Is 'Old Style' Ownership still feasible or likely in modern football?

[topcat]

In answer to the OP: self-evidently, no. In the EPL, and before long, Serie A and La Liga too, the vast wealth offered by qualification for the CL will no doubt attract more and more overseas investors - and unhappily, as we've seen with Shinawatra and Abramovich as well as Romanov, what the lord giveth, the lord taketh away.

 

In many ways, the situation may be even worse for a club like Hearts. Most Jambos want to challenge and some day overcome the Old Firm, even if it's just for one solitary season: seeing the league flag fluttering over Tynie again is, surely, our collective hearts' innermost desire. But the sad reality is, even if the stadium is increased to 25 or even 30,000 capacity, the revenue the OF pull in mean the only way we can ever hope to challenge them is via an outside investor with seriously deep pockets.

 

Think of it. If I, or anyone reading this thread, were to win the Euro lottery, we'd already require ?20-30m, and quite possibly much more, to buy Romanov out. The club would remain heavily in debt - and on our gates, probably ?5m per year extra would need to be spent on the wage bill. It's completely unsustainable - and the fact that even lottery winners would effectively be priced out says it all about the direction modern football, even in a league as modest as the SPL, is heading in.

 

Of course, if there was ever an acceptance across our support of these realities, it might be possible for someone to take us over and just run us within our natural means. But bear in mind that without the excitement of someone making grandiose claims regarding our ambitions, crowds would fall back, making it ever harder not to run ourselves at a loss - and more than likely, however shrewdly the new man in charge were to run things, fans would get increasingly frustrated at our inability to go beyond 3rd place. "Lack of ambition! Fleecing the club of its stars!" And so on, and so on: indeed, it's this very criticism which may have prompted Chris Robinson to keep living beyond our means in the vain hope of finding a pot of gold at the end of the rainbow.

 

One thing though. However Romanov, Shinawatra, Abramovich or Mandaric might behave, it does not follow that all 'new' owners of football clubs will emulate their pigheadedness, highhandedness, arrogance and flat out stupidity. Indeed, it continues to astonish me that successful businessmen, who must, surely, have been prepared to take advice while rising to the top of their various professions, seem to treat owning a football club as a toy - when they'd have much better chance of enjoying success if they could only listen, learn, and leave it to the professionals. At Aston Villa, Randy Lerner has pumped in considerable amounts of his own money, not simply lumped it on the club's debt as at Man Utd, Liverpool or indeed Hearts, maintained (up until now, at least) a low profile, and allowed Martin O'Neill to get on with what he does best: namely, running and improving a football team.

 

If Lerner is able to behave with such good sense and respect, why shouldn't others be? My hope is that more new owners appear and follow his lead: in which case, the behaviour of the tyrants will seem more and more abnormal, and increasingly at odds with how successful clubs are run. Because frankly, there's only so much of this 'cultural clash' stuff I can take: yes, Romanov will have grown up in a very different environment, and has his own ideas. But dignity, manners and simple common sense are a universal language - and there's no reason at all why any owner, however powerful, however wealthy, shouldn't be able to speak it themselves.

 

Good analysis.

 

I hope you forgive my pernickityness in poining out that if I spend ?30m of my lottery winnings on buying Hearts I'm going to expect the debt to be largely cleared before I take ownership.

 

Romanov was able to buy a controlling shareholding in Hearts relatively cheaply, the whole company was valued at about half a Craig Gordon, what required serious financial clout was buying out HBOS.

 

Buying a club the size of Hearts is beyond yours or my means but one wouldn't need to have wealth running into the hundreds of millions. What you would need is a plan to ensure the business to at least came close to breaking even given the debt that needed servicing at the end of the CPR's reign there was a distinct lack of people who had that.

 

If we leave the specifics of the Hearts case for a minute...

 

Even buying a club like Manchester United didn't cost the ludicrously huge amount that was paid. The Glazers were able to borrow most of the money they needed as individuals and then transfer the debt to the club. Although that was a bit easier because Man Utd are generally very profitable so people would be willing to lend money on it.

 

Conventional economic wisdom would suggest that as the value of owning a firm is largely based on it's expected future profits and Football clubs in general aren't known for making big profits they shouldn't actually change hands for as much as more reliably profitable companies of similar size.

 

There are some extreme examples that support this, Leeds United changed hands for ?1 and even that was possibly overvalued.

 

However this is countered by the fact that people invest in football clubs for reasons that don't fit in with economists' usual models of rational economic behaviour. I remember in pre-premiership days reading an interview with someone who'd just taken over a 4th division (as was) English club and when he was asked why he said 'There are only 92 owners of League football clubs, It's amore exclusive club than the House of Lords'. Being the Owner of a Premiership club is now as exclusive as being a Duke.Buying a football club is an investment but it's also conspicuous consumption.

 

It's worth bearing in mind that the value of a company is determined by it's underlying assets as well as it's expected profits. This has particular importance for clubs whose grounds occupy valuable real estate. John Boyle was able to take Motherwell into administration, fob the creditors of with a pittance and then carry on playing at Fir Park because Fir Park is in Motherwell and Motherwell is a dump. If CPR had tried the same stunt then HBOS would have been on the phone to Cala in no time. In West London Chelsea and Fulham are probably the most extreme examples of clubs who couldn't really justify the use of such an expensive piece of land on business grounds in the 80s there were moves to merge Fulham with QPR and after Chelsea lost ownership of Stamford Bridge Ken Bates was able to buy it for the nominal ?1. it's hardly surprising that they've fallen into the hands of super rich hobbyists. Wimbledon were killed off precisely because Plough Lane was worth more than the football club and Brighton's long period of homelessness is at least partly due to the price of property in Sussex by the Sea.

 

These things couldn't happen in Hull.

[JamboSean]

I think Barcelona is the best example. Each supporter buys a share and votes for a president, who must own x ammount of shares. Every few years a new election takes place and a new president is decided. The money is a constant flow of supports re-newing their shares and season tickets.

[shaun.lawson]

Good analysis.

 

I hope you forgive my pernickityness in poining out that if I spend ?30m of my lottery winnings on buying Hearts I'm going to expect the debt to be largely cleared before I take ownership.

 

Romanov was able to buy a controlling shareholding in Hearts relatively cheaply, the whole company was valued at about half a Craig Gordon, what required serious financial clout was buying out HBOS.

 

Buying a club the size of Hearts is beyond yours or my means but one wouldn't need to have wealth running into the hundreds of millions. What you would need is a plan to ensure the business to at least came close to breaking even given the debt that needed servicing at the end of the CPR's reign there was a distinct lack of people who had that.

 

If we leave the specifics of the Hearts case for a minute...

 

Even buying a club like Manchester United didn't cost the ludicrously huge amount that was paid. The Glazers were able to borrow most of the money they needed as individuals and then transfer the debt to the club. Although that was a bit easier because Man Utd are generally very profitable so people would be willing to lend money on it.

 

Conventional economic wisdom would suggest that as the value of owning a firm is largely based on it's expected future profits and Football clubs in general aren't known for making big profits they shouldn't actually change hands for as much as more reliably profitable companies of similar size.

 

There are some extreme examples that support this, Leeds United changed hands for ?1 and even that was possibly overvalued.

 

However this is countered by the fact that people invest in football clubs for reasons that don't fit in with economists' usual models of rational economic behaviour. I remember in pre-premiership days reading an interview with someone who'd just taken over a 4th division (as was) English club and when he was asked why he said 'There are only 92 owners of League football clubs, It's amore exclusive club than the House of Lords'. Being the Owner of a Premiership club is now as exclusive as being a Duke.Buying a football club is an investment but it's also conspicuous consumption.

 

It's worth bearing in mind that the value of a company is determined by it's underlying assets as well as it's expected profits. This has particular importance for clubs whose grounds occupy valuable real estate. John Boyle was able to take Motherwell into administration, fob the creditors of with a pittance and then carry on playing at Fir Park because Fir Park is in Motherwell and Motherwell is a dump. If CPR had tried the same stunt then HBOS would have been on the phone to Cala in no time. In West London Chelsea and Fulham are probably the most extreme examples of clubs who couldn't really justify the use of such an expensive piece of land on business grounds in the 80s there were moves to merge Fulham with QPR and after Chelsea lost ownership of Stamford Bridge Ken Bates was able to buy it for the nominal ?1. it's hardly surprising that they've fallen into the hands of super rich hobbyists. Wimbledon were killed off precisely because Plough Lane was worth more than the football club and Brighton's long period of homelessness is at least partly due to the price of property in Sussex by the Sea.

 

These things couldn't happen in Hull.

 

Great post, TC - sorry I didn't notice it until now. Your point about some clubs being particularly screwed because of their location is excellent: as the follower of a non-league side in Middlesex, I know this only too well. So many famous non-league clubs like Enfield, Wealdstone, Tooting or Dulwich (not to mention league or former league ones like Barnet or Wimbledon) have found their lives become impossibly difficult because of the price of the land, and resultant obstructive behaviour of their local councils. Meanwhile, clubs from just outside the boundaries of the M25 - most notably, Stevenage (and Wycombe?) - have risen in their stead.

 

Would ?30m really wipe out most of Hearts' debt, though? I can't imagine Romanov being prepared to accept the same sort of figure as the club was valued at under Robinson - then there's both the debt he inherited, as well as the loans he's provided. I'm certainly not an expert when it comes to all this, so am not sure either way, but still... I also think there's a huge problem when it comes to guaranteeing near break-even sustainability, which could surely only be attained through a much lower wage bill; and would the fans be prepared to accept this? Certainly, the way our gates plummeted despite back-to-back 3rd place finishes under Levein seems pretty ominous to me: something that I felt occurred more than anything because the club openly abandoned any ambitions of challenging the OF.

 

So I suppose the conclusion might be that we wouldn't need someone ridiculously rich, but they would require pockets deep enough to buy Romanov out, and provide the minimum couple of million each year to keep us ticking over nicely? In which case, who would be prepared to put large amounts of their own money into backing a club with no realistic chance of reaching the CL, and in a league where there's precious little dosh floating around?

[Charlie-Brown]

Down with sticks and up with bricks

In with boots and up with roots

Its in with suits and new recruits

Its build......

 

[Charlie-Brown]

Would it be better (less shame) for Hubz had they never won the Scottish Cup ever than win it concurrent with the invention of the penalty box......?