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 I’m referring to the off the pitch action at Liverpool. Anything one writes about is dated as soon as it appears on screen. Newspapers have printed complicated diagrams showing who is out with whom (or still on good terms) at the club. The basic facts seem to be these:
• There has been an irretrievable breakdown in the relationship between co-owners George Gillett and Tom Hicks with Hicks taking his grievances to the press rather than the board
• Hicks won’t sell his shares to Gillett and vice-versa but they cannot sell to anyone else without the other’s consent
• Dubai International Capital continue their courtship of the club, talking to influential figures such as former players
It is difficult to forecast when or how the stalemate will come to an end. It would seem, however, that Hicks may not have the funds to realise his ambitions and may (although this is denied) need to cash to pay off other loans in the near future. In that case, he may decide enough is enough and sell out. But I wouldn’t bet on anything.
What Is Bolton Wanderers For?
That is the question posed by the Financial Times yesterday in an article on the Lancashire side's struggle against relegation from the Premiership which was boosted by an away win at Middlesbrough. The Pink 'Un is not particularly having a go at Bolton, but raising more general questions about modern football. The FT comments about Bolton: 'This is a team that embraced the mundanity of survival all else, and so laid bare what a sham much of modern football has become ... For them the game is only about staying on the merry-go-round another season and collecting another sackful of cash.'
As a Charlton fan, I have a particular perspective on the situation of teams like Bolton (who did better than we ever did by qualifying for the Uefa Cup). 7th in the Premiership was as good as it ever got (or is likely to get) for the Addicks, but the man who achieved that (along with the board), Alan Curbishley, was much criticised by the fans for 'mid-table mediocrity'. Well, better that than mid-table mediocrity in the Championship under Alan Pardew. The Premiership is the place to be because the quality of the football is much higher (the gap has widened since we were last in the second level) and at least you get a chance to see the top players live on the pitch rather than on television.
To return to the FT article, it states, 'The sad truth is that, in the modern financial climate, teams such as Bolton have no chance of winning the Premier League. They had no chance of even finishing in the top four. This begs the question of what the point of the club is. Surely, it is more than simply staying up? It's more than admiring a healthy set of accounts and hoping your side can squeak a couple of draws against the big teams and do enough against the rest to go through it all [again] the following year. Surely it's about the possibility of glory?' How can that glory be achieved? The FT sees the cups as the answer. 'Hopefully the upsets of the FA Cup this season will remind the smaller Premier League teams of what is possible. The cups - FA, League and Uefa - all offer the potential for glory, and if the pay-off for stretching for that is an increased risk of relegation, then surely it is a gamble worth taking.'
A club's finance director might not agree. But just looking at it in footballing terms, will the domestic cups head the way of foreign competitions where teams put out reserve sides? That already happens in the league cup. FA Cup sides are sometimes weakened and for the top four it surely comes after the Premiership and the Champions League? The media hype up the 'romance of the Cup', and getting to Wembley, even for the semi-finals, is a big thing for fans. But, at the end of the day, the Cup is a lottery and winning it is no indication of relative strength which is why it only gives a place in the Uefa Cup. Whether there are traditional solutions to the challenges of modern media and finance-driven football is a matter for debate.
The Strange World of the Administrator
Over the past decade more than 30 professional football clubs have entered administration. It is rare for there not be to at least one club in administration in the British leagues (currently Gretna and Rotherham). However, the special nature of football as a business means that club administration is far from a routine matter for insolvency practitioners. David Acland, a partner with Begbies Traynor, which has handled a number of football club administrations, told the Financial Times, 'With Wrexham, we have debated for ages whether to accept the appointment because of the effect all the hours spent dealing with media and customer fan enquiries would have on our mainline business. You can't delegate down responsibility for handling such enquiries, no matter how time-consuming they can become.' Given that, why take the business at all? It may be that its high profile means that a successfully completed administration could attract business in other spheres, although I must admit that I am not sure how one selects an administrator for a business in trouble. Certainly, I cannot recall an administrator going bust and some football fans resent the fees involved.
Nevertheless, they are well earned because of the particular challenges that football clubs present. Trade union representation is generally strong and Philip Long, head of corporate recovery at accountancy firm PFK (UK) describes football as 'the last bastion of the trade union movement.' The Football League's insistence that football-related debts such as outstanding player transfer fees and wage arrears are paid in full, meaning that so-called 'football creditors' invariably get the best deal going, especially if the club is sold as a going concern. The league is in a strong position because it decides whether the club can carry on in the competition it was in. Player redundancies are also rare. 'You cannot tinker with the workforce in general terms,' says Mr Acland. 'It is very hard to make redundancies.'
Yet footballers are not the only creditors with bargaining power. Service providers such as the police and the long-suffering St John Ambulance (who are generally owed quite large outstanding bills by clubs in trouble) also have influence since most clubs could not operate without them. 'There is generally little interchangeability in a football club's main suppliers,' says Mr Acland, 'So you have to take pains to offer them a reasonable deal.' Football clubs are also unlike other businesses in that they cannot be sold to a direct competitor. At PFK (UK), Mr Long has yet to detect any shortage of prospective 'white knights' for struggling clubs. 'There are always people out there who want to get involved in football,' he commented. 'It is usually somebody who has got some strange [sic] connection with the area.' Certainly the 'another bus along in a minute' principle seems to work when a club goes bust. There is always someone willing to turn a large fortune into a small one.
Finding a buyer is not the end of the story for the administrator. It can take a long time to secure regulatory approval for the change of ownership in terms of the 'fit and proper person test'. Mr Long recalled, 'In the case of Oldham Athletic, a buyer "came out of left field" in the shape of three "computer guys" from the American east coast, but the process dragged on. "We got them on the hook to buy it and then we had to trade it [the club] with their co-operation until we could complete the sale."' A final constraint is that because of the 'transfer windows' it is difficult to realise the full value of players. Realising that a 'fire sale' is on, purchasers will ask for a bargain price.
A Tale of Two Clubs
Football in Scotland's capital city of Edinburgh has always been overshadowed by the economic power of the two 'Old Firm' clubs in Glasgow, Celtic and Rangers. But now a gap is opening up between the two clubs in 'Auld Reekie' in terms of their perceived competence and image. This was exemplified by the bizarre behaviour of Hearts chairman Roman Romanov, the son of the club's majority shareholder Vladimir Romanov, at the annual meeting. He suggested that the Scottish Premier League was 'fixed'. He said, 'For a very long time in this country it is a fixed league where Rangers and Celtic win by 30 points. Ask yourself how many games this season have got screwed by referees? Five games is 15 points.' The latter remark was one of many he made which were not readily understood, but may have been a suggestion that officials only had to influence a few matches to determine the outcome of the league. Someone in the crowd then shouted at Romanov, 'you've made a **** of yourself', and for a time the meeting looked like descending into chaos.
Hearts insist that their ambitious project to deliver a £51m redevelopment of their Tynecastle stadium is still on course, despite fears over their finances that focus on their current debt of £36m. Edinburgh City Council, which is considering the club's planning application for the state-of-the-art 10,000-seater main stand, has yet to give its approval. Hearts admitted that negotiations over moving whisky from bonds situated just behind the Wheatfield Stand, as part of health and safety requirements, had prolonged the process. Senior figures at the City Council are said to have expressed increasing concern about Hearts' ability to deliver their side of the redevelopment deal. The club claims that the stadium would mean an extra £2.5m a year in ticket revenue.
The situation at Hearts' rivals Hibernian offers something of a contrast. Hibs is in robust good health, with debt reduced, a £5m training centre about to open and steps being taken to complete the redevelopment of Easter Road with the building of a new East Stand which will take capacity to above 21,000. However, this position was only reached by taking some tough decisions when the club faced up to a record loss of £2.8m some six years ago. Hibs awoke to the reality of the situation ahead of many of their rivals, instigating a 'root and branch' review of all aspects of the club's business aimed at achieving break even. Now the club's finances are rock solid after reporting three successive operating profits.
Football Economy is a monthly article about the business of football by Wyn Grant, the publisher of footballeconomy.com. |
