The Red & Black Forums - View Single Post - Chinese Consortium
View Single Post
Old 09-08-2016, 20:24   #80
MilanMB
Serendipity
 
MilanMB's Avatar
 
Join Date: Sep 2009
Fav. Players: Maldini Nesta, Gattuso, Romagnoli, Suso
Default

Quote:
Originally Posted by vidarth View Post
SDIC is a fund that invests in other funds. Their portfolio and investment strategy will not be available to the public.

The fund that has bought Milan is a "Fund of funds"...ie a fund brought together by investments from SDIC and other funds.

Usually the more funds there are in the hierarchy, it is a good bet to assume that the investment will be a longer term bet.

An example:

An Angel Investor invests his own money - he will want his exit in 1-2 years.(Usually wants 200x ROI over multiple rounds)

A Venture Capital firm creates a Fund from several High Net Worth Individuals and Companies. They stay invested for 4-10 yrs. (Usually wants 20x ROI but moonshot companies usually return 100x like Facebook)

A Private Equity Fund (Like the one that has bought Milan) raises money from other Institutional Investors (Like SDIC) and the other Investment bodies that now own Milan. This sort of Investment is done with a 10+ year investment period in mind. (These guys usually take mature companies and aim for 2x or 3x ROI)

So the goal will be to bring Milan to a 2 - 2.5 Billion Valuation in 10-15 years (we're correctly at 0.75 B)

Now I've personally preferred this sort of deal to arab billionaire because the one thing that you can be sure is that these guys know how to tap into the China opportunity for $$. This is a Omnichannel Brand with several revenue streams as far as they are concerned.

They will work to correct/fix and improve all the revenue streams and hire the best guys to run the footballing side of things. Any non performers will be immediately fired (because they answer to their parent funds aka LPs like SDIC who will be monitoring the investment).

What I've found interesting is that Sovereign Wealth Funds usually invest in companies which they see as being part of a larger strategic goal for the State. This could be something like making China win the Fifa world cup by 2030.

The Chinese have the best infrastructure in place for athletes. Thats why they win so many medals at the Olympics.

What I'm trying to get at is that while profits are important, the true value of this Investment may be realized on how much of a role AC Milan plays in making football popular in China.

They will make their exit when they feel that Milan has played its part.

This is a lot of speculation, but this is how larger funds like these actually make strategic investments.

The rumor that Xi Jinping was in on the deal is not so far fetched after all.

One thing for sure...once this goes through in November....Inter will be our bitches like they always have been.
Quote:
Originally Posted by vidarth View Post
Im not sure any PE fund can return anything in 5 yrs...simply because their investments are that big.

So what you'll see is PE funds usually go for longer investment periods with more moderate returns in mind. 2x 3x

Now the question is when to exit - this is where the funds LP mix and the longer term vision for setting up the fund comes into play.

If people want to make quick money in 5 yrs AC Milan is a terrible investment. Even if we win the CL in 5 yrs our value will not go up by much. Even if we get to 1 Billion that is less than a 33% increase.

There are much better ways to get those sorts of returns.

While we can't speculate about exactly these guys plan to do...i think it is safe to bet that this is not a 5 yr investment.

No one can get decent returns on a nearly 1 Billion investment in 5 yrs. Making a quick 300 million profit doesn't seem like anything to a state owned fund.

I've raised Venture Capital from Indian Investors and A lot of Chinese and Japanese funds give our investors exits at a later stage.

I would be very very surprised if they sold Milan in 5 years for a small profit.
Thanks for informative posts.

I know very little about stuff like this. Your posts calm my nerves about the new owners, as I'm very worried about their purpose with buying the club.

-

You know Milan was used (very successfully) by Berlusconi to promote his brand. I'm thinking the Chinese want to do the same with their brands. That won't happen with an half-assed short term investment.


Signature
GOAT
MilanMB is offline   Reply With Quote