Is it worth investing in a football club?

As the tedious circus of the sale of Manchester United rumbles on and on and on, fans of the club have taken to protesting outside Old Trafford after yet more indecision regarding the takeover.

It reveals a battle of wits, ego, stubbornness, arrogance and a certain slice of idiocy. Is it really worth investing in a football club? By Alan

Wares

The controlling – in more ways than one – Glazer family put the club up for sale in November 2022. Since then, progress has managed to stall significantly.

The two front-runners – or at least those not put off by the current incumbents’ procrastination – are Sheikh Jassim bin Hamad Al Thani and Sir Jim Ratcliffe. Sir Jim, a local billionaire who made his fortune mostly in chemicals, was the Platinum cover story in issue 106, back in February this year. Sheikh Jassim is the former heir apparent to the role of Emir of Qatar. He relinquished his right to the throne of his country in 2003, citing a lack of interest in becoming Emir. Neither man has yet to be named as the preferred bidder.

The principal stumbling block, according to football finance expert Kieran Maguire, is that the Glazers wish to retain some kind of control over Manchester United as they believe market valuations of the club are too low. Wise heads reckon on around £3 - 3.5bn, the Glazers are holding out for nearly double that.

They are therefore hustling every kind of angle to extract as much money as possible, without letting go of the reins. For Sheikh Jassim, who actually wants 100% ownership of the club, that would be completely unacceptable. So on we go.

WHY GET INVOLVED?

The saga raises one main question –why does anyone involve themselves in running a football club? Rewind to the 1960s and 70s when an English football club chairman was almost always a local-boy-done-good businessmanmaybe a used car salesman, a local butcher or an estate agent. He’d be bigging himself up in the Directors’ Box with his executive sheepskin coat, outsized Havana cigar and appalling comb-over. Or worse, a wig.

Len Shackleton, who played most of his footballing career for Sunderland and England in the 1940s and 50s before heading into journalism, famously wrote, in his 1956 autobiography ‘The Clown Prince of Soccer,’ a chapter entitled

“The Average Director’s Knowledge of Football”. It was a blank page.

Chairmen were chairmen principally for ego, although their local business may have profited along the way. But since football’s genesis in the mid-19th Century, no-one – certainly not a chairman nor director – has ever got rich from owning or having shares in a professional football club. Not while trading as a going concern.

Today, the chairmen’s fashion may have changed, but the success of the businessman in question will need to be that much higher, prolonged and sustained in order to keep any given club running.

For would-be buyers, there are plenty of non-financial attractions. “Owning a big club gives you a celebrity status which other factors which surround your wealth cannot buy,” says Maguire. For wealthy people from certain countries, owning a major club might also be considered a safe way to store wealth, or perhaps an insurance policy against unwanted attention from one’s own government.

For the Middle Eastern investors with links to a nation state, the desire to build soft power to help further their country’s interests may be attractive –notwithstanding accusations of ‘sportswashing’.

PREMIER LEAGUE CLUBS NET DEBT 2021/22 (£MILLION)

Chelsea -£58m

Burnley -£2m

West Ham United £36m

Norwich City £42m

Brentford £46m

Everton £47m

Manchester City £75m

Aston Villa £85m

Wolverhampton Wanderers £94m

Southampton £106m

Crystal Palace £109m

Watford £132m

Leeds United £148m

Newcastle United £170m

Liverpool £184m

Some Numbers

For the 2023/24 football season which starts in August, of the 20 Premier Clubs, only four have a British majority shareholding. Seven are American, two are state-owned (Manchester City by the UAE, and Newcastle United by Saudi Arabia, with Manchester United being bid for by a high-ranking Qatari politician), plus an array of international ownership – and very few of them with the good of the game at heart.

It’s once you look at the figures that the mind boggles. Football clubs, in the main, have their financial year-end on June 30th. In the trading year ending June 30th 2022 (the most recent set of figures available), the Premier League clubs posted a collective pre-tax trading

Leicester City £377m

Brighton & Hove Albion £381m

Arsenal £575m

Manchester United £909m

Tottenham Hotspur £952m

500 750 1,000 loss of £707m. This is on a collective turnover of £5.45bn. Their collective debt, meanwhile, both internal (to people involved with running the club) and external (everyone else) is around £4.4bn.

The figures quoted in the transfer market are equally crazy. In June 2022, Todd Boehly took control of Chelsea FC, in a forced sale following the censorship of Russian oligarch Roman Abramovich. In his first year at the helm, Boehly, evidently out of his depth, spent £530m – over half a billion – on new players.

He then sacked the manager, three weeks after the transfer window closed, and paid a world record £23m in compensation for the services of a new manager, whom he subsequently sacked four months later. Another one was sacked six weeks after that. Unsurprisingly, Chelsea had their worst season in over 25 years.

Not that Chelsea were alone in this financial confetti-spraying. During the whole of the 2021/22 season, Premier League clubs spent £2.6bn on player acquisition alone. But it does all point to a rudderless club with no masterplan, and with more money than sense.

One Way Money

The remedy has long been throwing money at the problem, keep everyone onside and hope the situation comes good. This brings us neatly to Manchester City. The club was acquired in September 2008 by Sheikh Mansour bin Zayed Al Nahyan, vice president and deputy prime minister of the United Arab Emirates.

At the time of the acquisition, Manchester City had not long been promoted from the third tier of English football into the second. As it was, they were now a Premier League club, but one that hadn’t won a major trophy for 30 years. Many have marvelled – quite rightly – at Manchester City’s first ever success in the UEFA Champions League this season. The club’s dominance of English football is near total, and its aspirations on Europe are not far behind.

Who knew what could be achieved when you are the world’s richest club, with billions pumped into it over the past 15 years by the Abu Dhabi United Group (Manchester City’s parent company – set up and owned by Sheikh Mansour)?

Sadly – at least for the vast majority of other clubs – English football cannot compete on a level playing field with so much money being ‘passed through’ a small number of clubs. Since 2008, Manchester City’s net spend on players alone – that is, player acquisition minus player release fees – amounts to £1.28 bn.

Football’s trading rules, mostly coming under the largely toothless ‘Financial Fair Play’ (FFP), forbid clubs from spending more than a given percentage of their income, the largest outgoing being player acquisitions (infrastructure costs are exempt from FFP). Currently, UEFA – football’s European governing body – has made allegations against Manchester City of 115 separate breaches of FFP rules.

These allegations will take an age to resolve, and will only offer a large payday to both UEFA’s and Manchester City’s lawyers and accountants as white noise and obfuscation will come to the fore.

A REMEDY?

The nature of football club business, especially at the top end, is not based on a sustainable model. When compared to big companies, football clubs are just a drop in the ocean and there appears to be an imbalance in the way they operate when compared to a generic company.

In a football club, the employees hold all the cards and are the main beneficiaries from any revenue generated. The post-tax profits of the football clubs are minute compared to the money generated as it usually filters through to the players, agents and manager. Any surplus is usually reinvested into the transfer market.

Elite level football relies on outside income which can’t always be guaranteed, with many clubs borrowing against future revenues just to stay afloat. Broadcasting rights now account for around 55% of all income for the Premier League clubs. But such is the size of the gap in operating terms between the Premier League and the

Championship; the division immediately below the top flight, that in the past ten years, five clubs who have been relegated from the gravy train have gone into administration.

The UK government, backed by the Opposition and by most football fans’ representative groups wish for the football industry to have outside regulators. Given the appalling financial behaviour of many clubs, whether deliberate or through ignorant whimsy, the case for a regulator is very strong. Naturally, the Football Association and the Premier League clubs, while acknowledging that their house does need to be put into better order, are pushing back on these proposals.

One problem these proposals will have is that FIFA – the world’s normally useless football governing body – expressly forbids any governmental interference in any given country’s domestic footballing affairs. It’s a line the UK government would need to tread very carefully.

But no matter how professional, strategic or successful the management of a club is, the joy of owning a club should not be forgotten. You don’t go into club ownership expecting to make money. As Paul Barber, CEO of Brighton & Hove Albion – considered one of the better run clubs in England right now – concedes, it’s not possible to make a profit all the while you’re a club in the Championship. Not if you have designs on being promoted to the Premier League, that is.

SO WHAT’S IN IT FOR THEM?

There is a belief that the real power of football lies in ancillary benefits it can provide to owners, with political and business relationships forged through networking in directors’ lounges and corporate boxes.

The real benefit of owning a large international football club, whether in England or in any of the other four ‘big leagues’ across Europe (Spain, Italy, Germany, France) is influence. People take notice when the top individual at AC Milan or Paris St Germain or Barcelona invites an influential person into their private, exclusive football lair.

‘There’s something much bigger happening around Premier League clubs,” opines Professor Simon Chadwick, Professor of Sport and Geopolitical Economy, SKEMA Business School, Paris, “and the power of football more generally, that high-net-worth individuals understand and are keen to engage with.”

Indeed, at any given Real Madrid match, 15 of Spain’s most powerful people –from royalty to political leaders and heads of the country’s biggest corporates – can be found hobnobbing in the same executive suite.

It goes to show, Professor Chadwick says, that, ”you can do incredible things in business and political networks by owning a football club.” Even some of those who have lost a little money along the way would probably agree: it’s worth it.

To get back to the original question –it’s highly unlikely you will make any money while you’re trading in charge of the club. Your best bet is to invest – preferably at the elite level which is the only place you can hope to make a profit – execute your grand masterplan which makes your club fully functional. Therefore, in so doing, under your stewardship, the team eventually improves dramatically on the pitch, landing itself with glory, silverware and open-top bus parades.

At which point, you sell up at a vast profit to the next sucker as you sail off into the sunset counting your loot as you go – assuming your ego, the taxman or Old Father Time hasn’t got in the way.