014, Real Madrid was one of the first movers in China, partnering with Guangzhou Evergrande, the world’s largest football academy, to provide a coaching programme with 24 Real Madrid coaches.

Deloitte predicts that a team from China’s Super League has the “highest chance” of becoming one of the world’s top revenue-earning clubs in the next decade or so.

However, the trend of investing in football academies overseas extends beyond China, as shown by Real Madrid in Iraq. This year, PSG set up academies in Qatar, Turkey and Malaysia, while Inter Milan set up in Belarus and Slovakia in 2018.

More European clubs will follow suit as the number of clubs owned by individuals or companies from EMs grows. Arsenal, Manchester City, Wolverhampton Wanderers, Bournemouth, Chelsea and Leicester City in the English Premier League, plus at least eight clubs in the second-division Championship, are partially or fully in the hands of such owners.

Many EMs offer potentially lucrative and largely untapped opportunities in football. Outward investment from Europe looks set to accelerate, especially as growth in the sport’s digital audience continues a recent burst of pace.

Sebastian Shehadi is global markets reporter at fDi Magazine

[optin-cat id=7010]