7 Signposts to Success!
There are many football dreams on the market right now. For a few billion pounds you can buy yourself a place in sports history.
It may be late in the day, but if you have more than $6 billion you could yet bid for Manchester United in the Premier League.
Undervalued assets?
Most Premier League clubs are seen as undervalued assets with Manchester United at the top of the net worth league followed by Liverpool valued at $4.71 billion and league champions Manchester City at $4.43 billion, according to Sportico (see image below)
“There is an awful lot of money around and actually buying a Premier League club, given the noise a football club can make, works out ridiculously cheap,” says Kieran Maguire, an expert in football business at Liverpool University.
If you don’t have that much money, you could consider Bournemouth at $145 million, at the bottom of the net worth table, or Nottingham Forest at $160 million or Brentford at $200 million.
Takeover as financial salvation?
At the struggling end of the game, a takeover and new owner funding can be seen by the fans as a way out of cash-strapped mediocrity. A quick fix, but there are risks.
“I think the concern is among most of the Premier League clubs and I think all of the Championship clubs is that that they are losing money and the only way to recover those losses is either through asset sales – often players – which also has implications towards achievement and relegation and so on; and owner funding. The owner funding is fine until it is not fine and the owner has a change in personal circumstances as we saw in the case of Chelsea and Everton. Or, they lose interest as we saw in the case of Derby County where the owner put in £200 million, decided he wasn’t getting value for money, and walked away putting the club into administration,“ says Maguire
Yet, you have to follow a rigorous process, to even make it to negotiations, and it is not all about money. Here are seven signposts to success in the football takeover game.
1. Consult before you leap
You would be wise to take on the services of a takeover specialist in the shape of a private consultant like Oakwell to ask for a research paper outlining the best opportunity for takeovers, so says its owner and takeover veteran Andrew Umbers. “That would include broadcasting over the next two cycles, sponsorship, playing squad values, the competence of the squad, finances from Companies House, and then you would make an informal approach to the owner having decided to buy the club,” he told the Daily Mail.
2. Pass the test
You have to pass the owners’ and directors’ tests to show your fitness before you are allowed to bid. This is set by the governing body, the Football Association. To comply with these rules, you have to prove are not:
prohibited by law from being a director;
have power or influence over another football club;
have a significant interest in another football club;
have unspent criminal convictions involving dishonesty, corruption, perverting the course of justice, or a serious breach of the Companies Act;
have been convicted under FA Rules of betting or bribery offences;
bankrupt or are filing for bankruptcy;
banned by a sports governing body or a professional body;
you are required to notify personal information under Pt 2 of the Sexual Offences Act 2003;
been an officer of two or more clubs that have entered into an insolvency event, or, have been an officer of one club that has had two separate insolvency events, within the last five years;
been an officer of a club that has been expelled from the Premier League, Football League, Conference, Isthmian, Northern Premier or Southern Football Leagues within the last five years.
3. Check the revenue
Look at the books, from sponsorship to television money to operational costs. “If you look at that, the cashflow before player trading, which can be negative or positive, you can actually drive at the underlying profitability of what a club is. In the Premier League, because of the very high broadcasting rights in that league compared to the EFL, it’s easy to apply what you think is a realistic multiple – eight to 12 times – for buying a football club,” advises Umbers.
4. Gather your money
New rules make this slightly more complicated these days. It is not so easy to buy a club with a leveraged deal. New rules say only two-thirds of the price of a Premier League club can be raised with debts. “That commitment only lasts for 12 months, so, therefore, you could still be debt-financed after being acquired,” says Maguire. It is better to enlist solid, credible, investors.
5. Be prepared for inflation
The value of Premier League clubs goes up every year. It is probably best to buy in, rather than wait. In 2003 when Roman Abramovich bought Chelsea for around £120 million. When he sold it – arguably, in a fire sale after being sanctioned – the club fetched £4.25 billion.
6. Patience
You have to be incredibly patient to secure a football club. Aside from the compliance lawyers and money questions you have to be prepared to ride the twists and turns that appear to punctuate takeover deals these days. “ Takeovers take time. A standard takeover would normally take nine months. It is a bit like having a baby really,” says Ben Jacobs, a football journalist at the heart of the Manchester United takeover story.
7. Win over the fans
A very important part of your deal, often overlooked by many big-money buyers who don’t understand the game and supporters’ passions. At Manchester United, the Glazers found out the hard way that fan anger can be very damaging and can tarnish the image of the asset. You would be wise to bring in key figures – former players, influential people, or stalwarts at the club – to earn confidence among the fans and build bridges for the future… At the end of the day, the fans have customer loyalty that most businesses would die for.
Want more insights on finance, current events, business, news and more? Sign up for the Matt Haycox newsletter for fresh updates every week.
