It was a nice bit of business. Three years ago, the top Portuguese soccer club FC Porto paid FC Santos in Brazil €13 million ($13.8 million) to sign the defender Danilo. A couple of weeks ago, Porto agreed to sell the 23-year-old to Spanish giant Real Madrid for €31.5 million, a markup of 140 percent.
Signing promising players at a relatively low cost and then selling them on at huge profits has become a specialty at Porto, which hasn’t seemed to suffer on the field as a result: The team beat German champions Bayern Munich in the European League this week. Since 2004, publicly listed Porto has generated more than €700 million from transfer fees, paying out just half that amount for new players.
But those funds rarely find their way into the club’s coffers untouched, as third-party investors are heavily involved in most of the trades. Among Porto’s business partners is the Malta-based private equity fund Doyen Sports Investments.
Seeking investors to cover the costs of transfers remains an exception in Germany’s soccer league, called the Bundesliga, where it is more likely that wealthy fans stump up the cash to buy new players. But in Portugal, Spain and eastern Europe, so-called third-party ownership, or TPO, is a core source of funding.
Now, the world soccer association, FIFA, wants to halt the practice.