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Why United is worth less than the Glazers think

 Football finance guru Kieran Maguire was asked on Sky Sports News why bidders for Manchester United were not willing to match the Glazers' asking price of £6bn.

‘This is one way how we crunch the numbers, the discounted cash flow model (DCF).  Then use those figures to work out historic relationships between income, costs, funding etc. Use those to create some working assumptions...and mine are fairly optimistic, 15% income growth pa and no major CAPEX investment for at least 5 years.   On the basis of the assumptions project future growth of income, costs and perhaps most importantly cash.

Calculate what is known as a “terminal value”, which is the estimate of cash from 2028 onwards by using a bit of financial maths and assuming that investors want (a fairly low) 8% return on their investment. This values the whole business as £2.9bn.

Give the banks back what is owed to them first, and this means the shares come out at a figure of $17.35 a share...and the Glazers want about $30. Only reason to pay it is if there are cash flows that no one has at yet unlocked, so can understand why QSI might walk away.

It is difficult to see why anyone would think that Manchester United is worth 20x what PIF paid for Newcastle United from Mike Ashley. Not disputing that Manchester United has a bigger global fan base, but turning that into cash is the challenge.’

Arguably the DCF model undervalues capital appreciation (which is what the Glazers have enjoyed).
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