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 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 from £218 million. They paid £5.000 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 in design and administrative fees of their stadium plans, it was never built. In 2010, it was revealed that the holding company, Kop Holdings Limited, that Hicks and Gillette set up to buy the club, was 350 million in debt, by the end of their tenure, it was reported that they were paying £30 million 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 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 Henry and FSG pays £300 million to become total shareholders of the club, pledging to operate in a sustainable manner. Throughout their tenure, all borrowing has come in form of interest-free loans directly from the owners. In this period, they also converted £69 million 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 money into Liverpool. In May 2015, the club recorded a £297.9 million turnover for the 2014/15 year. 16.5% up on the previous year and 61% up since their takeover. A £122.6 million of this was broadcast revenue, 21.5 % up on the previous year and 54% up since their takeover. A £116.3 million was commercial income, 12 % on 2014 and 87% up on 2010 and finally, matchday income was £59 million, 15.9 % up on 2014 and 38 %up since 2010.
They also recorded a 60 million 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 of the league, only behind Chelsea, Arsenal, Manchester City and Manchester United, and they are over a £100 million ahead of Tottenham.
They've increased their commercial revenue through sponsorship deals with Subway and Dunkin Donuts, using their American connection and through their £25 million per season kit deal with New Balance, their shirt sponsorship with Stander 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 in stadium expansion. Anfield’s new capacity will be 54 thousand, up 8.5 thousand. This projected to increase matchday revenue by £20 million per season and increase commercial revenue £5 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 rumors 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.
Ali AMADGHOUS
Football Management Expert