Club up for sale
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CFC do not own the stadium or the land, Chelsea Pitch Owners PLC does. So I am not sure you could include the land in the valuation. There was talk of CFC moving in the past so they could build a 60k stadium. Not sure how the dynamics changes if CFC build 60k seater stadium on current site?
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I was thinking about this the other day - flagging for @Beamrider for his thoughts, but….
… if we’re valued at £3-4b, if FSG sold a 15-20% stake in the company that would, in theory, raise enough to pay down costs of the new stand, fill FSG shareholder pockets with some readies and splurge £300m+ in the transfer market.
The transfer splurge should be enough to both rebuild and future proof against the need to splurge heavily again without an injection of more outside funding, by giving us more sellable assets to flip to fund transfers - like City do.
I presume the share issue would show up on the accounts as some sort of cash injection, to offset against transfer expenditure without falling foul of FFP (hahahahaha).
As long as we’re not paying stupid wages there’s enough scope to take on significant amount of new, decent salaries for 6 or so good players - taking into account those on decent salaries out of contract at the end of the season and increased match day revenues from the new stand.
Our income from most areas isn’t that far behind City and they’re paying £750k a week more in salaries - they get revenue we don’t for stadium naming, but we bring in more in just about all other areas - except from Owner share capital and incoming transfer revenue.
The new stand & expected success if new players would also increase the value of the club through growth m, so that FSG’s smaller share still ends up worth as much as when they owned it all, plus the new minority shareholding would be worth more.
If that’s how it works - I like it.
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Obviously at this point this is just press speculation, but I'm going to assume there is something behind it and think about how it might work.
Firstly, we need to think about how a minority investment would work. As I understand it, Red Bird basically bought into FSG, so there was no direct cash injection into LFC. If a minority stakeholder were to buy into LFC, there are a few key things to think about:
- Valuation - a minority investor would not be acquiring control of LFC, and as such they wouldn't pay pound for pound on their shares - they would apply a discount to the price they pay to take into account the fact that FSG would still, effectively, control LFC and could out-flank the investor on any key decisions. This means the money coming in wouldn't be as significant, but the discount wouldn't be huge.
- Transaction structure - this could be either an issue of new shares by LFC (or possibly by UKSV Holdings, which is the top UK company in the structure). In this situation, new money comes into LFC and we have funds to spend - Yay!!!! Alternatively, FSG sells a stake in (probably) UKSV to the new investor. In that situation, the cash goes to FSG's shareholders and LFC gets no new money. Not great, in fact probably the worst outcome as we introduce potential dis-harmony among our owners AND get no new cash. It could, of course, be a mix of the two. If I were in FSG's shoes, I'd probably want to structure it so FSG got back all the cash it had invested into LFC (so I'd tell FSG shareholders they'd made no net investment in LFC and now had a "free" bonus company in their portfolio). That would then probably allow me more autonomy on running the business as I'd be less accountable to the minority shareholders who had then, effectively, paid nothing net into the company.
- Management structure - this is where I'm a little sceptical about these reports. Part of the rumblings coming out are about Mike Gordon and his apparent wish to step back from running the club. He is FSG's go-to guy on LFC. If they don't dispose of a majority share in the club then they're going to need to find someone to replace Gordon (which would be a risk) or give greater autonomy to the local board (which they've shown little inclination to do historically, although it may be that they have more trust in Billy Hogan, as someone from within the FSG family). I think we could rule out them allowing a minority investor to come in and call the shots on how the club is run.
SPENDING THE CASH
So I'm assuming here that there will be cash to spend. And I'm assuming we will follow FFP, if only because we worry about getting kicked out of the Champions League. Obviously an all-new, Abu Dhabi style owner might not care about this, but let's assume FSG are still in majority control, and we know they DO care.
Firstly, if we want to use our cash to pay down debt / fund capital expenditure, there shouldn't be much restriction on that - the FFP rules generally make allowances for this kind of stuff. On the capital front, I'm not sure there's much left to do. The Kop is best left well alone and because of the footprint of the stadium, particularly the constraints of Breck Road, there's not much you could really do with the Kop as you would need to build "out" (i.e. away from the pitch) and there's not much scope to do that. You could look to mirror the Main Stand in place of the existing Kenny Stand, but you'd lose a lot of capacity (including hospitality) during the build phase and, considering the land footprint of the Main Stand, you'd likely need to buy up houses in Skerries Road - that would take a long time. Finally, you'd need to spend a lot on public realm works, particularly access by road / public transport.
With the training ground done and the ground more or less finished, I think there's not much need for capital investment. The cost benefit of pushing towards a 70,000 capacity, plus the practical difficulties of doing it, probably mean it's off the table. Sorry to everyone still struggling to get a ticket every week.
And so to the squad. Bear in mind that with current FFP it's all about profit. As long as you sell a player every 2 or 3 years for a big profit, pretty much everything else is manageable.
Under the new rules, it's about managing the ratio of turnover to footballing costs (wages, transfers, agent fees). There's still a profit element, but it's more relaxed than before.
In simple terms, you need to keep your players costs below 70% of turnover. So for the likes of City / PSG etc, you work out your costs and calculate your turnover by grossing your costs up, and then plug the gap with a "pucker" sponsorship contract.
For everyone else, you do all you can to boost your revenues and then manage your costs down to 70%,
So with a squad re-build, you need to avoid:
Sorry I can't be more specific on this, but I don't think we'll just be able to go out there and splash a load of cash on the playing squad without risking a breach - we need to find a way of boosting our revenue and doing some clever deals so we can manage the costs. This might mean giving players longer contracts so we spread the transfer fees over a longer period (e.g. Fofana at Chelsea signed a 7 year deal), although that obviously carries risk in terms of the long-term wage commitment. It may also mean hanging on to existing players for a bit longer (as they will only really contribute wage cost) and it may mean the occasional sale of a star every 3 years or so to balance the budget (as we see the Italian clubs doing quite regularly under the current rules).
So in summary, it's likely more of the same as boosting revenue artificially under a City style model would require an outright takeover by a suitable sports washer. If we get in a reputable minority investor then even if they plug a load of money in, we won't be able to go out and splash it all on Bellingham and Mbappe. The alternative would be to try to build a Chelsea-style model of investing in youth to sell on for profit, but UEFA / FIFA have hinted they're going to clamp down on that, AND it's not something you can implement overnight. You also need to not be sentimental and sell when you get a good offer, rather than clinging to the hope that the promising young kid will become a world-beater. If he does (like de Bruyne did after he left Chelsea) then you just have to live with that.
Sorry it's not a more optimistic view.
Don't shoot the messenger.
So I'm assuming here that there will be cash to spend. And I'm assuming we will follow FFP, if only because we worry about getting kicked out of the Champions League. Obviously an all-new, Abu Dhabi style owner might not care about this, but let's assume FSG are still in majority control, and we know they DO care.
Firstly, if we want to use our cash to pay down debt / fund capital expenditure, there shouldn't be much restriction on that - the FFP rules generally make allowances for this kind of stuff. On the capital front, I'm not sure there's much left to do. The Kop is best left well alone and because of the footprint of the stadium, particularly the constraints of Breck Road, there's not much you could really do with the Kop as you would need to build "out" (i.e. away from the pitch) and there's not much scope to do that. You could look to mirror the Main Stand in place of the existing Kenny Stand, but you'd lose a lot of capacity (including hospitality) during the build phase and, considering the land footprint of the Main Stand, you'd likely need to buy up houses in Skerries Road - that would take a long time. Finally, you'd need to spend a lot on public realm works, particularly access by road / public transport.
With the training ground done and the ground more or less finished, I think there's not much need for capital investment. The cost benefit of pushing towards a 70,000 capacity, plus the practical difficulties of doing it, probably mean it's off the table. Sorry to everyone still struggling to get a ticket every week.
And so to the squad. Bear in mind that with current FFP it's all about profit. As long as you sell a player every 2 or 3 years for a big profit, pretty much everything else is manageable.
Under the new rules, it's about managing the ratio of turnover to footballing costs (wages, transfers, agent fees). There's still a profit element, but it's more relaxed than before.
In simple terms, you need to keep your players costs below 70% of turnover. So for the likes of City / PSG etc, you work out your costs and calculate your turnover by grossing your costs up, and then plug the gap with a "pucker" sponsorship contract.
For everyone else, you do all you can to boost your revenues and then manage your costs down to 70%,
So with a squad re-build, you need to avoid:
- Big losses on players you are shifting out (as these will be included in your costs)
- Big increases in the wage bill
- Paying ridiculous amounts to agents.
Sorry I can't be more specific on this, but I don't think we'll just be able to go out there and splash a load of cash on the playing squad without risking a breach - we need to find a way of boosting our revenue and doing some clever deals so we can manage the costs. This might mean giving players longer contracts so we spread the transfer fees over a longer period (e.g. Fofana at Chelsea signed a 7 year deal), although that obviously carries risk in terms of the long-term wage commitment. It may also mean hanging on to existing players for a bit longer (as they will only really contribute wage cost) and it may mean the occasional sale of a star every 3 years or so to balance the budget (as we see the Italian clubs doing quite regularly under the current rules).
So in summary, it's likely more of the same as boosting revenue artificially under a City style model would require an outright takeover by a suitable sports washer. If we get in a reputable minority investor then even if they plug a load of money in, we won't be able to go out and splash it all on Bellingham and Mbappe. The alternative would be to try to build a Chelsea-style model of investing in youth to sell on for profit, but UEFA / FIFA have hinted they're going to clamp down on that, AND it's not something you can implement overnight. You also need to not be sentimental and sell when you get a good offer, rather than clinging to the hope that the promising young kid will become a world-beater. If he does (like de Bruyne did after he left Chelsea) then you just have to live with that.
Sorry it's not a more optimistic view.
Don't shoot the messenger.
The Boston Globe, a publication privately owned by FSG principal John W Henry, claims that the Liverpool owners are leaning towards a partial sale of the club, rather than a full takeover.
The Reds are said to be in a discussion with “an array of suitors” around either an equity purchase or a full sale.
But a partial sale is reportedly the most likely outcome with the desire to raise money for both ”player acquisition and capital improvements" central to their decision to explore their options for the Merseyside club in the market.
The Globe suggested that a minority partner could arrive on the board and subsequently secure a full takeover of the club further down the line.
The publication quotes a source that claims any investor "would need to be philosophically aligned with FSG’s fiscal tenets and team-building philosophies."
https://www.sportbible.com/football/liverpool-sale-takeover-fsg-dubai-news-20221201
The Reds are said to be in a discussion with “an array of suitors” around either an equity purchase or a full sale.
But a partial sale is reportedly the most likely outcome with the desire to raise money for both ”player acquisition and capital improvements" central to their decision to explore their options for the Merseyside club in the market.
The Globe suggested that a minority partner could arrive on the board and subsequently secure a full takeover of the club further down the line.
The publication quotes a source that claims any investor "would need to be philosophically aligned with FSG’s fiscal tenets and team-building philosophies."
https://www.sportbible.com/football/liverpool-sale-takeover-fsg-dubai-news-20221201
Yeah what you want to is your business indeed but don't get butt hurt when you get called out for something you said and then try say that wasn't what you were saying...
My advice to you is dont get involved in a discussion when you dont understand the context.
@Beamrider
I think I’m following - with transfers, the fee gets expensed over the life of the contract - it £100m player on a 5 yr contract - would be expensed as wages + £20m a year for 5 years, then wages thereafter. Sales get lodged in a single season as a lump sum - so if we sold, for example 2 X youths every season for £10m each that would offset the transfer fee.
Or you increase revenue through new streams as you say.
Swiss Ramble breakdown on City’s accounts is very interesting - basically we bring in at least the same in prize money - the only main variance season by season is on which team does better in the CL. Our match day income is higher (and will increase youth the new stand), our commercial deal income overall is lower, but that’s only because of the £20m a season City get for stadium naming rights - all our other commercial deals (kit manufacturer, kit sponsor, etc) are as good if not better.
City basically splurged on transfers and showed massive losses 5+ years ago, but now show a healthy profit because they can flip more fringe players for profit.’ (Including getting good coin for youths).
So - we “could” replicate that model if money generated by a share issue was plough back in.
The question I have though are :-
- FFP is based on a rolling average isn’t it? - does the cash injection from the “share investment” if it hits the accounts offset that for whatever period it would apply - like 3 years.
- why the need to expense a transfer over tge lifetime of the contract? - why can’t the contract just be written off more quickly.
- what happens if a player gets a contract extension or new contract - eg signed on a 3 year contract, but after a season gets an additional 2 years and a new contract - does the original transfer fee just get written off over initial 3 year window, extended or just written off?
- if the issue is income over time - is there a way the share issue could be presented as ongoing income - rather than a one-off.
It seems we just need an investment to fund transfers and then the whole thing becomes self sustaining over time.
Although the disaster zone would be a drop in CL revenue.
Am I talking bollocks? Happy to be shown the light.
Here’s the Swiss Ramble thread for anyone interested :
I think I’m following - with transfers, the fee gets expensed over the life of the contract - it £100m player on a 5 yr contract - would be expensed as wages + £20m a year for 5 years, then wages thereafter. Sales get lodged in a single season as a lump sum - so if we sold, for example 2 X youths every season for £10m each that would offset the transfer fee.
Or you increase revenue through new streams as you say.
Swiss Ramble breakdown on City’s accounts is very interesting - basically we bring in at least the same in prize money - the only main variance season by season is on which team does better in the CL. Our match day income is higher (and will increase youth the new stand), our commercial deal income overall is lower, but that’s only because of the £20m a season City get for stadium naming rights - all our other commercial deals (kit manufacturer, kit sponsor, etc) are as good if not better.
City basically splurged on transfers and showed massive losses 5+ years ago, but now show a healthy profit because they can flip more fringe players for profit.’ (Including getting good coin for youths).
So - we “could” replicate that model if money generated by a share issue was plough back in.
The question I have though are :-
- FFP is based on a rolling average isn’t it? - does the cash injection from the “share investment” if it hits the accounts offset that for whatever period it would apply - like 3 years.
- why the need to expense a transfer over tge lifetime of the contract? - why can’t the contract just be written off more quickly.
- what happens if a player gets a contract extension or new contract - eg signed on a 3 year contract, but after a season gets an additional 2 years and a new contract - does the original transfer fee just get written off over initial 3 year window, extended or just written off?
- if the issue is income over time - is there a way the share issue could be presented as ongoing income - rather than a one-off.
It seems we just need an investment to fund transfers and then the whole thing becomes self sustaining over time.
Although the disaster zone would be a drop in CL revenue.
Am I talking bollocks? Happy to be shown the light.
Here’s the Swiss Ramble thread for anyone interested :
Dude Frogfish only quoted what you said. I read your posts, nothing was taken out of context. Maybe go back and read them. I have nothing against you bud but you did actually say it
FFP profit measures are on 3 year, backward looking, average (bit of a wrinkle for Covid as the two seasons affected are averaged out). So if a club made a big transfer profit every 3 years, that could cover other losses. This is what happened to us with Suarez, Sterling, Coutinho. Less of an issue now as we’re less prone to making losses more generally.
The share investment doesn’t hit profits, it goes onto the balance sheet. The only impact on profits will be that it will wipe out bank interest costs / generate interest income. We don’t pay a lot of interest anyway so this would only make a few £m difference. As and when the money is spent, we’d start to see it impact profits (eg writing off player investments, capital spend etc).
Contract write offs is just a convention and accounting policy says straight-line over the contract life is fine. In practice, you’d only vary from this if it didn’t take the hit quickly enough. Since the impact of player sales is almost always a net profit (ie industry wide, not individual clubs / players) then this says the normal policy is sufficiently cautious (prudent in accounting terminology).
On an extension, probably easier to illustrate. Let’s say we sign a player and £50m goes on the balance sheet, 5-year deal. We charge £10m a year. After two years, the agent gets his final payment and then wants a new deal for his boy. We agree a new, 5-year deal at the end of year 3 and pay the agent £5m. The player’s book value is £20m at that point. We add the extra £5m to the agent and write off the new total (£25m) over the new 5-year term, so £5m a year. That means that at the end of the player’s original 5-year term, with three years to go, there is still £12m of the original costs still on the books. So a new deal, rather than triggering a write off of the old costs, actually extends the period over which they are written off.
The share issue will always be a balance sheet item, but the use of the cash will eventually be recycled through profit (but as costs, not income).
Hope that makes sense.
NB - for any serious techies, the payment of transfers by instalments throws a minor wrinkle into the analysis above. If we buy a player for £50m, paid by instalments (as is normal) then it’s likely only £49m goes to the balance sheet originally (spread over 5 years) and the final £1m is charged as notional interest on the instalments over a period of 2 years. Just putting this here for completeness, not one to trouble yourselves with.
Its quite clear that you both dont understand the context of what has been said.
It makes sense and doesn’t make sense - if you know what I mean.
Different approach then - how do we fund a partial team rebuild involving significant outlaw in transfers in a short space of time while balancing the books & meeting FFP, without selling to a “sports washer” that will follow the City line of - we’ll sue your ass if you question it!
What is the benefit of a partial sale?
Question 1 - there may be some scope within our existing structure to do this to some degree because we have been performing better financially. This was part of the appeal in the sale of Newcastle as Ashley’s frugal approach meant they would have significant leeway to spend without falling FFP because of the profits in prior years. I’d need to look at our figures to get a clear handle on it, and from a brief cursory look when the new rules came in there wasn’t much wriggle room at that time on the ratio (best guess is that the new rules have been heavily influenced by Italian / Spanish / German clubs to punish English ones - this was what happened with the coefficient system in the UCL, but the benefit of that has eroded over time as English clubs have done well and built stronger revenue shares). But that assessment of wriggle room was after Covid disrupted years, so the situation may look better now. The 2022 accounts will likely be published in February and I will take a look then.
The other, simple, answer is to sell a star player for a profit. The vagaries of accounting rules mean, as you’ve said, that gains come along all in one go whereas costs for new signings can be spread. Theoretically, if you had a star player in one position, you could sell him for (say) £80m, realise a gain of (say) £60m, replace him with a new £80m player. The net effect, assuming a similar wage package, on your profit would be a £40m uplift (giving you room to spend a further (say) £140m or so (£28m a year transfer fee write-off + £12m wages), but you’d need to keep on doing that to some degree year after year. So selling for profit is a key part of it (as FSG figured out pretty quickly). Whereas the old “Moneyball” theory was about maximising profit, in football, Moneyball is about maximising your capacity to spend because football clubs don’t generally make profits, just big gains for their owners when they sell.
As for a partial sale, from LFC’s perspective I’d say it doesn’t make much sense as I think it would be potentially disruptive if the new part owner has different plans to FSG. I’d like to think that FSG recognise LFC needs investment in the squad but can’t persuade their wider ownership group to fund it. A new part-owner may come along, put cash into the business that helps improve it and helps improve the value of FSG’s diluted stake. In theory, if you pump a load of money in and spend it well, you increase value. So if a new investor buys in at the right price and that money is spent well, the value of your (say) 75% of the enhanced business is worth more than 100% of what you had to begin with.
Or it may be that there’s no-one out there who has the cash to buy the club as a whole who they are prepared to do business with (bearing in mind there is at least one (former) senator in their ownership group (George Mitchell)). Regardless of stake size, a guy like that will have significant influence on the wider ownership group. There may be other politically connected parties invested in FSG who don’t want to do business with sports washers.
FYI - I know about Mitchell as he headed up a senate enquiry into steroid use in baseball and was flagged as having a conflict because of his part stake in the RedSox (presumably via FSG).
What's quite clear is you don't know when to stop digging!
I wish you good luck when replying to others in the future. Mostly I wish them good luck.
Does that bring it within your budget from saving all your pocket money?
If you owned LFC would you ask for 1.5bn? They're entitled to ask for the highest price, because we're in the black as to what's happening, doesn't mean there isn't a hive of activity.
Unlike the Chelsea sale this isn't a shotgun sale, it will take as long as it needs to. Most likely NDAs exist to stop interested parties declaring themselves officially.
As one journalist said these transactions take on average 9 months if its a quick sale.
Me, I know FSG will be here during the January window, will they reinforce the MF, and RB? I don't care who it is as long as he has no track record of being injury prone.
More than likely BS, but if anyone wants to read the article, the link is there
[article]
Saudi-Qatar partnership 'planning' to offer FSG £4bn to buy Liverpool
https://www.liverpoolecho.co.uk/spo...udi-qatar-partnership-planning-offer-25667876
[/article]
[article]
Saudi-Qatar partnership 'planning' to offer FSG £4bn to buy Liverpool
https://www.liverpoolecho.co.uk/spo...udi-qatar-partnership-planning-offer-25667876
[/article]
Lol it OK. You said something you were called out on it and you then changed your stance.
Its grand, just forget about it and move on
The Arab Hicks & Gillette… no thanks.
Bahrain? I remember they were interested in AC Milan not so long ago.
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