Football club ownership is about to widen the chasms in the game

WITH Manchester United and Liverpool now on the market, both valued at well over £ 3 billion, another tranche of English football is about to move into the hands of investors from either the Middle East or the United States of America. As it stands, it looks as though both clubs may become part of the asset portfolio of an oil state, which would probably take both clubs to a comparable level to Manchester City and Newcastle United. The competitive advantages that Manchester City have may become eroded and two of the clubs that have complained vehemently about the uneven playing field that state ownership creates will move much closer to their despised rivals. It’s a contemporary version of “if you can’t beat them, join them”.

If, as expected, the new owners of Liverpool and Manchester United emerge as Middle Eastern petrostates, it reinforces the strength of both clubs and also becomes a wedge between them and those scrambling below. In other words, the already substantial gulf becomes wider as more clubs become beneficiaries of Arab money. The protests over Newcastle United’s takeover by the Public Investment Fund (PIF) sovereign wealth fund will surely be replicated in Liverpool and Manchester. Or will they?

Levels

Club ownership now has a kind of league table of its own. The Middle East is top of that league as the owners rarely want much in return. They see a successful football club as good for their image, something which can provide positive public relations, enhance their relationship with football authorities and help smooth the path of business. Call it sportswashing, manipulation or disingenuous, but a club owned by a country with a challenging reputation will undoubtedly receive lots of money. Roman Abramovich had a similar relationship with Chelsea, although his one big requirement was the indulgence of impatience. Managers were not allowed to “fail” but Chelsea fans consider the Russian was a good owner, delivering plenty of success.

The second level of ownership comes from the United States, a growing group of investors who are very different from the oil states. Arsenal, Chelsea, Liverpool and Manchester United, among others, are in this group at the moment. Typical US sports team owners demand success on the field, but they also want to run their club as a fairly sensible business, use modern methods to buy and sell players and they also expect some sort of return from their investment. If things go well, the fans sing the praises of the owners, but as soon as success dries up or becomes more spasmodic, criticism of the owners’ lack of investment or financial priorities starts to dominate the narrative. Arsenal fans were very vocal and demonstrative about Stan Kroenke over the past couple of years, but with the Gunners flying high and playing well in 2022-23, the noise appears to have subsided. Kroenke’s name has barely been in the press this season. Fenway were praised when Liverpool won the Champions League and Premier League, but recently there have been suggestions they should move on. Manchester United’s dislike of the Glazers dates back to the very beginning of their relationship, but with almost a decade of aimless wandering, the popularity of the US family has never been lower. It was no surprise when the news was released of the Glazers’ desire to look at fresh investment in the club, a comment that could be translated as, “we want to sell”.

For the few

The sale of Chelsea to a consortium fronted by Todd Boehly, for a very lucrative price, has been the catalyst for a number of potential divestments in the game. At the very top, football clubs are very cash generative and they can be good for your image, although the vast majority of football followers can see the  agenda of countries who want to deflect from criticism of their human rights record and social/political conditions. Sadly, football sells its soul all too cheaply and too many fans choose to ignore the moral hazards of aligning clubs with regimes that discriminate on a grand scale. The winning of silverware should not be more important than the crimes and misdemeanours of intolerant societies. It is also wrong to turn a blind eye if its suits your own purposes.

Modern football is a capitalist game that relies on the generosity of benefactors and investors. Clubs no longer “belong” to fans, apart from those that are bespoke fan-owned models. If you open yourself to the benefits and perils of the free market, then you have to take your chances. Manchester United benefitted from their forays into the capital markets back in the early 1990s and this helped create the empire that dominated football until the departure of Sir Alex Ferguson. But in doing this, the club also became an asset that could exchange hands and be the subject of takeovers or hostile takeovers.

The Glazers reputedly used a technique known as a Leveraged Buyout (LBO) when they bought United, loading debt onto the club borrowed to acquire their stake. While this was a much-used method for M&A markets, it was largely unknown in football at the time.

With clubs now worth far more than they ever were, prospective buyers start to become scarcer and in those circumstances, the net has to be cast wider and into territories that may not be wholly compatible. A club worth £ 4 billion only has so many takers and the appetite will also be largely governed by macro-economics as much as personal wealth.

The more owners of the type that have made Paris Saint-Germain and Manchester City into clubs with extraordinary resources, the more football leaves behind its past and solidifies the elite. Fans may complain about their owners and also those rivals that have unfair advantages, but deep down, they really want their own club to enjoy the same sort of status and that often means some have to eat their words. Be prepared for campaigns of justification in the weeks ahead if the Middle East rolls into town once or twice more.

A messy end to a golden era for Juventus

IT’S ALWAYS a mystery why seemingly intelligent people continue to flirt with financial malpractice in this age of intense technological scrutiny. Even the most cunning criminals and canny operators are invariably found out by governing bodies, the law or accountants. This leaves you wondering how professional people can either be so stupid or careless, not to mention occasionally dishonest.

Juventus are in the spotlight again for suspicions over their financial reporting. It’s not the first time the club has been in trouble, their current era of success came after the so-called Calciopoli scandal which involved the illegal selection of favourable referees, among other breaches. Juve were stripped of their 2005 title and were relegated to Serie B.

Juve enjoyed a run of spectacular success from 2011-12 to 2020-21 which included nine scudettos and five Coppa Italia victories. They also reached two UEFA Champions finals in 2015 and 2017 in which they lost to Barcelona and Real Madrid respectively. Juventus were, supposedly, the only Italian club that could seriously challenge the Spanish giants and Bayern Munich, but they were well beaten in their two finals.

Under president Andrea Agnelli, Juve not only won trophies, they also became a more modern, forward-looking club, moving to a new stadium which they owned, giving them a competitive edge over their domestic rivals. They also grasped the marketing bug and relaunched their brand, including a controversial new corporate logo. In 2018, they thought they were sending a signal of intent to European football by signing Cristiano Ronaldo, but in truth, his arrival marked a gradual decline in their fortunes. If CR7 was supposed to be the catalyst for UEFA Champions League success, it didn’t work and he left in 2021 with Juventus’s team clearly past its best.

Agnelli and the rest of the board have resigned amid concerns over the club’s financial practices. Among the questions being asked are the valuations of players in some transfers, such as exchange deals, and the arrangements over player wages during the height of the pandemic. But after investigations by the public prosecutor’s office in Turin and Italian market regulator Consob, Juventus have had to change the way in which they accounted for player payments for the financial years ending June 2020 and June 2021. Players had agreed to waive part of their salaries because of Covid-19 and later agreed “loyalty” bonuses. Consob believes the club has yet to show the logic behind the fair value ascribed to players in transfers with other clubs. Agnelli and 15 others at the club have been investigated but the saga is likely to run for a while as it’s still early days.  As they all resigned, the club continued to deny any wrongdoing, but Agnelli admitted there was a lack of unity which undermined the management of Juventus. The club has, apparently, agreed to amend its accounts for 2021-22.

The pandemic was tough for Italy’s top clubs and in the past two seasons, Juventus have made pre-tax losses of € 460 million and has generated a deficit of over € 600 million in the past five years. At the same time, their wage bill in 2021-22 absorbed 85% of income and their net debt now totals more than € 150 million, a substantial amount but over € 200 million less than the 2020-21 season. In 2021-22, the club had to raise € 400 million from its shareholders, taking the total of fresh equity raised since 2019 to over € 700 million. Investors and the market are not impressed, however, and the stock price fell on the news of the resignations. In 2022, the Juventus share price has dropped by almost 40% and the club’s market value is now around € 700 million.

What will the future hold for Agnelli, whose family’s listed vehicle, Exor, is the majority owner of Juventus? His ambitions have been battered by a series of setbacks, notably the ill-fated European Super League project, which meant he had to step away from the European Club Association and UEFA.  As for Juventus, the current season has been troubled, from a poor start to the campaign to an early exit in the UEFA Champions League. And this new scandal really highlights the danger of flying too close to the sun. Icarus may have been Greek, but he has been soaring over the city of Turin for some time. The question is, how long will it take for Juventus to repair its reputation once more?