Traditionally football clubs weren't renowned for making money, but with the
influx of additional commercial and broadcasting revenues, Premier League
clubs are now largely recording profits. This has attracted interest from
overseas investors and, very recently, this interest has often come from China.
Reports have linked one such Chinese conglomerate, Everbright, with the
potential takeover of Liverpool Football Club. Liverpool's Chief Executive, Ian Ayre,
has repeatedly stated that the club is 'not for sale', but to assess whether
Liverpool could benefit from a takeover we need to examine their recent and
current ownership. The club are currently owned by John W Henry's American company,
Fenway Sports Group, but to put his tenure in context, here's a brief history of
their previous owners, the Americans, Tom Hicks and George Gillett. Hicks and Gillette
bought Liverpool in 2007 for £218,9 million pounds. They paid £5,000
pound per share, a Hundred and Seventy 4.1 million in total and 44.8 million to
assume the club's debts. Throughout the process the pair reassured fans that there
was no debt involved in their takeover and that they weren't doing a 'Glazer'.
This was untrue. Their leveraged buyouts saw them borrow a hundred and seventy 4.1 million
pound to buy the shares. 11 million to pay the banks and advisors. 44.8 million
to absorb the club's pre-existing debts and 70 million with a view to building a
new stadium and to cover the general running costs of the club. They bought
the club without spending any of their own money and despite paying a further
35 million pound in design and administrative fees on their stadium
plans,
it was never built. In 2010
it was revealed that the holding company, Kop Holdings Limited, that Hicks and
Gillett set up to buy the club, was 350 million pound in debt. By the end of
their tenure it was reported that they were paying 30 million pound in interest
fees alone on their debts a year, close to a hundred thousand pound a day. For
this reason, their average net spend on transfers in those three years was only
10 million pound per season. They took the club to the brink of administration
and were taken to the High Court by their main financiers the Royal Bank of
Scotland and forced to sell the club. In 2010, John W Henry and FSG paid 300
million pound to become total shareholders of the club, pledging to
operate in a sustainable manner. Throughout their tenure all borrowing
has come in the form of interest-free loans directly from the owners. In this period
they also converted 69 million pound of that debt into equity, money that the
club will never have to pay back. Unlike Hicks and Gillett, FSG has injected large
amounts of its own money into Liverpool. In May 2015 the club recorded a 297.9
million pound turnover for the 2014-15 year. 16.5 percent up on the previous
year and 61 percent up since their takeover.
A Hundred and 22.6 million of this was broadcast revenue, 21.5 percent up on
the previous year and fifty-four percent up since their take-over. A Hundred and
16.3 million was commercial income, 12 percent up on 2014
and eighty-seven percent up on 2010; and finally Matchday
income was 59 million pounds, 15.9 percent up on 2014 and
thirty-eight percent up since 2010. They also recorded a 60 million pound profit
for the year, the highest of any Premier League club, and it was only the third
time the club had done so since 2004, although it should be pointed out that
this was largely to do with the sale of Luis Suarez. They have the fifth highest
turnover in the league, only behind Chelsea, Arsenal, Manchester City and
Manchester United, and they are over a hundred million pound ahead of Tottenham.
In 2014
Liverpool recorded their net debt at 57 million pound, down from 237 million
pounds in 2010. The club are in a significantly healthier financial
position under FSG's ownership. Admittedly to achieve this position the club have had to
endure the sales of their best players. Incoming transfer fees for Luis Suarez,
Fernando Torres and prospectively for Raheem Sterling and Christian Benteke
have inflated the club's overall profits.
Although their average net transfer spend throughout FSG tenure is actually
30 million pound a season. Ayre has admitted that without those funds the
club would be closer to breaking even
rather than in profit, yet suggests that breaking even reflects the
underlying growth of their commercial income, the best way of sustaining the
club long-term.
They've increased their commercial revenue through sponsorship deals with
Subway and Dunkin Donuts, using their American connection and through their 25
million pound per season kit deal with New Balance, their shirt sponsorship with
Standard Charter is up for renegotiation in 2019, at which point the club will
likely sign an improved deal. In 2015 FSG also invested 49 million pound in
stadium expansion. Andfield's new capacity will be fifty-four thousand, up
eight and a half thousand. This is projected to increase matchday revenue
by 20 million pound per season and increase commercial revenue five million
through additional sponsorship. Where they fall short is in their failure to
continue qualifying for the Champions League. Liverpool have earned from 85 to 155
million less than the four bigger clubs in this period,a huge potential source of
income.
So amidst the rumours of a takeover bid, FSG have again stated that the club is
not for sale.
More importantly, their actions by way of investment, have illustrated this
long-term commitment. Yet Ayre had admitted that for the right investment, they would
be open to a partner in the form of a minority stake holder. If Everbright or a
similar chinese conglomerate would consider this, it could help Liverpool
further increase their commercial revenue through Far Eastern channels
such a partnership would open, but at this point a takeover bid is unlikely.