Investment - why can't we get any...

[Rushian]

With the size of Liverpool we don't need an investor though, it'd have to be a "super investor" to take us over hence the reason the "little clubs" are getting picked off. Chelsea were incredibly vulnerable because of their debt situation and what the Glazers intervention will mean for the Mancs long term no one knows.

[Knox_Harrington]

Doesn't supporter ownership run into the same problem as anything else though? Getting the club off Moores, that initial outlay. It would take an act of benevolence almost unheard of in modern football, for Moores to hand the club, i.e. his 51% over to a supporter's trust and then set up a socio model. It also begs the question about what then happens to the shares in the other 49%.

[surf]

From an investment point of view I would have thought buying a mid-table club such as Villa or West Ham is a better option than buying an established club like ours.

 

I disagree. ManU are valued at 6 times what we are, it should be realistically possible to build revenues and profits at least in the region of what they have. Speaking from a business point of view, there's plenty of room for growth.

[Falconhoof]

Doesn't supporter ownership run into the same problem as anything else though? Getting the club off Moores, that initial outlay. It would take an act of benevolence almost unheard of in modern football, for Moores to hand the club, i.e. his 51% over to a supporter's trust and then set up a socio model. It also begs the question about what then happens to the shares in the other 49%.

 

 

There's no-one more likely to pay David Moores what he thinks his shares are worth than the fans. Many of whom sacrifice other areas of a well-balanced life, just to be able to watch the team play. I don't think you'd have any problems meeting any share allocation.

 

The shares in the other 49% either stay in their current ownership or they have the chance to sell them to registered fans (members).

[Guest Paris 81]

When did the mancs get any investment? I thought they were 300 million in debt?

 

I'm guessing those other smaller clubs are attracting investors because they are available at a much lower price, with more room to expand and make profit. I.E. Chelsea who were almost bankrupt.

 

We on the other hand are already a well run succesful club, so it's more difficult to attract prospective investors, apart from the money laundering billionare Russian types and I'm sure Moores is loathe to sell our history and future to one of those dodgy types, and we should be thankful for that.

[Knox_Harrington]

There's no-one more likely to pay David Moores what he thinks his shares are worth than the fans. Many of whom sacrifice other areas of a well-balanced life, just to be able to watch the team play. I don't think you'd have any problems meeting any share allocation.

 

The shares in the other 49% either stay in their current ownership or they have the chance to sell them to registered fans (members).

In the Barcelona model though the idea is that every supporter pays about twenty quid I think to get a years membership and gets benefits. To pay Moores what his shares are worth, say £50m which is very optimistic, means getting 2.5m paying members before you can entertain the notion of buying him out. That's ludicriously ambitious and can only be achieved with Moores' and the club's help. I'd argue that raising the price to something like £250 undermines the spirit of such a scheme and more than likely undermines the possible success.

 

Those other shares, if all decisions are made through the elections which they obviously should be, become inherently useless/worthless and undermine a membership scheme - you can't have shareholders have priority above paying members (again, undermines the spirit) nor can a traditional boardroom model hold sway. If a member gets elected to run the club then he should have complete autonomy with reference to who gets which job within the structure of the club.

 

I think it can be done, I'd like it to be done but it ultimately relies on someone, whether Moores or someone else, handing the club over to the supporters for free.

 

I could, however, be talking utter s**** but it seems logical to me!

[spencer]

Does anyone seriously want the likes of the Glazers, Abramovich, or Beresovsky running the club?

 

It's not just the money, it's also the right people and I'd rathe carry on as now than see the club sell its soul to the highest bidder.

 

We are a very successful club at the moment with every prospect of great years ahead after making some shrewd signings in the transfer market; I don't see any reason tp panic or cry doom and gloom.

 

As for West Ham - they may think signing the two Argies a wonderful coup - but wait till the devil comes to claim his due.

[LFC Montana]

The problem with the Barca model is that it is also the model used to run Real Madrid ~ the biggest gobs***e with the loudest mouth (we are going to buy so and so) is usually the one elected. This takes the process of planning player acquisition out of the hands of the manager and into the hands of the President/Sporting Director (at least every 4 years it does). With that sort of model in place 2 years ago, it would be very unlikely that we could have hired Rafa, since he bridled at the interference from the Valencia board and wanted to control all the team related matters.

 

It sounds utopian, but lets face it, football fans by and large are a fairly fickle bunch. A President looking for re-election in a popularity contest is going to be firing managers every season if things don't go well, just as Real have been doing the last few years. Its hard to build foundations at a club with those kind of constraints.

[Tim]

When did the mancs get any investment? I thought they were 300 million in debt?

 

 

double it and add some

[Keita]

teams like Tottenham, Portsmouth, Villa now West Ham (not to mention Chelsea and the Mancs) seem to have little trouble in attracting investment interest.

So, why can't we as the most successful club in English history, one of the 5 most successful in European history and a massive global brand with a famous world wide fan base attract the investment that the club is so obviously seeking?

 

it seems incredible to me.

 

 

attracting investment isnt the problem, its the sort of investment and the terms of it. People want something back like complete control, something Moores doesnt seem to want to do.

[Guest Portly]

I'm quite happy with things the way they are. Abramovitch is a one-off as far as investors are concerned. A more typical investor is a very hard-nosed businessman who will want to maximise the return that he gets on his investment. This would change the nature of the club - ticket prices would go up for a start.

 

I think most fans will agree that with Benitez as manager under the Moores/Parry regime we have been doing pretty well of late, and this summer we have signed some excellent players at pretty sensible prices. It's not only Chelsea but United who pay through the nose for their players - look at Rio Ferdinand £30 million and Carrick £18.5 million. Agger is at least as good as Ferdinand and Alonso is better than Carrick.

[David Hodgson]

From an investment point of view I would have thought buying a mid-table club such as Villa or West Ham is a better option than buying an established club like ours.

 

What a world wide brand that is hugely underselling itself ?

 

You're right inasmuch as it seems the only way would be up for share prices in a club like Villa, but Villa are valued at what ? £80m ? We're valued at £200m-ish ? Surely we'd be a good investment at that sort of price.

 

The problem is that putting Rick parry in charge of looking for a new investor/owner is liek putting a turkey in charge of Christmas.

[owenthomas]

The problem with the Barca model is that it is also the model used to run Real Madrid..

that's an excellent post, very good points..

[Guz]

We've done alright transfer wise this year. Who says we NEED it? We're already well on the path to better money management. And the team *should* continue to be successful.

 

This is Liverpool football club, not West Ham or Villa. We can afford to be choosy & patient. It's not like we're suffering greatly on the pitch is it?

 

By the looks of things we need the money for a new stadium. But no one is going to turn up on our doorstep and say "Here, have £xm, do whatever you want with it, call the stadium whatever you want and just mention my name a couple of times". Any potential investor of significant proportions is surely going to want to have a significant say in the running of the club and that's a worry for everyone - from the boardroom to the supporters.

 

Small clubs like Villa are so dried up of success they'll take whatever they can. As you say, we can afford to be a lot more picky about who we want to sell the club onto, especially considering it's the biggest decision the club will have had to make for years.

 

I don't get it though sometimes, people mock Chelsea and the mancs (~2000) for splashing out huge amounts of money on players and "buying the title" but expect our club to effectivley be able to fund whatever the manager wants. Almost as if we have enough money to buy whoever we want (within limits) but only spend a certain amount just so we dont buy the title. It's too perfect to be true.

[richt71]

What a world wide brand that is hugely underselling itself ?

 

You're right inasmuch as it seems the only way would be up for share prices in a club like Villa, but Villa are valued at what ? £80m ? We're valued at £200m-ish ? Surely we'd be a good investment at that sort of price.

 

The problem is that putting Rick parry in charge of looking for a new investor/owner is liek putting a turkey in charge of Christmas.

 

The problem seems to be reading from the echo today that there are parties that will buy the whole club and invest in the stadium but not pay the full price of £200m for the club plus the other £150m+ for a new stadium.

I guess if we don't want huge debts hanging over us and want the full £350-£400m purchase/stadium then it narrows who can invest in us rather a lot!

[Guest Paris 81]

I don't get it though sometimes, people mock Chelsea and the mancs (~2000) for splashing out huge amounts of money on players and "buying the title" but expect our club to effectivley be able to fund whatever the manager wants. Almost as if we have enough money to buy whoever we want (within limits) but only spend a certain amount just so we dont buy the title. It's too perfect to be true.

 

Liverpool fans are a complex lot. Probably the hardest-to-please fans in football.

[Eskimo]

I disagree. ManU are valued at 6 times what we are, it should be realistically possible to build revenues and profits at least in the region of what they have. Speaking from a business point of view, there's plenty of room for growth.

 

No reason to think not. However, as an investor can you tell me "when will I see a return"?

[fyds]

I disagree. ManU are valued at 6 times what we are, it should be realistically possible to build revenues and profits at least in the region of what they have. Speaking from a business point of view, there's plenty of room for growth.

Man utd were £663m in debt before thi transfer window and climbing.

 

I can't believe we're still having this debate. If someone wants to come in and pay Moores and the existing shareholders the market value for thier shares, fund the new stadium nad give Rafa a bigger pot to buy from, we're looking at an initial £500m. Anyone who can't see why that limits the possible options when added to our traditions and history just isn't looking hard enough. MSI baulked at buying Arsenal a few years back because THEY were too expensive.

 

Given all this, we either have to find a willing version of Robert Kraft (given what we know about his finances and ethics), or re-invent the whole system to suit our particular needs.

 

Well run clubs (such as ours) have become beyond the means of a fans buyout since the advent of Premiership finances - the barcelona model looks good on paper, but is not a feasable option in this current market for a club of our size.

[Eskimo]

What a world wide brand that is hugely underselling itself ?

 

You're right inasmuch as it seems the only way would be up for share prices in a club like Villa, but Villa are valued at what ? £80m ? We're valued at £200m-ish ? Surely we'd be a good investment at that sort of price.

 

The problem is that putting Rick parry in charge of looking for a new investor/owner is liek putting a turkey in charge of Christmas.

 

That's part of the problem IMO we are already an established brand (I hate that term). It takes a hell of a lot to maintain a brand status and even more to grow it whilst it would potentially be easier to reposition a brand such as Villa with less outlay.

 

Setting aside the new stadium there is very little room for improvement in the club IMO selling a few more shirts in the US would not make any real difference to the balance sheet although some believe otherwise So what are the options, well there is only one really and that's to build a new stadium which means another £200m so we are up to £400m-ish.

 

Right so club and stadium sorted now we need to be succesful on the pitch ah well that requires more money cos my manger wants top quality signings lets say another £100m up to £500m-ish now. As I said to surf "when will I see a return"? Short of finding a cashed-up die hard red who is willing to invest lets say £500m and is not worried about making an immediate return as he's gonna stick it around for 10-15 years what can you do?

[Knox_Harrington]

The problem with the Barca model is that it is also the model used to run Real Madrid ~ the biggest gobs***e with the loudest mouth (we are going to buy so and so) is usually the one elected. This takes the process of planning player acquisition out of the hands of the manager and into the hands of the President/Sporting Director (at least every 4 years it does). With that sort of model in place 2 years ago, it would be very unlikely that we could have hired Rafa, since he bridled at the interference from the Valencia board and wanted to control all the team related matters.

 

It sounds utopian, but lets face it, football fans by and large are a fairly fickle bunch. A President looking for re-election in a popularity contest is going to be firing managers every season if things don't go well, just as Real have been doing the last few years. Its hard to build foundations at a club with those kind of constraints.

Yet Madrid won the European Cup once under Perez as well as the league. And he was re-elected once. In latter days he was a disaster and I don't think that system is perfect. While I take the point there's no reason why certain ground rules couldn't be set in the run-up to any hypothetical socio election at Anfield. No discussion or contact with potential transfer targets for instance. And you could offer seven year terms, say, so a chairman could plan for the entire stretch rather than be fickle. Laporta never sacked Rijkaard when times were tough. Barca got the right man. It doesn't (and shouldn't) be identical to the Spanish model but is a way of continually raising income whilst maintaining the traditions of the club.

Well run clubs (such as ours) have become beyond the means of a fans buyout since the advent of Premiership finances - the barcelona model looks good on paper, but is not a feasable option in this current market for a club of our size.

The only reason it isn't a feasible option is the first step, that of buying Moores out. If that can be solved, and I can think of a couple of ways though they do rely to some degree on Moores' benevolence, then they become increasingly feasible.

[Flight]

I don't get it though sometimes, people mock Chelsea and the mancs (~2000) for splashing out huge amounts of money on players and "buying the title" but expect our club to effectivley be able to fund whatever the manager wants. Almost as if we have enough money to buy whoever we want (within limits) but only spend a certain amount just so we dont buy the title. It's too perfect to be true.

 

 

I dont think thats what most people are getting at.

 

I am very critical of the financial and strategic management at the club (as the folks you are talking about are) but happy with this summers transfer business. Best summer since the early 90's of Digger and Beardsley. Whats under discussion here isnt massive amounts of money to fork out silly sums on players, but necessary financial investment to ensure the mid and long term financial stability of the club ie get the new stadium built.

 

Lets not forget the stadium will be just that - an investment. Not only will it pay for itself but will bring in mid to long term profit, financial stability and growth for the club.

[RP]

I disagree. ManU are valued at 6 times what we are

 

 

I'd like to see the numbers to support that claim.

[Tim]

I think there are alot of people who are getting a bit mixed up in the search for investment and the link it has to a new stadium.

 

Yes the search for investment is linked to the new stadium, but I don't believe it is in such a way that people have been suggesting.

 

The stadium project is completely self financing in the models the club will be using, ie the profits generated each season from increased ticket sales (in league games only, as they are the only guaranteed games) exceeds the annual repayments if the entire project was funded by loans. It is even more self financing if a sponsor was to be found.

 

Based on current ticket prices the projected (top end estimate) increase in revenue from the new stadium (league ticket sales only) would be in the region of £25m. If we made the group stage of the european cup each season and sold out all three games each season this would bring in approx £1m to £1.25m per game in ticket sales. Total being upto £3.75m for the group stage only.

 

If the club were to get a stadium sponsorship deal, of the same value arsenal have, that would bring in an extra £3m per season. Thus bringing the increased revenue to £28m per season. With group stage sell outs it could go as high as £31m per season.

 

Now on loans of £200m (at a rate of 6%, that's about 0.75% higher than arsenal's debt is at) the annual repayments would be £15.6m per year over a 25 year term, or £20.5m per year over a 15 year term.

 

Now as can be seen the loan repayments (depending on structure agreed, but using a mortgage P&I, daily rest, repayment structure as a base) are easily covered by the projected increase in revenue. However that is in a best case scenario. What the club will have also been looking at in their financial models is what effect would there be if the ground didn't sell out regularly. This is where the stadium sponsorship and part of the reason for investment comes into it. What the club need to ensure is that if the stadium isn't full week in week out can the interest payments (at the very least) be met.

 

Now the other reason I believe the club decided to look for investment was to do with the cashflow of the club during the period of construction. What the club don't want to do is take out loans for them to have the effect that it reduces the transfer budget due to having to meet interest payments. Getting investment in helps the club two ways. One, if some of it is used as capital for the project it reduces the debt burden and thus the interest payments. Second it can be used to give the club some vital working capital while construction is going on. With this the club can then ensure that Rafa gets the transfer budgets he would get were the stadium not being built (ie a budget like this summers) while being able to meet interest payments.

 

There are three very important issues that have occurred since the club got planning permission 2 years ago.

 

1st. Arsenal obtained a £3m per year stadium sponsorship deal. This gives LFC the chance to explore getting either a deal of similar value, or to get an increased deal.

 

2nd. Shirt sponsorship values have exploded in the last 12 months. Man Utd's went up by over 50%, spurs went up over 100%, chelsea's went up by nearly 100% while Arsenal's went up by 50% (although they signed their deal much earlier than the other's mentioned). That gives LFC the chance of a much improved sponsorship deal, which is due to start next season. Get one of similar value to that of spurs/chelsea and we are looking at £5m more per season (over the life of the deal). Get one of similar value to the mancs and it is going to be nearly £10m extra per season.

 

3. The new premiership tv deal has been announced. I figure that tv revenues from the league could go up by upto £15m per season, over the life of the deal.

 

All of these very important factors add up. From next season we could possibly see revenues going up by £25m per season, and that is before the new stadium gets built. If that is the case it significantly reduces the pressure on getting investment in for working capital purposes. Instead it can bring it into focus so it gets used either purely on capital expenditure on the stadium or a mix of that and transfers (if we get investment).

 

(also when the new stadium is due to open, we will be into our next kit deal, probably with adidas and that has the potential to increase in value).

 

The club will have run numerous scenarios to determine the short, medium and long term risks associated with the new stadium. The key is to minimize the risk in all three cases. That, unfortunately, is something that takes time.

 

I disagree. ManU are valued at 6 times what we are,

 

I wouldn't say they are valued at 6 times what we are. Alot of analysts said that the Glazers over paid for the mancs. Also all of their assets are being used as collateral for the debt they have.

[fyds]

 

The only reason it isn't a feasible option is the first step, that of buying Moores out. If that can be solved, and I can think of a couple of ways though they do rely to some degree on Moores' benevolence, then they become increasingly feasible.

 

But how benevolent is benevolent in this instance, and legally would such largesse effect the value of the other shares in smaller hands if he undersold his - in terms of stockmarket rules of propriety?

 

I can't see any way around a legal minefield in that direction, though am happy to concede you may have seen something i've missed.

 

Of course, we're only talking in terms of takeover, there may be other alternatives as yet untried.

 

I think there are alot of people who are getting a bit mixed up in the search for investment and the link it has to a new stadium.

 

Yes the search for investment is linked to the new stadium, but I don't believe it is in such a way that people have been suggesting.

 

The stadium project is completely self financing in the models the club will be using, ie the profits generated each season from increased ticket sales (in league games only, as they are the only guaranteed games) exceeds the annual repayments if the entire project was funded by loans. It is even more self financing if a sponsor was to be found.

 

Based on current ticket prices the projected (top end estimate) increase in revenue from the new stadium (league ticket sales only) would be in the region of £25m. If we made the group stage of the european cup each season and sold out all three games each season this would bring in approx £1m to £1.25m per game in ticket sales. Total being upto £3.75m for the group stage only.

 

If the club were to get a stadium sponsorship deal, of the same value arsenal have, that would bring in an extra £3m per season. Thus bringing the increased revenue to £28m per season. With group stage sell outs it could go as high as £31m per season.

 

Now on loans of £200m (at a rate of 6%, that's about 0.75% higher than arsenal's debt is at) the annual repayments would be £15.6m per year over a 25 year term, or £20.5m per year over a 15 year term.

 

Now as can be seen the loan repayments (depending on structure agreed, but using a mortgage P&I, daily rest, repayment structure as a base) are easily covered by the projected increase in revenue. However that is in a best case scenario. What the club will have also been looking at in their financial models is what effect would there be if the ground didn't sell out regularly. This is where the stadium sponsorship and part of the reason for investment comes into it. What the club need to ensure is that if the stadium isn't full week in week out can the interest payments (at the very least) be met.

 

Now the other reason I believe the club decided to look for investment was to do with the cashflow of the club during the period of construction. What the club don't want to do is take out loans for them to have the effect that it reduces the transfer budget due to having to meet interest payments. Getting investment in helps the club two ways. One, if some of it is used as capital for the project it reduces the debt burden and thus the interest payments. Second it can be used to give the club some vital working capital while construction is going on. With this the club can then ensure that Rafa gets the transfer budgets he would get were the stadium not being built (ie a budget like this summers) while being able to meet interest payments.

 

There are three very important issues that have occurred since the club got planning permission 2 years ago.

 

1st. Arsenal obtained a £3m per year stadium sponsorship deal. This gives LFC the chance to explore getting either a deal of similar value, or to get an increased deal.

 

2nd. Shirt sponsorship values have exploded in the last 12 months. Man Utd's went up by over 50%, spurs went up over 100%, chelsea's went up by nearly 100% while Arsenal's went up by 50% (although they signed their deal much earlier than the other's mentioned). That gives LFC the chance of a much improved sponsorship deal, which is due to start next season. Get one of similar value to that of spurs/chelsea and we are looking at £5m more per season (over the life of the deal). Get one of similar value to the mancs and it is going to be nearly £10m extra per season.

 

3. The new premiership tv deal has been announced. I figure that tv revenues from the league could go up by upto £15m per season, over the life of the deal.

 

All of these very important factors add up. From next season we could possibly see revenues going up by £25m per season, and that is before the new stadium gets built. If that is the case it significantly reduces the pressure on getting investment in for working capital purposes. Instead it can bring it into focus so it gets used either purely on capital expenditure on the stadium or a mix of that and transfers (if we get investment).

 

(also when the new stadium is due to open, we will be into our next kit deal, probably with adidas and that has the potential to increase in value).

 

The club will have run numerous scenarios to determine the short, medium and long term risks associated with the new stadium. The key is to minimize the risk in all three cases. That, unfortunately, is something that takes time.

 

 

Exactly right Tim. It was all about opening up new investment streams, of which 'investment' in the classically accepted sense was but one option. The stadium could be buffered by such 'investment', but is not and never was dependent on it.

[growler]

Can we make tim's post a sticky, so that tomorrow, when someone else asks about investment, they can read that first?

 

Great post mate, I've kept a copy for future posts about investment!