From the moment they sold English Premier League club Birmingham City it was clear that David Sullivan and David Gold were on the lookout for another club to invest in and they finally ended up with the keys to Upton Park, home of east London club West Ham United which both men had supported as boys.
The pair paid a reported £20 million for the club and significantly, took on £110 million of debt, of which £50 million is owed to banks and the remainder to other clubs. The debt is the legacy of the club’s previous ownership.
It is, Sullivan admits, an ‘incredibly bad situation’ but the fact they pushed ahead with the deal indicates that they believe its one they can fix. That can’t be said about other clubs they considered buying. Sullivan told the media that the pair looked into 20 or so in the Premier League and Coca-Cola Championship and had been horrified by the financial disaster zones they had encountered.
The acquisition of West Ham came shortly after the announcement that Manchester United was looking to a £500 million ($780 million) bond issue in order to restructure its massive debt while Liverpool, another of the Premier League’s marquee clubs, continues to be in a financial mess. And of course there’s Portsmouth, one of the league’s smaller clubs, but one which appears to have been badly burned by its Icarus-like ambition. The club has had three owners in the last year and - at the time of writing - its current owner had failed to deliver promises to spend money to set the balance sheet straight.
Current owner Ali Al-Faraj is a Saudi businessman and his appointment raised hopes that he would be able to pump endless funds into Portsmouth and end the slide which began when previous owners had proved unable to provide the funds to maintain an impressive run which saw the club win the FA Cup. Since then the best players have been sold, the club are bottom of the league and could be relegated even if they don’t lose 10 points for slipping into administration.
Portsmouth fans are urging Al-Faraj to either p**s or get off the pot. But even if he were to take the latter option, there are precious few prospective owners out there looking to take on the massive liabilities of an ex-Premier League club. Membership of the world’s most lucrative league is Portsmouth’s biggest asset. If that is lost, the outlook is bleak. Experts have been saying for some time that this is the year that financial over-ambition and mismanagement will lead to at least one major English club going to the wall. And if that happens, the outlook is bleak for everybody involved in the game.
The clubs, with their fanatical fans and rich and varied histories, are football’s greatest asset - the beacons around which the passion for football congregates. To protect the strength and character of the game, the clubs themselves have to be protected and there have been suggestions that the Premier League itself should play a more active role. But it is difficult to know exactly what.
Clubs already have to submit annual accounts to the league which can, if it at all concerned, become directly involved. As the Portsmouth case has demonstrated, they have the ability to withhold payments and impose transfer embargoes. There’s also a Fit and Proper Persons test which prospective club owners have to pass, although this has proved ineffective in a handful of cases (see page 12).
UEFA wants to tackle the situation with a licensing system to ensure that clubs only spend the money they earn. On the face of it that sounds reasonable, but it is also a formula which would effectively petrify football’s pecking order. Big clubs would remain big clubs, small clubs would have little chance of progressing. There are also business principles and legal issues which might scupper attempts to stop super-wealthy individuals ploughing money into a club as an equity investment or gift.
What might be considered, however, is a move to introduce football regulations which prevent the debt-backed acquisition of any club. The fact that Manchester United, a giant of the world game with a massive income, should be in a financially precarious position because its owners used its major assets to guarantee the debt which funded the deal is simply absurd and should never be allowed to happen again.
Likewise, the fact that an owner can take over a club for a nominal sum and then prove unable to deliver the investment required to operate it successfully is bonkers.
It’s time to introduce a scheme under which individuals or corporate owners have, not only to show a business plan and proof of the funds to deliver it, but also a significant cash bond - a kind of deposit to the League for the right to operate one of its assets, proving that they have cash to hand and providing a fighting fund to be drawn upon if finances go pear-shaped. Let’s not forget one thing. - the people who buy football clubs may become their legal owners but a single club is worthless without all the others. The clubs are enduring brands and their owners simply leaseholders with a duty of care.
