Both Liverpool and Chelsea are seeking outside investment for different reasons
On the investment front there is little to report when it comes to Liverpool.
During the club’s summer tour to Singapore recently, Reds CEO Billy Hogan commented that discussions around a partial sale of the club to a third party were ongoing, reiterating that a deal would only be struck for outside investment if it was “additive” to what the club was doing and its future plans.
In November last year, Liverpool owners Fenway Sports Group revealed themselves to be willing to listen to offers for the club, either full or partial, but swiftly dialled back on a full sale, with principal owner John Henry revealing there would be no sale before reaffirming the commitment of FSG in an exclusive interview with the ECHO back in March of this year.
Hogan, speaking in Singapore last month, said: “Certainly nothing to announce. Those conversations continue, and as the ownership has said, the opportunity is obviously there for investment.
“If it happens, it’s going to be based on finding the right partner – the right partner for Liverpool, and Liverpool being the right partner for them. At the appropriate time, if there’s something to announce then we’ll let you know.
“In any relationship, partnership is part of it. Having the right partners is incredibly important. In the same way we look at our partners from a sponsorship and commercial standpoint, an investment partner needs to be the right partner to be additive to what we are doing.”
Liverpool’s investment search is more focused than what some of their rivals may be targeting. The Reds don’t need to recapitalise the business to aid cash flow at present, and whoever comes on board as an investor in the club will likely form part of the overall exit strategy in the future for the Reds, potentially accreting a minority position into a majority one over time.
Valuations for Premier League teams continue to rise, making them very attractive to outside investors looking to get a good return over a period of time. Liverpool were acquired for £300m back in 2010 by FSG but now, given the continued strength of the market and the talks around a full sale of Manchester United at a £6bn valuation, the Reds will sit north of a £4bn valuation, a figure relative to just how much money that they will be able to raise from a partial sale, likely of between 10 and 20%.
For now, however, there is little to report in that search moving forward and sources in the US familiar with the matter have told the ECHO recently that there isn’t anything that has moved the needle considerably in recent months.
For one of Liverpool’s Premier League rivals, however, the search for investment is moving forward, albeit seeking different outcomes than the Reds who are keen to match capital with expertise to aid the growth of the club as a global business.
Chelsea have been on a spending spree the likes of which English football has never seen over the past 12 months under the ownership of Todd Boehly and Clearlake Capital, with more than £900m committed when it comes to transfer fees.
Of particular focus has been the length of contracts that have been handed out at Stamford Bridge, with seven, eight and nine year deals having become the norm, with Chelsea using the legitimate accounting tactic of spreading the amortisation costs in their accounts (how transfer fees appear on the balance sheet) over a longer period of time, thus aiding their position when it comes to trying to remain under the Premier League’s profit and sustainability threshold, something that some believe they won’t be able to do.
Accounting for these deals by spreading the amortisation over a longer period of time is one thing, but these deals still have to paid and the selling clubs don’t set out their payment terms along the same lines as amortisation. Some clubs may want all of the money up front, as RB Leipzig reportedly did for Dominik Szoboszlai, while others may want to receive it over a period of two or three years in instalments.
Either way, real money has to change hands and that affects cash flow at clubs. For some deals clubs may seek to go to a lender to get the deal paid in full and then spread the cost of their payments by going through a broker, but in other scenarios clubs may seek to raise capital to create liquidity in the business to pay the bills as and when they arise.
Chelsea, as well as planning for success on the pitch through their bold but risky transfer strategy, are also looking for growth off it, with the redevelopment of Stamford Bridge or possible move to a new stadium both on the agenda.
The West London side have been in talks with financial institutions around raising capital in exchange for equity in the club, with one of those potential suitors being Ares Management, an American private equity firm that already has positions in sport with the like of Olympique Lyonnais through investment in Eagle Football, the company owned by Crystal Palace co-owner John Textor. Ares has also been linked with taking a partial stake in Manchester United earlier this year.
The Chelsea owners, who also want to continue to expand their multi-club network having acquired French side RC Strasbourg during the summer, will see raising capital as a way to ease the cash flow situation at the club ahead of when the payments start to be demanded. With so many deals struck in the past year or so, around 23 permanent deals, there will be a lot of money flowing out of the building to the selling clubs, not least to the likes of Benfica, Shakhtar Donetsk and Brighton & Hove Albion for the deals for Enzo Fernandez (£105m), Mykhailo Mudryk (£88m) and Moises Caicedo (£115m).
Boehly and Clearlake are believed to have confidence in their overall plan and vision for Chelsea, one that is heavily reliant on this talented assemblage of individuals delivering on their promise and potential over the longer term. But there is the need to find the funds to pay for it all moving forward, making the investment search for Chelsea a different proposition than the one that Liverpool seek, and one that will attract a different type of investor.
