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Throughout the 80s and 90s, Italy’s Serie A was the soccer league of reference. It had the best teams, players, coaches and frequently held the world transfer record. Additionally, Italian teams were tough competitors at European level. Between 1952 and 1992, there were only four years when Serie A didn’t have the most expensive players.  However, over the last 20 years, Italian soccer has lost its lustre driven by revenue decline, corruption and increase cost. Its appeal and international glamour continue to decline, and unsustainable finance, and nepotistic governance practices have drained the league of many of its global stars, brands, and trophies. The once-mighty sport is affected by a general lack of innovation, international finance, and leadership.  Just to add a reference point here, some of the Serie A Team’s revenues today are lower that they were 10 years ago, Fiorentina being a good case in point which in 2020 generated 72 million Euros in revenues. Serie A is now the No. 4 ranked league in Europe and the Italian national team has also fallen to 11th in the top 25 rankings having not participated to the last world cup as it did not qualify. On the infrastructure side, over the last ten years, only three new stadiums have been built in Italy, compared with 153 in Europe overall. This was mostly due to lacking financial resources as well as complex ownership structure.  

Private Equity is part of the solution. Due to a combination of old-style management, and poor financial performance, and limited innovation, most Italian soccer teams are significantly undervalued from a financial standpoint. For this reason, over the last 3-5 years there have been an exponential growth in interest towards Italian soccer teams from US Private Equity and Hedge Funds. These are investors that believe that better management and stabilized finances can lead Italian soccer back to glory and grow their valuation significantly over the next 5 to 10 years.  As of today, of the 20 Serie A soccer teams, 6 are controlled by North American investors. What made these acquisitions particularly attractive was the general underperformance of these teams, their attractive brand equity, and the overall unique standing of soccer in Italy which has no competing sports whatsoever. 

The opportunity ahead. We believe the Italian soccer sector is ready to be disrupted, given the high level of debt of soccer teams, the declining revenues (exacerbated by Covid 19), as well as a ripe market for new technology adoption. It is however, a highly regulated and complex country where personal relation and local business nuances are of high importance to secure new deals. Additionally, it is essential that investors interested in soccer teams know how to navigate the local politics as these play a key role in any business transaction in my country.