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AC Milan: The slow, painful collapse of a legendary club

10:00 GMT+3 01/07/2018
Leonardo Bonucci, AC Milan
The Rossoneri's slide from the top of the sport has hit a new low following their European ban - just another punch for a club in financial chaos

AC Milan, the club which for so many years was able to boast of its ‘Champions League DNA’, have been banned from taking up their place in the Europa League next season. One of the world’s most famous footballing names has been on the slide for some time, but this is by some distance a new low for the Rossoneri.

Wednesday’s judgement by UEFA will be challenged by Milan in front of the Court of Arbitration for Sport but the general sense is that whatever argument the club will put forth will prove futile.

Their spending spree last summer following the takeover which saw Silvio Berlusconi sell up to a Chinese consortium cost them well in excess of €170 million in transfer fees. Leonardo Bonucci was the biggest name arrival in a €42m deal from Juventus, but the likes of Andre Silva, Hakan Calhanoglu, Lucas Biglia, Andrea Conti and Mateo Mussachio also set them back eight-figure sums.

While those outgoings are in all cases spread over the course of the players’ contracts and thus do not all come into account for UEFA’s damning 2017-18 review, the salaries and deferred purchase costs of their existing squad members have helped to tip their figures well beyond what the European body allows.

It is all a far cry from the glory days of times gone by in which they racked up seven European Cup titles and 11 final appearances in total. But it is not a demise which hadn’t been coming for some time.

Milan have been run badly for years. Berlusconi and his trusted CEO Adriano Galliani failed to adapt to a post-Calciopoli world in which Italian football lost its veneer of greatness, and then utterly lost the plot as the Rossoneri began to be cut adrift in Europe too.

Just a year on from the 2009 agreement by UEFA to introduce Financial Fair Play restrictions, Berlusconi’s daughter Marina – the president of the family’s Fininvest company – had told her father there were simply no more handouts available to spend on Milan. Silvio’s response was to splash out on Zlatan Ibrahimovic and Robinho anyway, with Galliani lauding him publicly for such ‘gifts’.

Within two years, Milan were forced to sell Ibrahimovic on the cheap along with star defender Thiago Silva to Paris Saint-Germain and also ended up flogging Alexandre Pato to Corinthians for €15m just a year after brazenly rejecting a €35m offer from PSG. There was simply no forethought put into their transfer business anymore.

Galliani had previously been crowned as a transfer king during the days when Berlusconi was running for political office and using Milan as a tool to boost his popularity. But once the handouts had disappeared and Milan were left to fund deals with their revenues alone, they were always likely to become the most high-profile of casualties in the era of FFP.

As the money stopped being pumped in artificially, the product on the pitch deteriorated. When they were eliminated from the Champions League by Atletico Madrid in March 2014 it was clear that they wouldn’t be back any time soon.

In 2015, Galliani attempted to defend annual losses of nearly €100m by claiming they would have been nearly halved had they been in the Champions League and still been reliant on the income of the Fininvest company owned by the Berlusconi family, entirely missing the point of the need to achieve sustainable management.

Recent years have seen a never-ending story of failed coaching appointments and underachievement on the field, but the boardroom dramas have kept ticking over too.

The emergence of Bee Taechaubol as a potential investor in 2015 looked set to deliver some light at the end of the tunnel, but Berlusconi wasn’t keen on somebody simply coming on board. What the president wanted was a complete takeover as if it would suddenly wash away all the ills of the previous decade.

As such he glossed over the proposals of Mr Bee, despite a late appeal by the Thai businessman in an exclusive interview with Goal, and decided to sell up to a group of Chinese financial brokers headed by Li Yonghong instead.

But that move has proven a complete disaster to this point. Simply to complete the takeover, Li - who was an unknown in the business world until that point - had to borrow over €300m at high-interest rates from US hedge fund Elliott Management Corporation.

The new owner immediately followed the Berlusconi model of pumping in millions without thinking for one second whether it meets the new UEFA measures. The artificial income far outweighed the raises in revenue by which the European governors judge a club’s financial durability and, as such, their Europa League suspension comes as no surprise.

Milan are a club whose total revenue in 2016-17 was €191.7m according to Deloitte’s annual ‘Football Money League’ report. It was the first time ever that they hadn’t appeared in the top 20 of the list, placing 22nd in the chart for gross income. And this from a club who had been in the top 10 every year up to 2012-13.

The less lucrative broadcast rights in Serie A compared to the English Premier League and others is restrictive, and something which also comes into UEFA’s thinking. The fact that clubs in Italy are tied in to the current TV contract for three more years doesn’t help either, as Deloitte explained in its January report.

“Serie A’s existing broadcast deal is in place up to and including 2020-21 and so revenue growth will depend on improved commercial and matchday performance on a club-by-club basis. Unfortunately, the picture continues to look bleak for Italian clubs in the Money League.”

Milan’s gate receipts were around just €52.45m in 2016-17 according to Forbes, and while their average attendance went up markedly following the Chinese takeover the result of that on the balance sheet has yet to be unveiled. The figure is unlikely to have been nearly enough to dissuade UEFA’s financial control board from acting with an iron fist.

So what next for Milan?

The worrying thing for fans is that the club may not even have hit rock-bottom yet. The current owners have been struggling for several months now simply to keep up with loan repayments.

With interest rates originally at 11 per cent, Li Yonghong must pay €380m by October or else the club will be repossessed by Elliott. To compel matters, some sources say that interest rates may have soared to as high as 25%.

So, the question fans are asking - and indeed another key reason why Milan were banned from Europe - is if Li Yonghong is struggling to simply repay this loan, how on Earth is he going to be able to fund the club going forward, let alone build a great AC Milan side again?

There are multiple parties showing interest in buying the club and ending the Li nightmare, including American parties headed by Mediacom chief Rocco Commisso and the Chicago Cubs-owning Ricketts family.

It seems clear that Li Yonghong must sell the club simply for it to survive, but what must be impressed upon any potential new owners is the need to learn from the failings of recent years. No more throwing unearned money around. No more promising the earth when the club - and the owner - cannot afford or sustain it.

There will be no quick fixes, no matter how long Milanisti have already been made to wait for their club to get back onto an even keel. The lack of European football in the meantime is just another punch in the stomach they will have to grin and bear for now.

The great AC Milan as we know it is dead and it will be a long road to its rebirth.