You have sold some shares and
you’ve got some money to spend. Now you want the ultimate: Your own football
club. Hold on there, are you sure? Football clubs are a nightmare to run. In
fact, almost two-thirds of premiership clubs have been in receivership at some
point. Remember Portsmouth FC ploughed through four owners some seasons back
and landed itself a debt of £60m and relegation in the Championship....
Think of Leeds United’s
tragicomic collapse; the balls-up at Cambridge United; Rotherham going into
receivership in 2006 and 2008; Southampton’s sorry saga. And, of course,
Crawley Town getting a winding up order years back. So, what do we know? Don’t
buy a football club for the glory. So, before Dangote aspires to join
Abrahamovic, Glazers and Al Mansours, he should make sure he knows his stuff.
But does Dangote know how much
these football clubs really cost?
It is often mistaken that these
clubs go for a quid. For instance, Swansea City was bought by investors for
£100, and sold four years later for a £1. But beware: underneath those figures
lies a pile of debt.
Does Dangote have the cash, can
he do an Abramovich?
No, he can’t. New UEFA Club
Licensing and Financial Fair Play Regulations already in place, require clubs
to balance their income and expenses. Dangote cannot operate under such rules.
The premiership is too organized and transparent for any businessman to easily
manipulate. The wage structure of footballers is too large for a businessman
like Dangote to take on. Let us forget that those goons at Forbes have told us
that Dangote is Africa’s richest man. As it stands, he cannot afford the
outright purchase of a big football club like Arsenal. It is as simple as that.
He will go broke. It is a possibility if we are talking about a club in the
coast of West Africa. Dangote has most of his wealth in shares and physical
assets and the football business requires liquid cash to sustain. Have we a
ll forgotten that the same
Dangote got a 3G licence and sold it to Etisalat? He is a very smart
businessman who knows how to pick his areas of investments.
Can he get Bank backing?
Unlikely! No serious private
equity firm would get involved with a football club. They are not proper
businesses. Too much politics, too many egos. And there’s no proper exit route
– the history of football clubs on the stock market is checkered, to say the
least. They are rich men’s toys, great for entertaining your mates, and that’s
about it. I don’t think Dangote can afford such an expensive toy.
A lot of people think it is
relatively easy to make a million pounds by being the owner of a football club.
That all you have to do is put in that first two million pounds. But these
people should also know that since the English Premier League was formed in
1992, football finances have dried up to the extent that making a million pound
profit is no longer a walk in the park. It is also the case that buying a
football club is unlikely to yield that much of a return. Despite the
significant TV and other commercial revenues, football clubs in England’s top
flight still struggle to break even. This is ironic, given the goal of setting
up the Premier League was to stabilize club finances.
Is Dangote putting his heart over
his head?
Yes I think so. Simon Jordan, in
his autobiography, tells the story of how owning a football club can go
terribly wrong. Jordan amassed a fortune of £75m in the early days of the
mobile phone revolution. In 2000, he paid £10m to take control of South London
football team Crystal Palace, becoming the youngest football club chairman at
the age of 32. He was warned by many not to do it, but having watched the club
since his childhood, he could not resist. Fast-forward 10 years and the club
was in administration and Jordan’s personal wealth largely wiped out. It is
reported that Roman Abramovich, the Russian owner of Chelsea, has written off
more than one billion pounds he ploughed into the club since acquiring it in
2003. Catching him up fast is Sheikh Mansour from Abu Dhabi, who has invested
close to one billion pounds in Manchester City since 2008. Can Dangote write
off such a huge amount of money? It is in fact the amount of money he borrows
to invest in businesses. But again, I think Dangote is just trying to hype
himself. Most of the serious money flowing into football recently has come from
the Middle East. The Qatar Investment Authority (the country’s sovereign wealth
fund) bought the French Ligue 1 side Paris St Germain in 2011 and has gone
about transforming them in the same way Sheikh Mansour has Manchester City.
Forget those guys at Forbes, Dangote is not in the same league as these guys.
The Glazer Family bought
Manchester United in 2006, recognizing the immense value of its global brand as
a cash generator and the opportunities to enhance it even further. The cost of
buying the club was loaded on to the club itself, with the revenues it
generates used to pay the debt and interest that the Glazers undertook to buy
the club. Eventually, the hope is that the club will essentially pay for itself
leaving its American owners in possession of a multi-billion pound asset but
till date, the Glazers are still gnashing their teeth and are still neck deep
in debt. When it was speculated that a Middle East consortium was willing to
pay £1.5bn for Arsenal Football Club, it was stated that Stan Kroenke, the
American who owns about 63 per cent of the shares in the club, would have made
just £400m on his shares. So, given the appalling financial returns, why do
people buy football clubs?
Who can buy Arsenal football
club?
Anyone can buy Arsenal football
club, but that anyone doesn’t include anyone who obtains bank loans to fund a
business. Sir John Madejski, chairman of Reading Football Club, describes the
ideal football club owner as having deep pockets, mercurial, and not
faint-hearted.
Credit: PUNCH
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