Leveraged buyouts of football clubs

[One More Solo]

Today I have received a couple of emails from MUST (the Manchester United Supporters Trust) regarding the imminent IPO of United on the Singapore stock exchange, and it made me realise that my thoughts on the Glazer takeover of United have changed significantly over the years. While I am certainly not a supporter of it, my concerns over its impact on the club have diminished to the point that they are a non-issue. The increasingly desperate scaremongering by MUST, which it must be said is largely based on rumour and hearsay, seems to reflect an opinion shift.

Yes, ticket prices have risen, but no faster than during the PLC years and still represent good value in comparison to other PL clubs and similar events e.g. other sports, concert tickets and so on. Only the addition of the ACS (making the purchase of home cup tickets compulsory) has been massively unpopular. Our spending has continued at identical levels to the PLC days and the success on the pitch has reflected that.

While supporters organisations point to ownership models like Barcelona's, those same models are propped up by banks and seem to suffer massive cash flow issues. They talk about running the club responsibly and living within our means but the notion that there is a benefactor out there with £2bn burning a hole in their pocket that is willing to hand over their £2bn asset to the fans is frankly ridiculous. Similarly, selling up the club to the Qataris or a similar group would see any notion of fiscal responsibility fly out the window. What would then happen if they upped and left? We'd be ****ed, just like Chelsea, Man City, PSG or the many other sugar daddy owned clubs. Peter Kenyon, of course, claimed Chelsea would be self-sufficient by 2009: they still posted an operating loss of £68.6m in their most recent accounts and the results for next year will be even worse given their huge recent investment in players. If the Glazers sold up tomorrow, business would continue as usual at United.

The point I'm ultimately making is that leveraged takeovers force clubs to be run responsibly and within their means, and being subject to one is generally a good indication that your business is in good shape (unfortunately this can be said for very few clubs). Trimming the wage bill, reducing expenditure and maximising income is something that all clubs should aspire to, and it is forced upon clubs subject to LBOs. At the moment we are seeing with Everton what happens to a club that has failed to do these things and wasted money they didn't have trying to achieve an impossible level of success. Now they are left with a club that makes no money, an owner that has no money and zero interest from buyers. Had they stuck to basic business principles none of this would have happened.

So, are the Glazers really the bad guys of football? I'd be interested to hear people's views on ownership of clubs throughout the world so please don't limit discussion to United, that's not my intention.

 

[One More Solo]

I like how your thinking is: All leveraged takeovers = What the Glazers have done at Man Utd. Despite the fact that there's a club not too far from yours that quite recently showed the downsides of the whole business.

Well, Hicks & Gillett had the right idea with Liverpool but unfortunately they were disastrous businessmen and made promises which there was no possible way to fulfil. On top of that, if they'd had some sense they could've sold the club within a very short time for twice what they'd paid but greed got the better of them. I think clubs like Liverpool and Arsenal still have massive untapped commercial potential which would make the latter (new stadium) very popular to potential investors and was obviously a motivating factor behind the FSG takeover of the former.

 

[One More Solo]

There shouldn't be a comparison between a leveraged takeover and a sugar-daddy as they're both equally wrong. The comparison should be between Utd's position pre-Glazers and under the Glazers. Utd were already run responsibly and lived within their means so nothing has changed there and in real terms, Utd have far from spent identically to what they done pre-Glazers too.

Any comparison between pre and post Glazer transfers is always going to include Ronaldo which is an exceptional case. It's difficult to suggest we spent £60m in 07/08 knowing we'd recoup £80m in 09/10.

The only difference I see between Utd pre-Glazers and now is that £100m's has been spent on interest and bank fees now and if worst comes to the worst, Utd have ~£500m worth of debt hanging over their head.

If the worst came to the worst, there would be no shortage of buyers though.

 

[One More Solo]

The H&G thing doesn't tally with what you're saying. The fact they could sell it on for more was just them being glorified middle men, they didn't do anything and the club wasn't transformed into something better, they just got a rare thing at a price low enough that they could sell it on.

As I said, they were terrible businessmen and made promises that similarly are not possible as a result of a leveraged takeover e.g. increasing expenditure and building a new stadium. They basically made promises to inflate the value of the club, attracted bids for the inflated value, tried to inflate the value even further until it became apparent they could actually do none of those things and their position became untenable.

Wasn't the transfer known about a year in advance?

Yeah, but that was two years before.