http://www.redandwhitekop.com/forum/index.php?topic=300878.0 ------------------------------------------------------ FSG and finances; are they doing enough? A common question on the minds of us Liverpool fans. The main areas of interest and debate seem to be the price they paid for the club, the wage structure, our net transfer spend, and their own personal investment. I have attempted to have a look at what they have done so far, and to put it into some kind of context. The price paid for Liverpool The most obvious thing to look at first is how much FSG paid for Liverpool. The common belief is that FSG got us at a steal. In order to determine whether this is true or not, I have put together a small list of recent takeovers. At £300m, FSGâs purchase of Liverpool is the second most costly. The real interesting comparison here is the price FSG paid, compared to the price Hicks and Gillette paid. The latter bought the club when we had just contested two Champions League finals in three years. We were the number one ranked club in Europe and had a top manager with a world class squad of players. FSG bought us when we were in freefall. We had Roy Hogdson as manager and the squad talent had vastly decreased with the likes of Jovanovic, Konchesky, Poulsen et al. The wage bill had grown out of control, and most importantly, we had no Champions League football. How much of a steal are we looking now in comparison with our previous price, and that of other clubs? It would actually be easier to argue that FSG overpaid for a toxic asset when looking at the data. Wage restructuring One of the main reasons we were a toxic asset was down to our wage bill expanding rapidly. The Swiss Ramble did an excellent piece on our finances which can be found here: http://swissramble.blogspot.co.uk/2012/05/liverpool-keep-car-running.html The article showed that our wage bill was growing while our revenue had stopped and started to decrease. We were making big losses as a club during this time, so obviously this needed to be addressed. You can see in the image we were nice and stable around the 55% mark, with the wage bill growing as revenues grew. However once the revenues stopped growing, the wage bill did not. We simply could not afford to spend at that level considering the loss of the revenue Champions League football brings. Some argue that FSG are cost cutters. Thatâs right in a way, but it was absolutely necessary. Tom Werner has stated the long term aim is to increase what we spend on wages (as wages correlates with league position), however this must be done sensibly so we needed to get the wage bill under control before then growing revenues. Thereâs no reason not to believe him â yes we did let go of big earners like Kuyt and Maxi, but crucially they were not providing value. FSG have been more than happy to increase the wages of our best players, and tie them to longer deals (Suarez, Lucas, Agger, Skrtel, Johnson). Net transfer spend Wages leads nicely onto transfer activity. To judge whether FSG are doing enough, we first must establish what âenoughâ actually is. Below are two images, the first shows Premier League clubs net spend since 2003. And to make it more relevant, the second image shows the same thing over the last 5 years. So what is a reasonable budget? As we can see, outside the Sugar Daddy clubs, spending £15m per season seems to be the maximum that clubs average out as. A shock to many of you Iâm sure. Thatâs the reality of it though; itâs just not possible to be spending £20 or £30 million every summer. Some of you may now say, âThatâs all well and good, but we managed that under Mooresâ. Well again Iâm sure some will be shocked. But thatâs not actually the case at all when we look at the figures. This image compares the net spend of our current and previous owners. Quite a large jump! And in fact itâs much bigger than not only our previous budgets, but the league budgets as a whole. Our immediate aim is obviously to get ourselves back into that top four. So naturally we should look at what is needed to break the top four? Or more specifically, is the budget weâre currently provided with enough? The last three teams to break the established top four (Man Utd, Arsenal, Chelsea, and ourselves) are; Everton, Spurs, Man City. To compare those clubs with FSG I am going to take their net spend from the season prior to finishing in the top four, and the season they did (minus Man City as thatâs just not realistic for us). Everton 03/04 - £1.6m 04/05 - -£20.2m Spurs 08/09 - £19.5m 09/10 - -£1m So Everton managed to break the top four averaging a net spend of -£9.3m, and Spurs managed it with an average net spend of £9.25m over two seasons. Our budget of £24m (which will be bigger after January) is therefore more than sufficient to catapult us into those places. Own investment The last thing I will look at is FSGâs reluctance to put their own money into the club. A key thing here is our commitment to financial fair play. Financial Fair Play means that clubs must only spend what they generate, i.e. function without owners putting money into the club. John Henry outlined at the very beginning that he had no intention of putting his own money into Liverpool âWeâve always spent money weâve generated rather than deficit-spending and that will be the case in Liverpoolâ¦itâs up to us to generate enough revenue to be successful over the long term. We have not and will not deviate from that.â Surprising, he didnât actually stick to this. He loaned the club £30m (interest free) in order to boost last seasonâs transfer kitty. This means that he has more or less invested the maximum that he could have. Was this perhaps the under promising and over delivering that he spoke of? So in conclusion, are FSG doing enough financially? In my opinion itâs a resounding yes. After paying a very big price for the club, they have sorted the wage issues, they have given us a very large transfer budget each year (and have committed to spending more in January), and have personally invested as much as they could do under FFP. If FSG stay committed to what they have done so far, then it wonât be very long at all before weâre back where we should be.
Fantastic read and it confirms what I was thinking anyways... One other thing to remember is that NESV bought Liverpool with their own Money while United, Liverpool (2007), Aston Villa (not 100% on this one - can anyone confirm?), Newcastle were all leveraged buy outs while PSG, Man City & Chelsea get by with "interest free loans" from their owners
One error I'd like to point out - The 30 million wasn't loaned for the transfer kitty. The 30 million from Henry was in essence a way to ensure Liverpool only pay him (themselves) interest instead of to RBS. (basically) By having those 30 million in reserve funds RBS didn't take interest payments from Liverpool, for one reason or another. Meaning the debt was cleared and then the remaining interest that those funds generated were loaned back to the club as a safeguard type cycle. Nothing to do with the transfer fund, which was separate.
The Red Sox are failing badly in sporting terms and they're financially struggling(according to some American sports hacks)and money being made by LFC will find its way to prop up John Henry's pride and joy.
Some of the figures are surprising butthe most incredible is that arsenal have a net spend of -£9 mil Per season for the last 5 years. No wonder their fans get frustrated. Just shows how well wenger has done to keep them competitive. Also why they couldn't afford to get rid of him.
guess we will have some idea of what the owners intentions are with the Sterling situation. Do we pay an 18yr old the wages he wants which sounds like its £35k to £50k a week, or will the owners say he doesn't justify that at his age, and we end up selling him for between £10 - £15 mill. to be fair i don't think Sterling is being greedy(well in the football sense lol) when you consider what players like Downing and Cole are on, and he is more important to the team than that,wages have got silly nowdays and unfortunately if we don't pay the going rate to keep quality players like Sterling someone will. just hope the lad stays grounded and signs, heard a horrible rumuor he wants to head south.
Interesting figures JS but I can't agree with your assessment that FsG overpaid for the club. You can bet your bottom dollar they researched LFCs potential for growth (in revenue terms) and found we were very good value at the price they paid. I'd be much more worried about their business acumen had they overpaid. Bear in mind that H and G turned down an offer from the Kuwaiti's of nearly double the amount paid by our current owners. However I don't think many Reds fans issues with the owners are based solely around money. Firstly they had/have no knowledge of the game whatsoever. They tried to apply an American sports philosophy to a sport that is completely different. They appointed Comolli who many suspected was as useless as he turned out to be. Their first attempts at restructuring the club were an abject failure and cost us big time (both financially and on the pitch). They have moved the club nowhere in terms of stadium development. They made an unholy mess of the Suarez affair and hung Kenny and Suarez out to dry. They sacked Kenny in a way which was always going to upset a lot of the faithful. They still had no processes in place to ensure a better summer of transfer dealings this year. They are still as distant as they've ever been. They have other issues elsewhere that many suspect means their main focus is not (and never will be) Liverpool Football Club.
to be fair. since they have hired a manager that they are 100% behind they have now completely restructured the scouting team bringing in Dave Fallows & Barry Hunter
This is what I'm hoping but it seems as if we're getting Sturridge and Ince which suggests that maybe the scounting dept isn't fully up to scratch?
This article sort of explains how I'm thinking about FSG. They came in and didn't know much, they took advice (**** advice but they wasn't to know) and ****ed up with DC etc. They then ****ed up again in the way they sacked Kenny - I can't say i was totally happy about the sacking it self but they had made a decision, it is the manner in which they handled it that I hate. They have now changed their approach and are still learning. IMO, they deserve time to get things right just like a player or manager does (lets ignore Roy and Kenny here since neither was really their choice). They have not gone back on their word, they have not committed to plowing money into the club, they have said from day one that they want to club to run from its own revenues, something most of us wanted to see prior to them arriving. since they have arrived the fans expectations of the owners as raisin, is it a case of the grass is always greener? Although they bought the club with the provision that they would increase capacity by either building a new stadium or expanding Anfield, they have not gone back on their word about this either. Sure they have dragged their feet a little but wouldn't people rather see the right decision made rather than a quick fix...? I am not getting on their back, I am prepared to give them the benefit of the doubt because I remember where we were just a couple of short years ago when we were making a profit in each window
Agreed. Better late than never so we can judge them on that as we go forward but you can't argue that their appointments so far have been awful (they've already sacked most of their original team and add Jen Changs embarrassing episode to that list). If Sturridge and Ince are our January transfer targets then I'd say our scouting network is still piss poor. I've said before that I'll be more than happy if they have learned from their mistakes and improve us going forward. To push the argument that they've been good for the club so far by producing spurious figures is missing the point. They might be better than H&G I won't argue with that but that's like saying having one ball chopped off is better than having both balls chopped off. They could and should be running the club better. Simple as that.
For January, signing Ince & Sturridge isn't bad. We all know how over-inflated the January market can be. We have decent keepers, a decent defence with options, we've got options in midfield to last us until the end of the season (maybe a decent backup for Lucas is needed) so it's only strikers we need and need now. I'd be happier if January brought us Walcott, Sturridge AND Ince because that then gives us 4 strikers by the way of Borini, Suarez, Sturridge & Walcott - We also need to get Sterling signed up long term. I want that to happen sooner rather than later!
Having four strikers would be great and I agree about Sterling. Walcott we won't get anyway but if we did then why get Sturridge too? Genuine question...would you rather we sign Sturridge or Llorente? No guarantee he'd sign for us but £12 mill bid would be accepted if we made it.
The ONLY time that managing a new acquisition can be handled with complete success is when you shut it down. Otherwise, any new management is at the beginning of a very steep learning curve and mistakes are always going to carry a large price tag. FSG have not been immune. However, if you have done your homework well, the purchase will have been made for the potential that it offers. In LFC's terms, that potential was and continues to be huge. The test of FSC's management will come from here on in. Have they actually learnt from those mistakes? If so, the the prospects are good. If not then we stagger on from one 'crisis' to the next.
Which is exactly why I don't believe for a minute they overpaid for us. Just the opposite. As I said before I'd be much more worried about their business acumen if they had overpaid.
