Politics may scupper Serie A private equity investment, predicts leading Italian finance journalist

Cash-strapped Serie-A clubs could find it difficult to agree a deal with a private equity investor because of internal politics and deep-seated rivalries, according to leading Italian financial journalist and football analyst Marco Bellinazzo.

Speaking to SportBusiness ahead of tomorrow’s key meeting of Lega Serie A clubs which will address a raft of financial and media issues, Bellinazzo said: “Because of the political approach which overrides everything else it could be difficult.

“The clubs don’t trust each other and while smaller clubs see this as an opportunity to boost their cash flow, the big clubs like Juventus, Milan and Inter are concerned there may be issues around governance which will disadvantage them.”

In May, private equity firm CVC Capital Partners tabled a bid worth a reported €2.2bn ($2.47bn) for a stake in a new company which would be set up to sell Serie A’s media and commercial rights over a 10-year period.

Since then two other companies, Bain Capital and Advent, are reported to have made offers.

But according to Bellinazzo, there has been little or no communication between the league and CVC since the initial offer was made and a committee began to examine it in detail.

While he believes that this is the best possible time for private equity to invest in Italian football because of its relative lack of commercial development, it would be a big ask to turn the sport around quickly.

He said: “The offers are so big that it would take 20 years for football in Italy to be worth so much.”

The bids come against a background of uncertainty around Serie A’s revenues which has been exacerbated by the Covid-19 crisis which interrupted the season. Most if not all clubs have already borrowed against future media revenues and Bellinazzo says the current cumulative debt is around €250bn.

“The problem is that they have borrowed just to cover current spending levels, not to build for the future,” Bellinazzo said.

Consideration of private equity offers comes at a time of confusion over future media rights revenue. Although payment issues with domestic rights-holder DAZN and international rights-holder IMG over withholding of fees following the suspension of the season have now been settled, there are other areas to tackle.

It was reported last week that the league had issued pay-television broadcaster Sky Italia with an ultimatum to pay its missed rights fee instalments totalling €131m ($147.3m).

Sky holds the rights to seven of the 10 weekly fixtures, a total of 266 matches broadcast on its platforms per season. DAZN holds the rights to the remaining three matches giving it a total of 114 per season. The deals with Sky and DAZN are worth €973m per season.

The rights sales process for the cycle beginning with the 2021-22 season was due to have started in April but has been delayed and, according to Bellinazzo, the uncertainty has led Mediapro, the broadcast production and rights agency, to re-think plans for a joint venture on a Lega channel and to demand the return of a €64m deposit lodged with the league.

He explained: “There is already some doubt about their ability to maintain the same financial level because of lack of competition to Sky Italia and DAZN in the domestic market and because Sky’s valuation is affected by the law which prevents them enjoying exclusivity.

“There are also problems internationally. IMG has not been successful, and part of the reason is that Serie A has not invested in building and enhancing its brand overseas in the way than LaLiga and others have done.”

Pay-television broadcaster BeIN Media Group holds Serie A rights across a slew of territories, including France, Australia and the Middle East and North Africa in a deal running from 2018-19 to 2020-21. The broadcaster has now succeeded in renegotiating its agreement, which was worth around $170m per season.

Bellinazzo believes that the key to re-building the finances of Serie-A is in the depth of commercial and governance expertise which a major private equity investor could inject.

He observed: “The potential to have a big financial investor as part of the operation around Serie A is an extremely important opportunity. With proper financial support and management, it could be up there with the (German) Bundesliga and (Spain’s) LaLiga.

“In Italy there is already an appealing fiscal regime to attract players and with specific investment in events, infrastructure and academies the brand would be significantly enhanced.

“But if PE is simply looking for a profit in three years without developing a proper growth strategy it will simply not be a success.”

Interestingly, Bellinazzo also feels that enhancing the governance and commercial performance of Serie A will have an impact further down the Italian football pyramid.

“It will encourage people to look at investing in smaller clubs and those which have fallen out of the top level. A club like Palermo, which was in Serie A five years ago but is now in the fourth level, might be seen as a good investment if there was the right level of revenue at the top to aim for.”