24th November 2022
The news that the Glazer family were exploring a possible sale of Manchester United has understandably sent the world’s media into a bit of a frenzy. Speculation and valuations abound. And yes, it is not often that the most famous club in English football comes up for sale. But along with Liverpool, two Big 6 Premier League clubs up for sale at the same time warrants further examination.
We looked at some of FSG’s possible motivations for selling up in our last blog. Now that there are two US owners looking to leave the Premier League, our own thoughts on those possible motivations would appear to hold even more water than before.
Those of you who are familiar with our work will know that the Premier League clubs do not achieve economic profits to any large degree. Indeed, since 2010, Liverpool has achieved 4 economic profits in 11 years whereas Manchester United has achieved just one single economic profit in 2012-13. This was also Sir Alex Ferguson’s and David Gill’s (Chief Executive) last season with the club. Consequently, Manchester United’s underperforming share price has reflected the lack of profits and the financially painful descent towards a club record economic loss of £145m in 2021-22.
Undoubtedly, Covid has been a factor but not the instigator of poor economic performance. The majority of Premier League football clubs were achieving significant losses despite record revenues up to and including the 2018-19 season.
Thus, on a day to day basis, football is not the profit-achieving enterprise that we are led to believe it to be by those in close association with the administration of the game. For club owners, this presented something of a problem. To the American owners steeped in sports business, it presented a challenge. How to turn a profit from a traditionally philanthropic and loss-making enterprise? Without merger and acquisitional activity, there are only two routes that could deliver profits in a dysfunctional financial environment: operational or structural reform. They chose structural reform. Thus, Project Big Picture and Super League were born.
Both initiatives failed. Both were heavily supported by FSG and the Glazer family. Both owners are now attempting to sell their interests in English football.
For the Premier League, this, we believe, is a pivotal moment. Two of the biggest clubs in the division are for sale. The new owners, whoever they may be, could pay a combined £10bn+ to complete both transactions. You would think that the Premier League’s administrators would be jumping for joy at the value-creation achieved by such prices for its own shareholder clubs. However, we suspect that there may be very serious trouble ahead.
Even if Liverpool is sold for, say £3.5bn, and Manchester United sold for, say £6.5bn, the challenge for the Premier League is whether the current format can deliver returns on such enormous acquisition prices.
And this brings us right back to the issue of Super League and the potential it offers in terms of future profit. The new owners, and we include Chelsea in this, may well resurrect the concept simply because playing local league football does not provide the returns to justify the initial acquisition price. Indeed, because there is increasing competition for the currently and limited lucrative Champions League places with two of the main contenders being state-backed entities, the investment risk is abundantly clear. The Glazers have found this out to their cost with an operational cost base geared for Champions League participation but increasingly failing to qualify for it. Arsenal is another example.
We do acknowledge that there is growth to be had within the women’s game but again, it requires significant ongoing investment.
Investors do not like risk when it is weighted against them. Sure, there are opportunities and buying into two of Europe’s biggest clubs cannot be ignored but the burden of acquisition will weigh heavily in terms of how the future of football will be shaped and as we’ve said plenty of times before, the Premier League isn’t ‘it’.
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4th August 2022 – Soccerball – Over-enthusiastic, over-subscribed and over here. The American invasion into English football is in full swing.
17th May 2022 – Money Heights – Valuation models fail to match the price paid to buy loss-making Chelsea.
25th April 2022 – Same but Different – UEFA’s proposed changes to Champions League qualification mirrors aspects of aborted Super League.
18th March 2022 – Let It Go – With a freeze on Russian assets, Chelsea hits the market following a record economic loss.
10th February 2022 – Underwater – Manchester United’s share price fails to defy gravity and sinks below its IPO level. Has the market got wise to the club’s poor economic performance?
1st December 2021 – Fantasy Football – The Fan-Led Review findings fall short of the necessary value-driven approach to regulatory reform.
23rd June 2021 – Road to Nowhere – Football stands at the crossroads ahead of the Fan-Led Review process. We examine the key questions that it must answer.
11th May 2021 – Prime Numbers – Football’s elite clubs seek a route to profit as fans yearn for sporting tradition. In between lies a gulf of mistrust and misapprehension.
26th April 2021 – A Bitter Pill – GSK’s new strategic direction fails to find riches in the middle of a pandemic when other pharma companies have prospered.
25th April 2021 – The Wrong Stuff – American-style football league won’t wash but the conditions that led to its launch are still present and are likely to get worse.
19th April 2021 – Super League Arrives – As we predicted, football’s elite breakaway emerges from the shadows.
30th March 2021 – $hooting B£ank$ – Arsenal’s commercial performance analysed.
22nd February 2021 – Measure for Measure – Take two financial measures, add pandemic and stir.
18th January 2021 – The Football Factory – If football was an industrial entity…
10th December 2020 – Pump Up The Volume – ExxonMobil comes under fire from an agitated investor.
16th November 2020 – The Pain Game – Manchester United’s Q1 2021 financial release opens the lid on a Covid-19-affected financial can of worms.
11th November 2020 – A Tight Squeeze – Football’s Elephant in the Room leaving little space for financial relief.
29th October 2020 – Form and Function – Proposals-a-plenty for football’s structural reform.
13th October 2020 – Project Big Profit – Americans come bearing a proposal for football’s structural reform, just as we predicted in 2016.
8th October 2020 – Game Aid – Football is caught in the crossfire of indecision and financial necessity.
24th September 2020 – Crisis? What Crisis? – We look back 12 months at the demise of Thomas Cook and its relevance to more recent events.
11th September 2020 – Distance Learning – New rules and new values as Covid-19 challenges traditional mindsets and misconceptions.
19th August 2020 – Socked! Marks & Spencer’s Shrinking Value – Retail giant is fast becoming a shadow of its former self.
22nd May 2020 – You’re Gonna Need a Bigger Boat – An assessment of the double financial whammy of potential relegation from the Premier League and Covid-19.
30th April 2020 – Home, Alone – Initial indicators from the wider economy point towards economic and financial downsizing in sport.
6th April 2020 – Board Games – Government, football clubs and players adopt separate ‘brace’ positions as Covid-19 crashes the sports economy.
27th March 2020 – Markets, Mayhem and Manchester United – A look at the questions posed by the share prices of publicly listed businesses.
15th March 2020 – When Saturday Goes – Football has come to a halt. We take stock of the game’s position and ponder its return.
10th March 2020 – Futureworld – The potential economic effects of the COVID-19 outbreak.
12th December 2019 – The Cost of Chasing Gold– In collaboration with the BBC, we look at the high price being paid by clubs to gain promotion into the Premier League.
7th November 2019 – Where to Next for M&S? – November 2019 results suggests the retailer is losing its way
10th October 2019 – Red Mist – Manchester United’s 2019 FY numbers and the stagnation of England’s biggest revenue-earning club.
13th March 2019 – Financial Fair Play – Guilty as Charged? – Our thoughts on FFP schemes and their key weakness.
18th December 2018 – Long Division – The Post-Ferguson years at Old Trafford have come at the expense of declining economic and on-pitch performance.
20th November 2018 – The Relegation Game – Tales of woe and economic performance at the wrong end of the Premier League table.
9th October 2018 – A Different View – Why fans ought to be acutely aware of football’s financial dynamics.
17th August 2018 – The End of the Beginning – La Liga heads west to conquer new worlds.
9th August 2018 – Reaching for Sky – the sequel – Latest offer price for satellite TV company is good for shareholders, less so for prospective owners.
8th August 2018 – American Dreams – English Premier League economic dynamics and American money – is a Euro Super League the next step?
3rd August 2018 – Mall Administration – Retail Property Co. bonus payouts at odds with increasing shareholder value.
20th April 2018 – Goonernomics Part Deux – The departure of Arsene Wenger…
18th April 2018 – The Price of Everything – Tesco’s latest numbers offer little in value.
12th April 2018 – Say What? – WPP’s very mixed message.
14th February 2018 – In Case of Emergency – Premier League’s UK TV rights auction comes up short.
4th December 2017 – A Billion here, a Billion there… – The Premier League reaches a major milestone, quietly…
25th November 2017 – Getting out of Toon. – Is Mike Ashley pitching the sale price of Newcastle United at the right level?
16th October 2017 – Goonernomics. How the ‘Bank of England’ club falls short of its North London neighbour.
25th September 2017 – Highlights. More record-breaking numbers from the biggest football club in the land, but no economic profit…
23rd September 2017 – Football’s Economic Back Pass. A guest blog for the Soccernomics website.
12th September 2017 – Crystal Balls-up. Changing strategic direction is not a good idea when you haven’t looked at the economics.
27th July 2017 – Football’s Summer of Money and the £65 pint of beer. The sport that just can’t spend enough.
11th July 2017 – Football Special. Observations following the launch of ‘We’re So Rich…’
9th May 2017 – Illuminating, non? Political energy lacks vision and power.
2nd March 2017 – Claudio’s Burden. The price of failure outweighs the price of success.
12th January 2017 – Shopping for Godot. A never-ending quest for value in Retail.
27th December 2016 – Reaching for Sky. Is Rupert Murdoch’s £10.75 per share a fair price?
6th December 2016 – Auld Lang Syne. A reminder from history of the damage that poor financial planning can cause.
1st December 2016 – Fork Handles? Four Candles? Tesco’s blurred strategic vision.
27th November 2016 – Football’s Instant Replay. Financial warning signals for the top English Premier League clubs