The Political Economy of Football V2

The commercial property firm run by an American said to be bankrolling a proposed takeover of Everton defaulted on loans and auditors raised concerns about the future of the company. Maciek Kaminski is said to be providing the bulk of the £500m for the takeover of the club by a consortium fronted by Peter Kenyon.   The consortium has a period of exclusive negotiations with the club. The Kaminski family are deliberately private and there is little public information about their wealth.  Maciek or 'Michael' Kaminski has been the subject of an investigation by the Internal Revenue Service in the US and last year failed in a court action to prevent the IRS seizing his bank records.

Derby County's joint administrator has formally accepted local property developer David Clowes's offer to buy the club.   It is hoped to complete the deal by Wednesday.  Clowes Developments Ltd. has already bought Pride Park and issued an interim loan to the club. Clowes emerged as the potential new owner after American businessman Chris Kirchner withdrew his offer to buy the club.

From 2012, Manchester United’s revenue grew year on year, other than a slight dip in 2015, until it hit a record £627.1 million for the year ending June 2019. It then dropped to £509 million in 2020 and again to £494.1 million in their latest set of annual accounts (2021). Despite failing to achieve sustained success on the pitch in the past decade, United were still able to generate huge sums of money because of their illustrious history. But with interest payments on their debt — servicing the Glazer family’s leveraged buyout in 2005 — over the last decade understood to total £282 million and dividend pay-outs since 2016 hitting £122 million, the club’s losses are being accelerated. United will point to the fact that paying the dividends has not dented their ability to invest over £1 billion since 2013 and that the percentage is small when compared to overall revenue. And, although the Glazers receive the overwhelming majority of the cash, the dividends also go to pens...

John Textor, the man fronting the €800mn takeover of French football club Olympique Lyonnais, is betting he can solve football’s money problem. “Unfortunately, football is very much about money,” Textor told journalists this week. With a background in technology, Textor thinks football clubs can generate revenues from new sources aside from ticket and merchandise sales, broadcast deals and sponsorships. But it is his network of clubs — he controls Belgian side  RWD Molenbeek , Brazil’s  Botafogo , and a 40 per cent share of  Crystal Palace   — that could be critical to finding an edge. While he’s visited Palace’s first-team training facilities a handful of times, Textor says he’s been to the youth academy on 50 separate occasions. “That really tells you what my interests are, I love the youth development side of the sport,” he said. “What I like about Eagle Football and our strategy is that we are attempting to create a family of highly collabo...

The authoritative Swiss Ramble reviews the latest accounts of Stoke City.   Thepre-tax loss narrowed from £88m to £10m, despite revenue falling £10m (19%) from £50m to £40m and profit on player sales decreasing £2m to £1m, as they made £33m profit on the sale of stadium and training ground. Operating expenses down £55m (39%). Loss after tax was £8m. Following four consecutive years of (small) profits between 2014 and 2017, Stoke have now posted losses four years in a row, adding up to a hefty £143m in total (£176m excluding the stadium/training ground sale). The £88m loss in 2019/20 was the highest ever in the Championship. Revenue decline Since relegation from the Premier League,   revenue has dropped by £87m (68%) from £127m in 2018 to £40m, very largely due to less TV money in the Championship (£73m decrease), though gate receipts and commercial are also down £8m and £7m respectively.    Even after the decrease, #SCFC £40m revenue was still 6th highest...

Football finance guru Kieran Maguire has praised Plymouth Argyle's long-term strategy but says it will be difficult for them to become a sustainable Championship club:  https://www.plymouthherald.co.uk/sport/football/football-finance-expert-impressed-plymouth-7213288

Simon Jordan claimed on TalkSport, “Klopp’s net spend is £28m-a-year, Pep’s is £100m-a-year.  The Swiss Ramble examines this claim. In thae period since Klopp arrived at Liverpool in October 2015, City have reported £656m net spend, averaging £131m a year, which is over twice as much as Liverpool £318m (£64m average). In fact, Liverpool have also been outspent in this period by Man United £630m, Chelsea £465m, Arsenal £428m and Everton £359m. In terms of gross spend, City have spent just under a billion in the last five years, the same as Chelsea, while Liverpool’s outlay is only around two-thirds as much at £660m. Even on a gross basis, the Reds are below under-performing Man United £850m and Arsenal £676m. So Simon’s estimate of £100m annual net spend was fairly close for Pep (£115m), but significantly understated Klopp at £28m (actually £62m. In terms of wages, Liverpool are much closer to City with their £1.4 bnn in the 5 years up to 2020/21 being just 9% lower than Cit...

Farhad Moshiri has been contacted by several groups interested in acquiring his majority share of Everton. To date, the group led by former Chelsea and Manchester United chief executive  PeterKenyon are in pole position. There has been a head of terms agreement drafted — essentially a non-binding document that sets out the main issues in a proposed takeover or sale.   Nobody close to the talks expects them to be resolved imminently. Some close to Moshiri are urging caution, counselling him that if he were to plough ahead with building the stadium at Bramley-Moore Dock in time for the 2024-25 season, he may then be able to sell the club for around £1 billion — double the £500 million he presently values Everton at. But Moshiri, who seven days ago broke his silence to supporters to apologise for the mistakes of his six-year reign thus far and reiterate his commitment to building Goodison Park’s successor, may yet decide two years is too long to wai...

A number of consortiums have expressed an interest in buying Everton.   They include a group of American businessmen fronted by former Manchester United and Chelsea chief executive Peter Kenyon. The valuation of the club would be difficult given the commitment to build a new stadium at Bramley-Moore Dock that will cost at least £500m. Meetings have taken place with other consortiums, one thought to have links with the Middle East.

The authoritative Swiss Ramble analyses Sheffield Wednesday’s 2020/21 accounts (when they were relegated from the Championship), when their loss slightly increased from £24m to £26m. Revenue fell from £21m to £12m and profit on player sales down from £6m to £1m, offset by £14m reduction in operating expenses Very few clubs manage to make money in the Championship, but the £25m loss was the fourth worst, only surpassed by Bristol City £38m, Reading £36m and Boro £31m. Just four clubs were profitable, led by two that were recently relegated from the Premier League. The Owls have consistently lost money, only reporting a profit once in the last decade, and that was only due to one-offs in 2019 (stadium sale £38m plus £6.5m settlement agreement). The club has lost £87m in the last five years (£125m excluding the stadium sale). Revenue falls Revenue has fallen by £11.1m (49%) in the last two years from the pre-pandemic level of £22.8m to £11.6m. The 2018 peak of £25.2m was inflated ...

The authoritative Swiss Ramble reviews the latest accounts of Crystal Palace where the pre-tax loss narrowed from £58m to £40m, despite revenue falling £8m (6%) from £142m to £134m, due to profit on player sales increasing from £1m to £10m and expenses falling £17m (8%), mainly due to a change in the accounting date (two fewer months). Although the £40m loss is obviously not great, the 2020/21 Premier League was badly impacted by the pandemic. Only four clubs were profitable, while many reported huge losses with three of them above £100m. Since promotion to the Premier League in 2013, Palave have made money in half of their eight seasons, though they have made an overall £93m loss in that period, including a £128m deficit in the last four years alone.  This is in line with the Premier League average. Revenue falls Main driver of revenue fall was COVID, which led to reductions in gate receipts, down £8m (97%) to just £247k, and commercial, down £4m (20%) from £21m to £17m. P...

You can make money from owning a football club even when the prospects look poor.  AC Milan had a host of problems on and off the pitch when hedge fund Elliott Managemen acquired them almost by chance.  It wasn't their usual investment territory. Even after injecting €750m into the club, they will turn a profit of €450m with the sale to US investment group RedBird, excluding interest payments coming from the new owners.   That amounts to a return of about 15 per cent a year, nice money if you can get it. The deal is an unconventional one in that Elliot lent €600m to RedBird at 7 per cent, a sum expected to fall to €200m later this year as money is raised from existing investors and partners.   Elliott also secured warrants that could be converted into an equity stake of between 1 and 2 per cent if the club is sold again or goes public. RedBird's Gerry Cardinale hopes to draw on his experience of working with top tier sports clubs in the US such as the New Y...

As deals linked to Alisher Umsanov are worth an estimated £20 million a year, a sizeable hole was left in the finances of Everton who had already posted three consecutive losses of more than £100 million.  There were question marks around Everton’s finances before those partnerships were suspended. Without them, this applies even more.  For the financial year 2019-20, at least £42 million of Everton’s £64 million sponsorship receipts came from USM Holdings (the company in which Usmanov holds a 49 per cent stake) alone. Then there is the anticipated loss of USM as a potential sponsor for the club’s new stadium. Included in the same set of accounts was a £30 million sum from USM which granted it first option on naming rights at the new facility at Bramley-Moore Dock. The direction of travel at the moment is that such an option is highly unlikely to be exercised.  Everton knew existing revenue streams would need to be improved, and partnership portfoli...

Cautioning that there are many problems in measuring debt, the authoritative Swiss Ramble looks at the top clubs in the Deloitte Money League (other than Zenit St. Petersburg). While it is important to be able to ultimately pay off debt, the ability to service the debt via interest expenses is absolutely crucial. The highest interest payments (in cash terms) in 2020/21 were FC Barcelona £29m, Atleti £23m, Manchester United £21m, Spurs £18m and Inter £15m. Three English clubs have the largest gross debt: Chelsea £1.5 bln (Abramovich funding, soon to disappear), Spurs   £854m (new stadium) and Man United £530m (Glazers’ leveraged buy-out). Then come the Spanish giants: Real Madrid £515m and FC Barcelona £472m. Bayern Munich have zero financial debt. As you work your way down the leagues, it is often the case that the majority of a club’s debt is provided by the owner. A good example is the EFL Championship, where over 80% of the financial debt has come from generous owners. L...

The authoritative Swiss Ramble reviews Birmingham City’s 2020/21 accounts, when their loss narrowed from £18m to £5m, thanks to Jude Bellingham’s transfer, which led to £27m profit on player sales. Revenue fell 40% to £14m, due to COVID. Gross debt was down £5m to £123m. The Blues have consistently lost money, only reporting a profit once in the last nine years – and that was just £1m in 2015. Since then, the club has accumulated £90m of losses – or £107m if the profit from the stadium sale in 2019 is excluded. Excluding player sales, underlying profitability is poor, as shown by their £30m operating loss in 2021. This metric has been consistently negative, though in fairness every club in the Championship posts substantial operating losses with ten of them above £30m. Revenue has fallen by £9.6m (41%) in the last two years from the pre-pandemic level of £23.3m to £13.7m. This is about a third of the £39m generated in 2012, the first season after relegation from the Premier Leagu...

Watford should be able to deal with the drop to the Championship better than following previous relegations.  One part of the post-relegation coping strategy is an intrinsic part of the Pozzo model: player sales. The other is something new, and perhaps evidence of a lesson learned: not being lumbered with high wages in the second tier. The big change this summer is the financial protection afforded by the vast majority of the squad having significant wage cuts built into their contracts. It is understood up to 80 per cent of the playing staff will see a reduction of 50 per cent in their basic salaries, with the squad’s lower earners seeing a drop of only around 30 per cent. As Watford only spent one season back in the Premier League (as opposed to five prior to that relegation) they only get two years of parachute payments this time around. That roughly equates to 55 per cent of the basic award (of approximately £100 million) in year one and 45 per cent in year two. Clubs who s...

 Elliott Management has agreed to sell Italian title winners AC Milan to RedBird Capital in a €1.2bn deal.   Elliott will retain a minority stake in AC Milan and is likely to keep a board seat. US investors have a strong interest in Italian football with Atalanta, Fiorentina, Genoa, AS Roma, Spezia Calcio, Parma Calcio and Venezia all having US owners or investors.

Why did Chelsea go for the price it did when football finance guru Kieran Maguire calculates its real worth at £2.3 billion?   (Although this is based on a comparison with Manchester United which would some would argue is invalid given their recent poor performance). One answer is scarcity. Chelsea ranked eighth in revenue in last year’s Deloitte Money League. None of the rest of the clubs in the top 10 have changed ownership or even been publicly for sale in the last 10 years (the most recent is seventh-ranked Paris Saint-Germain, acquired by Qatar Sports Investments in 2011). The top three ranked clubs — Barcelona, Real Madrid and Bayern Munich — are all governed by fan or member models that prevent a private takeover. Opportunities to buy European football clubs of Chelsea’s size, with a huge international profile and a recent track record of success at the elite level, are extremely rare. European football clubs are cheap In comparison to US sports f...