There are three leading experts on football finance. Dan Jones is the head of the Sports Business Group at Deloitte. He and his colleagues provide authoritative analyses of football finances, including an annual report on trends and the Deloitte Money League that ranks clubs by financial success with Real Madrid often coming out on top. The expertise and analytical ability of Jones and his colleagues is beyond doubt but, given their client base, they are necessarily looking at football from a corporate finance perspective. That said, someone needs to defend the Premier League.
Many think that the highest standards in impartial analysis of football finance are set by the Swiss Rambler who tweets as @SwissRamble from Zurich. Kieron O’Connor has spent a lifetime in finance and is also multilingual. Hence, he is able to produce in depth analyses of football clubs from across Europe. I find the amount of detail he provides and the perceptiveness of his comments just stunning.
Last but not least, there is Kieran Maguire who teaches the Football Industries MBA at the University of Liverpool Management School. He regularly appears on television and radio discussing football finance. He also tweets many times a day as the PriceofFootball and has a podcast. He also writes occasional longer blog essays. He has now brought out a book on The Price of £ootball with Agenda Publishing and it is this book that is the subject of this post.
In the introduction he says that the book is not intended to turn readers into accountants, but it does help you to understand basic accounting terminology and how to analyse a club’s accounts. I have to admit that I have always had problems getting my head round terms like amortisation or EBITDA (earnings before interest, taxes, depreciation and amortisation) which is actually a key measure of a club’s financial health, but not straightforward to calculate. Kieran provides a helpful glossary of accounting terms.
Quite a lot of the book is relatively technical and I suspect that a key audience is what he refers to in the introduction as ‘those of you who may be studying a football finance module as part of your education.’ There is, however, a very interesting case study of Manchester United which makes some comparisons with the other Big Six clubs.
One of the most interesting parts of the book from a fan’s perspective is a classification of different types of owner. The first category is the local fan made good who has made enough money to buy and develop the club he has supported all his life.
The classic case is Tony Bloom at Brighton. By the time Brighton and Hove Albion was promoted to the Premier League he had provided £280m in the form of shares and loans. Maguire points out that ‘The advantage of having a genuine fan as owner is that if they do loan money to the club it is likely to be interest free … The downside of such a relationship is that the owner-fan may have a limited amount of money to invest.’ As the old joke goes, if you want to make a small fortune, start with a large one and invest in a football club.
Maguire says that being a millionaire is beyond the wealth of most regular fans. In fact, millionaires are now two a penny. In asset terms, many people in the south-east are millionaires just by virtue of the value of their properties. However, this asset cannot be easily cashed in. Millionaires tend to be asset rich but cash poor. In any case having a few millions is not sufficient, even for an ambitious non-league club. You really need to be a multi-millionaire on a big scale to take on an EFL club, ideally a billionaire.
Maguire points out that ‘When the owner’s money runs out they may sell the club to simply get rid of it and not pay much attention to who takes over.’ The classic example is Bolton Wanderers, once riding high in the Premier League but now almost certain to be relegated to League Two. As his health failed and his funds ran out, Eddie Davies sold the club for £1 to former player Dean Holdsworth and Ken Anderson, the latter having been banned from being a company director for eight years, not that this proved a barrier to passing the EFL’s owners’ and directors’ test.
The category of the ‘butterflies’ is based around one case, David Sullivan and David Gold who owned Birmingham City and then bought West Ham United. Moving to the London Stadium produced only a six per cent increase in matchday income and left West Ham still well behind the leading London clubs. Maguire comments, ‘Without substantial extra money coming from the move to the new stadium, the attitude of many fans is that they sacrificed their beloved Boleyn Ground for a larger but soulless home which was never designed for football in the first place.’
Much more common is the trophy asset. Such an owner may be in a position to pour money into a club, but ‘The biggest downside is that if things don’t go according to plan, they may lose interest and stop backing the club.’ In my experience this happens more often when owners who are not mega rich have hopelessly ambitious plans for non-league clubs, Billericay Town being a case in point.
Perhaps more importantly, ‘The downside with a club being a rich person’s plaything is that the owner is not answerable to anyone apart from themselves as they have total control of the club.’ Another downside is that an owner may want to have a say in the playing side of the club. Since acquiring Chelsea Roman Abramovich has invested over £1.1 billion in the club. However, he has intervened over decisions about players and, more significantly, has proved impatient with managers. He has been through 13 managerial appointments since he bought the club. Plans for developing Stamford Bridge have been shelved after Abramovich encountered issues with his UK visa.
Many supporters would like to see fan owned clubs. Some Spanish clubs are owned in this way, but Maguire comments, ‘The downside of this is that [club] presidents spend a lot of time campaigning for re-election and making populist promises that are not always in the club’s long-term interests.’ In England the history of fan owned clubs is mixed. Even with a prosperous fan base, raising sufficient capital can be challenging as AFC Wimbledon have found recently with their planned move back to a new stadium near to their historic home in Plough Lane. They were successful, but others, such as FC United, have encountered greater challenges. Fans can’t afford to underwrite losses and this may lead to a cautious financial strategy.
Although those with relevant skills in law and accountancy can usually be found in the fan base, they can still be out manoeuvred by sophisticated financial operators. At Swansea the Supporters’ Trust played a key role in rescuing the club from near oblivion and took a 21 per cent stake. ‘When a majority stake was bought in the Trust by two American investors, the Trust claimed that it had been bypassed and other investors made millions of pounds in the process.
I am writing my own book for Agenda on the economics and politics of football. Meanwhile, Kieran Maguire has set a high standard of analysis to try and emulate.
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