Stories Behind A.C. Pavia's Bankruptcy, The First Chinese-Acquired Italian Football Club

A.C. Pavia from Serie C Italy, bought by a Chinese investor in 2014, recently went bankrupt, which showcases how the sports industry could go wrong for the Chinese capital market.

(Chinese Version)

In July 2014, Pingyi Shanghai Investment headed by Zhu Xiaodong bought all of the shares in A.C.Pavia, an Italian football club with over a history of over a century. It’s the first club in Italian football history that’s acquired by a Chinese company. Zhu Xiaodong, who controlled the company, became the first Chinese boss of an Italian club.

Two years ago, the craze for the sports industry was still making its way to the surface and Chinese capital seldom set its foot in overseas sports clubs. That’s why A.C.Pavia, a club active in Serie C Italy, didn’t raise much attention when it was bought by a Chinese company.

However, the unexpected turn came when the local Italian court announced A.C.Pavia’s bankruptcy, as the media subsequently reported scandals ranging from delayed salaries of the players, the management incompetency etc. Unfortunate as it is, A.C.Pavia now has become a heatedly-discussed topic.

This Summer, international leading clubs such as AC Milan, F.C Internazionale Milano, Premier League, Football League Championship, Championnat de France de football Ligue 1 and Primera división de Liga etc. have been bought by Chinese investors. In contrast to this hot investment scene, the downfall of A.C.Pavia sticks out on the media like a sore thumb.

Zhu Xiaodong had promised to bring the club with a history of over 100 years back to the Serie A, Italy's top league, within five years and build a new stadium for the club through big investment. But his promise made in two years ago is obviously in vain as the club goes down. Perhaps A.C.Pavia’s failure can provide Chinese investors and the clubs they invested in and bought some insights on potential developmental paths in the future.

The unfortunate A.C.Pavia

Pavia is a small town 35km from Milan in the south, where A.C.Paivia was founded in 1911. In 1950s, A.C.Pavia was able to make it into the Serie A for a period but then it slumped to Serie B and C and was never able to make it back to the top league. A.C.Pavia didn’t really stand out on the Apennine Peninsula as the professional football industry was just too prosperous.

Embracing Chinese investors

During the 2013-2014 league season, A.C.Pavia was at the bottom of Serie C league match with disappointing performance. Luckily, the club made its uprising in subsequent league matches through expanding its football team after the Serie C. In July, Chinese investors came to Pavia and changed A.C.Pavia’s fate entirely.

Pingyi Shanghai Investment announced to acquire A.C.Pavia and eventually bought all of the club’s share. Businessman Zhu Xiaodong and his Sunrise Asset were the steersmen of the acquisition. It’s reported that Zhu Xiaodong only paid one euro in his name for A.C.Pavia, but he actually paid the club’s one-million-euro debt.

The honey year

The first season after Chinese investor’s takeover, A.C.Pavia was actually doing quite well. In the beginning, Zhu Xiaodong came up with a beautiful future vision for A.C.Pavia and the club’s fans, promising to bring the club with a history of over 100 years back to the Serie A, Italy's top league, within five years, and build a new stadium for the club through big investment, and that groups of Chinese tourists would come visit Pavia and bring up the local economy.

To convince local Pavia people and Italian media of Sunrise Asset’s ability, Zhu Xiaodong even got famous Italian actress Maria Cucinotta for the club’s publicity. In the 2014-14 season, A.C.Pavia was like a roaring tiger that finally woke up from its sleep. The club then made it into the play-off for the Serie B as the no.3 team. However, the sudden change of team leader killed Pavia’s chance.

Maria Cucinotta, the Italian actress who supported A.C.Pavia’s publicity event, also played a role in the Chinese film Magic Card, in which Cucinotta and Ren Dahua acted a scene at A.C.Pavia’s HQ.

Losing the chance of entering Serie B didn’t make Zhu Xiaodong lose heart. He stated that more efforts would be put on the football team for the next season. Still, this failure laid the seed of conflicts and doom.

The nightmare strikes

The second season for the Sunrise-Asset-owned A.C.Pavia was a hellish ride, as the football team couldn’t keep up with their previous performance and lost the match as no.9.

During that time, the management team of the club was having great disagreements against each other. The stadium and Chinese tourists Zhu Xiaodong had promised before never came. After the season ended, there were even rumors saying that the club was delaying to pay players’ salary and that the club was in financial trouble.

Before the 2016 new season started, Zhu Xiaodong and his company suddenly announced the transfer of A.C.Pavia’s ownership to an Romanian contractor, who was later found incapable of paying for the club’s debt. In the end, the club entered bankruptcy liquidation.

After the ownership transfer took place, many fans were attacking the management team of the club on social media.

After the ownership transfer took place, many fans were attacking the management team of the club on social media.

For the players and fans, the most terrible thing that could ever happen was financial issue. When A.C.Pavia lost the chance to enter Serie B, the players who refused to give up on their dream even registered a team called Pavia 1911 themselves for the Italy amateur league. However, their dreams might probably die with the downfall of the club.

So what went wrong for the Chinese investors?

It’s undeniable that the greater economic condition makes it very hard for Italian professional football industry to develop. Even leading teams like Serie A Palermo would have to face the danger of going bankrupt. However, in A.C.Pavia’s case, the Chinese capital within the club sparks concern for all those Chinese investors that have been buying football clubs in recent months.

Was A.C.Pavia the right club to invest in?

To talk about this bankruptcy case, we have to first look at A.C.Pavia. In the past I have analyzed many takeovers made by the Chinese investors. Many cases have shown that the geographical location of club is an essential element that decides whether the Chinese investors would buy it. Just looking from Pavia’s population, which is around 70,000, it’s apparent that the club wasn’t an ideal club to invest in.

England-based clubs that Chinese investors bought are all located around Birmingham, the second largest city in England

England-based clubs that Chinese investors bought are all located around Birmingham, the second largest city in England

Whether it’s the city scale, global reputation, tourism resource, or the 40km distance from Milan, all of these make Pavia far from an ideal destination for investment. It’s in fact quite a big dream to attract visitors and boost local economy through Serie C matches, which remains just a dream so far.

On the other hand, although Zhu Xiaodong only paid one euro for A.C.Pavia, he still needed to pay the one-million euro debt that came along with the club. As an investor, it’s impossible to make a sudden debut with a Serie C team in a short time.

Promises, easier said than done…

When first bought A.C.Pavia, Zhu Xiaodong promised the club a new stadium, and an amount of 100,000 Chinese visitors every year. He even promised to bring the club back to Serie A for a placing in UEFA Champions League. According to Zhu, Pavia has 50 million potential fans in China. These were the figures that Zhu promised to Pavia, which didn’t come true.

Whether it’s inside or outside the stadium, the football industry has its own rules. Making high promises that can’t be achieved for promotion can’t get you anywhere. Such great promises and visions would only anger fans when they realize they can’t be achieved. Rivals would also observe and find ways to make their assault through all those visions.

The management chaos

“A fortress can be easily breached from the inside,” this is the perfect phrase to describe A.C.Pavia’s failure. In the final round of the Serie 2014-15 season, A.C.Pavia, which was ranked no.3 in the competition, decided to make a sudden change of team leader, replacing main coach Maspero with Vavassori.

When the team was going for the Serie B, replacing the coach that had led the team into the top three would no doubt disrupt the players’ status.

What’s more, Vavassori hadn’t been in the field for five years before taking the coach’s place. A.C.Pavia’s failure was in part due to the management’s dooming decision.

This June, Zhu Xiaodong, who was pretty much the center of the attention in this case, posted a video explanation on the club’s status via A.C.Pavia’s Facebook page. Zhu also revealed in the video that there had been great problems in the club’s management.

Since China and Italy are world apart, Zhu Xiaodong and his management team could only visit A.C.Pavia’s HQ once every two or three months. Most affairs of the club were dealt with by the Italian staff and reported to Zhu and his team.

The lack of supervision made it incredible easy for the staff at A.C.Pavia to acquire interests by abusing their position, such as signing players that weren’t that good at an unreasonable price. The staff even cooperated with the agents and players to trick the boss’s money.

As a matter of fact, such phenomenon is not uncommon in the international professional football industry where the global capital is abundant. That’s why usually the new owner of the club would have his or her ears and eyes in key departments such as the finance department and HR department.

Sunrise Asset didn’t know the basics of management in the football industry and recklessly entered the filed. It’s naturally for the company to have worms sucking its blood internally.

"Perhaps we should be more patient."

In the interview video, Zhu Xiaodong even complained that the company had poured in 10 million euro to back the club while the fans only brought in a return of a couple hundred thousand euro. I couldn’t help find it funny and saddening.

Two years after the takeover, Zhu Xiaodong and his Sunrise Asset still failed to realize acquiring an overseas football club was never going to earn them money. The reality is burning money for football clubs will not bring back much of a return to make up the loss so far. So why got involved in the first place when you care about the money you pour in and the return you won’t really get?

Just don’t expect to have immediate return as if you are investing in the football industry.

Zhu Xiaodong had stated before in this speech that they had arranged a five-year long term plan for the club, which seems to be much of a myth now. If they really did have a long term plan, could some temporary failures kill the plan entirely? I guess Zhu and his team are perhaps not patient enough.

Of course, the doubts I have raised above are analysis based on the facts and development of A.C.Pavia. It remains unknown what’s the true intention of Sunrise Asset to take over A.C.Pavia and invest in Italian football.

Think twice before buying overseas sports clubs

The craze for Chinese investors to buy European sports clubs in the past few months has been unprecedented and surprising. It’s exciting, but also worrying. When we are feeling sorry for A.C.Pavia’s loss, we should also note that many Chinese investors have made similar promises like Zhu did two years ago when acquiring overseas clubs. They all described a beautiful picture for the fans and clubs. All those pretty words are powerless to make a great football club.

Let’s look at AC Milan & F.C Internazionale Milano, which have also been acquired by Chinese investors for example. AC Milan and F.C Internazionale Milano now rank the 6th and 9th in Serie A. After the takeover of Chinese investors, rumor has it that Suning fails to provide fund for Internazionale Milano on time, and that the management has been having issues with the coach team. As for AC Milan, the club is still clouded by the takeover of a mysterious company that’s only founded less than a year ago.

In the Football League Championship, RECON’s Aston Villa Football Club just rose away from the relegation zone while FOYOENT’s Wolverhampton Wanderers Football Club is still in the middle. Only Palm Capital’s West Bromwich Albion Football Club is having a stable performance as the top force. Nice, partially funded by Chinese investors now tops that France Serie A at the score 20.

Chinese capital’s overseas layout in football:

China Media Capital holds 13% of City Football Group’s shares

Dalian Wanda Group holds 20% of Club Atlético de Madrid’s shares

China Energy Company Limited holds 60% of SK Slavia Praha’s shares

Ledus TECH PRO TECHNOLOGY DEVELOPMENT LIMITED holds wholly the Football Club Sochaux-Montbéliard

Tang Hui and Li Xiang bought all shares of Fútbol Club Jumilla

Xu Genbao bought all shares of La Hoya Lorca CF

UNITED VANSEN INTERNATIONAL SPORTS is the biggest shareholder of Haaglandse Football Club

RASTAR GROUP owns 50.1% of Reial Club Deportiu, Espanyol de Barcelona’s shares

RECON owns wholly the Aston Villa Football Club

SUNING COMMERCE GROUP owns 70% of Football Club Internazionale Milano’s shares

The Plateno Group invested in Olympique Gymnaste Club de Nice Côte d'Azur

Ledman Optoelectronic Co., Ltd bought all of Newcastle United Jets Football Club’s shares

Desports bought 98.13% of Granada Club de Fútbol’s shares

Fosun Group bought Wolverhampton Wanderers Football Club

Yunyi Investment owns 87.7% of West Bromwich Albion Football Club’s shares

Org Packaging owns 59.95% of Association de la Jeunesse Auxerroise’s shares

IDG Capital Partners owns 20% of OL Groupe’s shares

Anyhow, it’s not necessarily a bad thing for Chinese investors to enter the football industry. At least their moves prove that professional football and sports industry present value and influence in China.

When I had an exclusive interview with Pavia’s president Xia Jiantong a few months ago, I did feel that he was trying to make a change and achieve something as a club president. However, the obstacles occurred in the operation of the club cost them a high price, a price that they should have foreseen when signing the contract to buy the club.

The downfall of A.C.Pavia not only marks the failure of the earliest Chinese-owned foreign football club, but also showcases many typical obstacles that Chinese investors face when entering the sports industry. We mourn for the death of the football dream that had been ongoing for two years. Investors that have been buying sports clubs, however, should be alerted.

We just have been making the same mistakes for too long.


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[The article is published and edited with authorization from the author @Eco_Sports, please note source and hyperlink when reproduce.]

Translated by Garrett Lee (Senior Translator at PAGE TO PAGE), working for TMTpost.

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