Archive for February, 2009

David Beckham & deal making with AC Milan

February 13, 2009

Over the next hour an amazing deal could be struck between the MLS and AC Milan.  If egos get in the way that would qualify as a bad idea.

The David Beckham transfer saga provides a great opportunity to think about deal negotiation, for at first glance there is no reasonable way to conclude a deal.  I would argue, however, that this is an incredible opportunity for both sides.  The MLS has set a deadline of 3 PM New York time for making a deal.

Why Make a Deal?
MLS and the LA Galaxy do not want to let Beckham go, and it is not just about the money they've paid for him, as bringing Beckham to the MLS ostensibly raised the worldwide stature of the whole league.  AC MIlan, on the other hand, are in third place in their race for the scudetto (Italy's Serie A league championship) and urgently need an edge.  Beckham's long passes, crosses and freekicks do not make him the most valuable player on their team by any stretch of the imagination, but Beckham might provide that little edge that makes the difference and helps them win games and perhaps the championship.  They need that edge right now.
I would assess the two parties as follows:
  • Expects the deal should be financially positive for them as measured by the greater of what they paid for Beckham and what revenues he would generate for them in MLS
  • Wants to maintain or increase the marquee value of MLS league players
  • Wants vindication that the Beckham experiment was successful
AC Milan

  • Needs a team roster that will win them games over the remaining season of Serie A
  • Can pay a sizable fee, but needs it to be a financially sound decision and taking into consideration Beckham is not a good long term investment
  • Players egos and morale are in the mix.  The transfer fee cannot be out of line compared to the AC Milan stars which include some of the best and most famous players in the world.  
  • Like any major soccer team, AC Milan has very good players who for some reason are not playing at top form this season.  In the long run they are still major assets, but they are not contributing materially to the current season goals, which are critical.
Deal Noises

We've heard rumors of demands for a very large transfer fee, anywhere from $10 – $100M, as well as a demand for a "star"player in exchange, such as Ronaldinho.  Ronaldinho is not currently playing as many minutes for AC MIlan as David Beckham is, but Ronaldinho is still a much greater star both at the box office and on the pitch than David Beckham; it would be an outrageous request to ask for Ronaldinho in exchange!  It does raise some interesting deal prospects though.
Potential Levers in a Deal Structure

Here are some potential considerations that might prove constructive in structuring a deal for David Beckham's transfer to AC Milan:
  • League calendar variance.  Since the MLS and Serie A have league calendars which overlap less than 100%, there is time where the player in one league is idle while the other league plays.  This is what gave rise to the loan.  In a few months when Serie A ends, MLS will be in full swing.  
  • Timing and length of services.  Time wise the value to AC Milan of David Beckham's services is greatest now through the end of the current Serie A season, which ends midway through the MLS season yet to start.  As Beckham is fairly senior for a soccer player, his value diminishes quickly over the seasons ahead at the level of play required in the world's most demanding soccer leagues like Serie A.  On the other hand David Beckham's play and box office draw in the MLS can likely continue for many years to come.  David Beckham's greatest value now is at AC Milan, his greatest value in years to come is potentially in the MLS.
  • Beckham's future marquee value.  If David Beckham joins AC Milan and they win Serie A, Beckham would be even more valuable to the MLS, as his star power would have increased.
  • David Beckham's resale value for top league soccer the years ahead is relatively low.
  • AC Milan's roster contains players of great quality who are not currently making a critical contribution to AC Milan's season success.  These are players who are not currently very important to Milan, but whose play could raise the level of an MLS team quite significantly.  Generally the MLS cannot afford players of such quality.
  • AC Milan has players of incredible world wide star status such as Kaka, Ronaldinho and others.  These players are much bigger stars than Beckham in the soccer world.  Bringing them to benefit the MLS in some manner could be of great value, even if it was only a loan or more creative arrangement.
  • AC Milan is a team of enormous prestige whose association with MLS or a MLS team could be of enormous value.

Deal Specifics

I think a deal could be quite a win-win for both the MLS and AC Milan if they are both thinking about this creatively and without too much ego.  Here are some potential arrangements I'd expect to see some or all of in a deal:
  1. Beckham is loaned or sold to AC Milan for a fee of $5-$20M
  2. AC Milan forms an official partnership either the LA Galaxy or MLS
  3. AC Milan provides quality players back to the MLS on loan or transfer for the current season
  4. AC Milan considers loaning a marquee player to the LA Galaxy
  5. AC Milan does a Summer tour of the US playing perhaps 10 of the MLS teams in games which their biggest name players will participate in.
  6. MLS has a buy-back right to David Beckham at the end of some period of time
What do you think, is there a good deal to be struck for both sides?  How would it be structured?
The artificial deal deadline is up in less than one hour

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