Great call of China

One of the most notable developments in global football in the last 12 months has been a marked increase in the level of interest of Chinese stakeholders in the game.

This has been driven in large part by the Chinese Government’s explicit commitment to football. Xi Jinping, the Chinese President, is an ardent football fan and the launch of a 50 point plan for the development of Chinese football has accelerated domestic interest in the game, with one of the stated long term aims being hosting a FIFA World Cup.

This commitment to football has also triggered investment of c.£200m in playing talent by Chinese Super League Clubs in the 2016 winter transfer window, highlighting the scale of intent of CSL owners to develop the domestic league.

Club football elsewhere is also feeling the effects of increased Chinese interest. While the ownership of Premier League clubs by overseas investors is not new, indeed not since 2003/04 has the title been won by a club with domestic ownership, investors from the world’s most populous nation have been conspicuous by their absence. This has changed with China Media Capital’s acquisition of a minority stake in City Football Group in 2015. Recently relegated Aston Villa announced their sale to China’s Recon Group in May 2016. These follow several others recent investments in European football.

The ownership of a successful European club has long been seen by many as a global trophy asset, providing owners with an enhanced business profile and access to important relationships. This, considered with the additional political goodwill towards football within China, will no doubt further increase the attractiveness of Europe’s clubs to Chinese investors.

Where these attentions will be focussed will undoubtedly be influenced by the continued financial health of the Premier League. With the announcement of a second consecutive year of pre-tax profitability in 2014/15 and a further 50% increase in the value of Premier League broadcast rights for the 2016/17 to 2018/19 cycle, the English top flight is clearly appealing. Equally, Championship clubs aspiring to promotion may also be an attractive investment prospect.

An investment in a club can be aligned with the growth of the sport as a whole in China via the sharing of knowledge, expertise and best practice.

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The Premier League also has an appeal within China that would allow investors to leverage their overseas investment domestically. An investment in a club can be aligned with the growth of the sport as a whole in China via the sharing of knowledge, expertise and best practice as well as obvious commercial opportunities.

However, any investment must be treated with due caution and rigour, as there are numerous examples of unexpected and unwanted risks in the aftermath of a change of ownership. Robust diligence and planning should be a critical part of any acquisition.

Deloitte regularly advises clients in respect of their interest in investing in European club football.

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