One of the common themes from AC Milan’s mercato so far is that they have shifted to giving new signings a four-year deal as opposed to the five-year contracts they used to hand out to younger players.
Milan have today closed the deal for Youssouf Fofana who will be the fourth signing of the Rossoneri mercato after Alvaro Morata, Strahinja Pavlovic and Emerson Royal. The four signings have one thing in common, the length of their contracts.
As the lawyer Felice Raimondo points out, the Milan management have made a very precise and reasoned choice to give their new additions a four-year contract with the club holding an option for a fifth year.
By doing this, the transfer fee paid is amortised quicker than with a fixed five-year contract and thus there is the possibility of generating more significant capital gains in a short time.
With the ‘4+1’ formula, after two years the club have already amortised 50% of the transfer fee, and after three years it is 75% but two years from contract expiry (with the option that can be exercised).
There is even the possibility of offering three-year deals with a two-year option to players who could accept this solution for their first contract with Milan. In that case, after two years 66% of the transfer fee would be amortised.
As a working example to illustrate, Milan paid €20m for Pavlovic. With a five-year deal, after three years there would have been €8m residual value, whereas with a four-year deal it would be €5m. If he were sold on (as long as not for a very low fee), it would be an extra €3m capital gains.
Top notch accounting. Small changes like this can further improve finances.
Wait…… I thought this club was run by a bunch of i*iots who don’t have a clue what they are doing….. something doesn’t compute.
🙄
Meh, in reality it is only effective if we sell the player before the option is activated. In case it is activated, the value should be revised and we will be on -. Anyway, hopefully we don’t end up relying on creative accounting for our transfer markets.
But it gives us the option to do so, no? It’s maximum flexibility. And if we do exercise the 5th year option, it does not change the amortization achieved so far, it just lowers the rate for the now two remaining contract years.
Not sure on the specifics in football and how the sporting bodies govern this. You are most probably right and his amortization will change only over the remaining period, but that also means we are registering bigger expense (lower profit) every year up to that point.
Anyway, highly speculative and not really important bit of news. My best guess is they believe there’s some advantage for the club to re-negotiate earlier and maybe let loose more easily from future Origis.
Correct we end up taking higher expense upfront so it doesn’t make a difference over the term of the contract – the expense total is still the same but just the timing gets shifted around
I never said that lol but I know who you are referring *cough* maldinis heir *cough*
Pretty sure nobody doubted their banking and accounting skills. Furlani is a banker. It wouldn’t really make sense for him to have come this far if he were bad at it. “🙄”
Exactly, don’t know why some need to start the stir with such comments when non has said anything regarding this. Then they play victims, feeling attacked when we respond in same matter.
However, I do think the sports side of the club could use a skilled sporting director.
every projection is a admission
😂 exactly my thoughts. I think i can be pretty wasteful in football management app as well and then hit the reset button when game is over
Basically it’s a sign that the club is healthy, instead of trying to spread the payments over a longer period just for a short term gain. Having the option is healthy position to be in too.
Morata’s deal is longer than ideal, but that’s presumably related to him dropping his wage so spreading that cost out a bit more for his total salary.
This site is rather filled with bunch of dead-skulls thinking they know more than the appointed professionals
Coming from corporate world, sadly not so rarely that case is true. Many random figures with questionable skills and knowledge manage to go up the ladder by pure chance, good connections and/or good communication skills.
Also true, most of the colleagues here can’t manage a single person in real life but they believe they would have smashed it if they were in the management.
At least we are all here out of love for the club, nevermind the different ways we show it 🙂
Appointed professional… how many of the people running this club had any proper prior experience in football?
Furlani worked for elliot. Scaroni is some business man. And our lord and saviour moncada is a foking scout. Was never a player or anything.
Appointed professionals
What does designing a contract have to do with playing football? You think Ibrahimovic is going to devise a contract that is essentially a five year contract with the amortization of a four year contract because he was a professional football player? If they’re doing this it’s precisely because Cardinale, Furlani and Scaroni come from the world of finance/business. Don’t conflate identifying, training and coaching talent with running the financial aspects of the business. That’s why each of these dudes have their roles, i.e. Scaroni works to increase commercial opportunities, Fonseca trains the squad, Moncada finds players, etc.
I’m not talking about contracts. Every m*r*n with a law degree can write up a contract. And they’ll do it cheaper than the appointed professionals
I don’t see anyone insulting users of this blog out of the blue like you’re doing. It may bulk your shallow ego but doesn’t make you look smart. It makes you look both mentally and intellectually deficient. Gtfo with that.
4 + 1 option gives club leverage in case of scenario where player becomes more valuable and don’t agree new contract.
Or, in case of like Caladara, Milan will lose 4 year salary and not 5.
I don’t see where anyone doubted their ability in running this club from financial point of view. That’s something I’ve given them a praise many times before and even now. I was always first and foremost for a sustainable way of running this club after Silvio almost flushed it down. When the Chinese took over I knew nothing good will come out of them and I was a vocal protester against them and their way of operating back then.
It’s the sporting side of running this club now that’s not really my cup of tea. And here’s where I don’t share the vision of Gerry and The RedBirds unfortunately.
So stop putting words in our mouth and then turn it into a fact. We all have our reservation and disagreement on certain things but not everything.
I agree with you. I have been someone who has defended the board (although mostly from a place a centricity against blind attacks) but I agree we are lacking a sporting figurehead. However, we finally got our man and this window has shaped up pretty well. Get a couple of outgoings done, tie down Theo and Mike, and I’ll have few compliments.
Now that we have sign Fofana let’s finalise the signing of Samardzic Lazar from udinese
In life, we learn every day. This management has done a lot of new things, for the progress of the brand. They do not have much money, but, they have been astute in spending. This may not be our dream team, but, so much is coming together. As a fan, I am really proud. And with the way they are going, we have a lot to hope for.