Real Madrid have appointed former Chelsea and Milan coach Carlo Ancelotti as their new manager, ending months of speculation.

The Italian has left his managerial role at PSG and has been replaced in Paris by former France boss Laurent Blanc.

The two-time Champions League-winning coach has signed a three year deal at the Bernabeu and replaces Jose Mourinho.

The transfer is set to have some repercussions on the transfer market. With Ancelotti in place, Arsenal are expected to complete the signing of Argentine striker Gonzalo Higuain in the next few days, and Manchester City target Isco is said to be close to a move from Malaga to the Spanish capital.

Laurent Blanc, meanwhile, has been out of a job since leaving the France job after the wreck that was Euro 2012, but previously enjoyed success at Bordeaux where he won a league title in 2009.