This week, Etcetera
comes for Aliko Dangote who few days ago declared his intention to buy
Arsenal FC. Etcetera analyses it for him, saying point blank he cannot
afford it!
Etcetera Writes...
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
organised 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 all 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 chequered, 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 stabilise 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, recognising 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.
Source : Punch
He is a good writer no
doubt but his style of writing is too consistent,too perfect,too rigid
,too knowing and too unbending..I am now getting bored.I like change and
diversity in writing,i can almost predict what he has written before i
even read...
No comments:
Post a Comment