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Can hedge fund revive AC Milan?

In April 2017 an unknown Chinese businessman, Li Yonghong, acquired AC Milan for €740m from Silvio Berlusconi, the three times Italian prime minister, who had owned the club for two decades. He hoped to exploit the club's large Chinese fan base. The takeover was funded by €300m of high interest loans from Elliott Asset Management, a $38.2bn hedge fund described by the Financial Times as 'the world's most feared hedge fund.'

In July 2018 Mr Li defaulted on the loans, losing €500m in equity overnight. Elliott effectively acquired AC Milan for €400m, just half of what the club had been valued at months earlier.

Admittedly, AC Milan had faded from earlier glories. It last won Serie A in 2011 and has failed to qualify for the Champions League for five seasons. Over the past decade its revenues have stagnated at around €200m. Those at Real Madrid have doubled to almost €750m over the same period.

Elliott's plan is clear: win matches on the pitch and raise revenues off it, all to enhance the club's value and sell for a healthy return. The scarcity value of such a renowned club means there will always be buyers in the market.

Quite extraordinarily, the club previously had no dedicated sponsorship sales people. This provides a key revenue stream for all top clubs, in particular it is something at which Manchester United has excelled. The club has approached hundreds of brands in a search for new sponsors. In 2017-18 the club made €70.2m in sponsorship agreements, half the €143m earned by Juventus and well behind the €356.2m at Real Madrid.

The club is awaiting a decision on permission to replace the San Siro stadium on an adjacent site. The €1.2bn cost would be shared with Inter Milan. The clubs estimate the income from a new stadium would more than double from €40m today to over €100m, closer to the €145m earned by Barcelona.

Elliott seems to have acquired a taste for football, negotiating a complex debt deal with the owner of French club Lille.

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