Xi Jinping’s fandom helps fuel China’s world-beating splurge on soccer M&A
Chinese firms poured US$2.4 billion into soccer team mergers and acquisition investment from 2014 to 2016, dwarfing the United States’ US$350.6 million
Soccer-related mergers and acquisition (M&A) activity in China in recent years has outpaced that of the rest of the world by a wide margin, partly due to the fandom of the country’s leader.
Between 2014 and 2016, mainland companies put €2.15 billion (HK$18.79 billion) into investments in soccer teams, or more than half the total global investment tracked by British cross-border M&A consultancy ThinkingLinking.
Based on the firm’s examination of 201 soccer-related deals by 41 countries worth €4.09 billion over the same period, China spent more than the remaining 40 countries combined, far outspending the No 2 investor, the United States, which chalked up €313 million in soccer M&A spending over the three years studied. “Never has one country risen so fast in the league, nor left the others so far behind,” said Mark Dixon, ThinkingLinking’s chief “thinking officer”.
“China has, without question, won the M&A Cup,” Dixon said.
The soccer buying spree partly reflects President Xi Jinping’s ambitious goal of making China a global football superpower before 2050. In 2011, Xi, an avid fan, revealed his dream: that the nation would someday qualify for, host and win the World Cup.
According to ThinkingLinking, no soccer M&A deals were recorded on the mainland in 2014. But the next year, the figure surged to €555 million and then last year hit €1.59 billion, just as Western investors had pulled back slightly from the sector.
Mainland soccer buyers generally targeted controlling stakes in top league clubs. Their motive was gaining prestige while attracting the interest of Chinese soccer fans, who are mostly interested in the big teams.
Compared with buyers from countries that were directly involved in the business of sport, most of the mainland investors were from outside fields, ranging from pharmaceuticals to manufacturing, ThinkingLinking said.
Late last year, the State Administration of Foreign Exchange began to increase its scrutiny of cross-border acquisitions, to slow the flight of capital and stabilise foreign exchange reserves to prevent the yuan from depreciating. Outbound investment in entertainment and real estate, in particular, was deemed “irrational”.
But according to Dixon, there has been little sign of China retreating from soccer investment so far this year.
In April, mainland investment company Sino-Europe Sports, headed by businessman Li Yonghong, invested €740 million in AC Milan.
Li became the club’s new chairman.
“There is still a huge amount of interest in the sector,” Dixon said. “And of course, it’s going to be more difficult for companies to get approval.
“The Chinese government has the power and freedom to allow transactions, if they see it as in the interests of China,” he said. “They [mainland companies] may have to make their argument more strongly. They have to demonstrate their business plans.”
But whether these large deals could actually drive mainland soccer up to an elite level was open to question, Dixon said.
If China intended to eventually win the World Cup by learning from the West, it would make more sense for it to buy smaller teams, he said.
“You can get hundreds of transfers of know-how through those [smaller deals] into China, for the same price as a half a billion [dollar] deal”.
At the highest level, “China may be torn between big and better”, Dixon said. “But in this case, small is definitely better.”