(Yicai Global) July 31 -- Chinese investors' craze to buy European football clubs has cooled down amid Beijing's tightened regulation on overseas sports investment and setbacks in previous acquisitions due to cultural differences in management styles. 

"Projects of European football clubs have been suspended for a while, and it is not easy to find a Chinese buyer now," Jason, an agent who frequently traveled between China and the UK to negotiate sales of powerful European football clubs two years ago, told Yicai Global. 

Chinese soccer investments have gone south in the past month as Chinese businessman Li Yonghong defaulted on a EUR32 million (USD 37.5 million) loan repayment to US hedge fund Elliott Management. The fund repossessed the Luxembourg registered holding company Li used to broker the deal. Another Chinese businessman, Tony Xia, sold part of his stake in English Aston Villa club to Egyptian consortium NSWE on July 20 to bridge a deficit of GBP40 million (USD52.5 million). 

Beijing clamped down on 'irrational investment' in overseas sports clubs with a policy shift last August to scrutinize each deal and restrict borrowing for these projects.

Chinese Soccer Lovers' Golden Era of Two Years

"We have stopped investigating European football clubs a year ago," an executive director of a Chinese group who has consulted with Jason several times told Yicai Global, admitting that Chinese investors have had management problems.

"Most of these investors I worked with are football lovers indeed, who are eager to learn European experience through acquisition and management, and then influence China's football," the executive director said, adding that things went wrong for many because of their lack of management experience, or their inadequate competence in financial management.

"Chinese capitals' passion about acquiring football clubs only lasted for two years," Jason said. "The acquisition itself is not something hard, while the post-acquisition work is the tough thing," Jason added, giving examples of disparity in corporate cultures such as misunderstanding about the duties of the board, how the investors' right of speech works, as well as how to select and oversee executives.

Management Mismatch

The proposed management models in newly acquired clubs often prove unfit. Business-owners for foreign private firms generally apply two management models, Gao Jisheng, the largest shareholder of Southampton Football Club in the English Premier League, said during an industrial summit in recent days. "The first is the absolute control after the acquisition, where they changed the former owner and became the top leader, while another model embodies inaction, where they did nothing."

Soccer clubs also have strong cultures of their own that may be hard to break into. "Football clubs all hold their own core business secrets, and you will not necessarily access all of them even if you are a controlling shareholder," a Chinese investor told Yicai Global, adding that European clubs all have a strong intention to protect their brands so they will never adopt the new buyer's control automatically.

It takes time to know each other's culture, and the boss is supposed to respect the innovation skills of players, fans, and executives, Southampton's Gao concluded.

Editor: Emmi Laine