Boardrooms at English football clubs have undergone considerable upheaval in recent years.
All Premier League clubs are on the radar of investors and consortiums, and a substantial proportion have changed hands, invariably sold to Russian, Middle Eastern, American or other overseas investors. The financial implications have ranged from the instant injection of huge sums of capital, as at Chelsea, Manchester City and, pending due diligence, Portsmouth, through to more moderate, well targeted investment, as at Aston Villa, to debt-funded takeovers, secured against clubs’ assets, of huge revenue generators like Manchester United and Liverpool.
For those whose business model is premised on reaching or remaining in the Premiership, achieving that goal is a financial imperative as much as a source of sporting pride
Beyond the Premier League, many takeovers have been precipitated by clubs going into administration. Since the Premier League’s inauguration in 1992 there have been 40 such insolvencies, none of which occurred in the elite division.
For those whose business model is premised on reaching or remaining in the Premiership, achieving that goal is a critical financial imperative as much as a source of sporting pride.
Over in Wales, a club currently for sale on BusinessesForSale.com won't ever reach the Premiership, but thanks to its frequent triumphs in the Welsh league it does play in prestigious European competitions on a regular basis. Barry Town, based in Glamorgan, South Wales and founded way back in 1888, once reached the second qualifying round of the Champions League after beating Porto, and, remarkably, is on a par with Tottenham Hotspur, Everton and Napoli in UEFA's rankings.
Fewer buyers
The tide of takeovers by billionaire foreign investors has dried up since the financial crash, but Phil Hall, founder of PHA Media and media adviser to Man City, Portsmouth and West Ham, doesn’t believe the downturn has affected demand for football clubs: “The downturn hasn’t affected investors’ appetite for football clubs,” he maintains, adding: “At least six potential buyers are circulating now.”
But Philip Long, corporate recovery partner at PKF’s Football Interest Group, indicates otherwise: “There are fewer buyers about as people have seen what happened with Mike Ashley at Newcastle United,” he says, referring to the sports retail magnate’s difficulties in offloading the club.
At one point last season, according to Keith Harris, chairman of investment bank Seymour Pierce, 16 of the Premiership’s 20 clubs were officially or unofficially up for sale, hoping to attract Middle East investors, seemingly the only group left with deep enough pockets. Harris says the value of clubs has probably dropped by about 20% due to the credit squeeze. “You can’t expect the asset values of soccer clubs to avoid being affected,” he says.
The perennial spectre of administration looms even larger in the enduring recession. “Far fewer people are taking up season tickets,” says Philip Long, who has worked on administrations for the likes of Northampton Town and Motherwell. “Corporate spend will be reduced, so executive boxes on an annual licence are a problem. Additionally, merchandising sales will fall.”
Alan Switzer, a director in the Sports Business Group, concurs: “Lower revenue growth in forthcoming seasons means clubs will have to focus on improving cost control – both wages and other operating costs – if profits are to be maintained.”
The frequency of administrations means opportunities aplenty but also, of course, shows it’s a risky business at present. Investors should at least ensure they begin on a reasonable footing and conduct thorough due diligence – unlike Newcastle United owner Mike Ashley.
Ashley rushed through the process of buying the club only to find an organisation laden with debt, outstanding liabilities on old transfers and the highest wage bill outside the Champions League quartet of Manchester United, Chelsea, Arsenal and Liverpool. Moreover, Ashley completely ignored the following golden rule outlined by Philip Long: “A key thing is an ability to make profit. That’s the critical thing. And the biggest overhead at all football clubs is the wages.”
