Who Would Buy Liverpool?

Every neighborhood has one of “those” houses.  From the sidewalk, it is gorgeous – an old Victorian with plenty of historic, quirky charm.  Many people have houses, but this is home.  As you get closer, you notice that the porch seems a little worn, but nothing that a good coating of paint won’t solve.  When you walk inside, you notice the hardwood floor is creaky, and you are trying to decide whether that adds to the charm or would drive you nuts.  You walk into the kitchen, and you go a little slack-jawed.  The sink has separate faucets for the hot and cold water like in the 1940s.  The counter has tiles missing.  The two burner stove and teeny oven look like a fire trap.  There is only one bathroom upstairs, and it is a biohazard.  Your contractor buddy who came with you reports that there are big cracks in the foundation, the basement has a ton of water damage and the furnace looks like it could explode at any moment.  As you walk out the front door, you turn to your friend and ask, “Who on earth would buy this house?”

As Liverpool owners Tom Hicks and George Gillett try to find a buyer for Liverpool Football Club, many of the potential purchasers are probably asking themselves the same question.  Hicks and Gillett have turned to Barclays to find a buyer in the £500 million range, which would include paying off £240 million of debt.  The question is what would a buyer get for £500 million?

On the upside, you get one of the best brands in all of sports, one that commands a world-wide following, and a group of passionate, dedicated fans.  These fans, who sing songs about players long dead, weep at the mention of victims of Hillsborough and will follow their team up to and through the gates of hell, are a very valuable asset.

However, the downsides are enormous.  Anfield has plenty of history and charm, but it is difficult to monetize history and charm.  What Anfield really needs is another 25,000 seats and all the modern amenities that draw corporate clients and gives normal fans an opportunity to drop another £30 each game.  To build another stadium will cost the new owner another £350-400 million or so. 

However, if you are going to lay out that kind of quid, the fans will demand a quality team.  And let’s face it, those wonderful singing, crying fans are a pain in the neck.  Over the past six years, Liverpool under the direction of Rafa Benitez, has more net expenditures in the transfer market than any team other than Chelsea and Man City, where money has no meaning.  Rafa has spent in the transfer market like a drunken sailor at a Hong Kong brothel, and still the fans march and protest and scream that more needs to be spent.  With a porous back line and the top players eyeing the emergency exit door, without a serious spending spree in the transfer market, this team will get worse before it gets better.

At this point, any prospective owner is looking at spending almost £1 billion to turn Liverpool FC into a modern, title contending team.  For that owner, the first £1 billion of income would just go to making him whole. That owner will not see a return on his investment until sometime between a long time from now and never.

Which begs a larger question.  Hicks and Gillett are not a couple of hayseeds who won the lottery and decided to buy Liverpool.  They are seasoned, experienced sports owners.  They are well entrenched in the sports industry and understood the financing and brand management of owning a team.  If they could not make a go of owning Liverpool, and instead became the bane of the fans’ existence, what makes someone else think they could do better?  The hard truth is a new owner who cares about money would be hard pressed to improve on Hicks and Gillett’s experience at Liverpool.

Given that reality, the universe of potential Liverpool owners has shrunk to those who do not care about money – oil sheiks, Russian kelptocrats, Chinese industrialists, and others who look at owning a team as a diversion rather than an investment.  Those people exist, but there are a lot fewer of them compared to a couple of years ago before the global economic meltdown.

Unless Barclays can entice one of these ultra-rich types that Liverpool is a luxury good that they need to have, Hicks and Gillett will be hard pressed to find a buyer.  In the meantime, the club could be entering a period of stagnation.  As they wait for a buyer that may or may not come, fans should expect transfer spending to be slight and results to disappoint. 

Instead, the team will come more and more to resemble that Victorian house that has been on the market too long.  It will still retain some charm, but the weeds will start to grow in the front lawn as that “For Sale” sign becomes just another neighborhood fixture.  The longer it stays on the market, the fewer buyers will be interested.  Every house has its buyer, but it could be a long wait until this property changes hands.

17 thoughts on “Who Would Buy Liverpool?”

  1. “Who would buy Liverpool?”

    I would. I’d offer a solid Abraham Lincoln for it. A paper Lincoln, of course….

  2. Good article.

    I am still at a loss as to how Liverpool were so good last year (second place) and so mediocre this year. Wasn’t it mostly the same exact team? What changed? Was it injuries? Seems so strange that a team could go from such heights to such lows. Now Liverpool is discussed with the same ominous future as Leeds United. A Champions League final just a mere few years ago, and now…a bankrupt club on verge of generational failure and malaise.

    What happened???

    1. What happened?

      Well, one player left. While he was vital to the team, you can’t blame all the misfortunes on one player.

      What really happened?

      They had an off season (it does happen sometimes) and the temptation to sensationalize is just too much for most of us to resist.

  3. Oh, look the sky is falling! The sky is falling!!!!!! Bull sh*t! This summer will see the team sold and things will move on as usual… YNWA stills means something to supporters while fans are falling away, joining the media who need to have controversy to sell their trade.

  4. That multi-million dollar old home also has a massive mortgage that is one of the pick-a-payment loans and is in danger of going into default. The likely buyer of that home is the bank at the foreclosure auction. Not saying that would happen here, but if the price Liverpool will sell at will yield a loss to H&G, they might just let the loans default and go to the bank, depending on the loan terms. Strategic default – happening everywhere.

  5. Some research should be done before a blog with gross inaccuracies is posted.

    “Liverpool under the direction of Rafa Benitez, has more net expenditures in the transfer market than any team other than Chelsea and Man City, where money has no meaning.”

    This is simply untrue. The net spend over the six year period in charge is under 18 million a season. Tottenham, Chelsea, Man City, and Manchester United all field a starting eleven with a total cost over 200million. Liverpool’s starting eleven is under 150million. Please post responsibly

    Thank you

    1. Matthew-

      You are wrong about this. Tottenham and ManU may have spent more on the transfer market, but they have also sold more. Liverpools total NET expenditures outpace everyone except for Man City and Chelsea.

      1. This all might be true but it seems noteworthy to mention that Benitez still has a player who could fetch £100 million or a £75 million profit. Presumably Man U would have been on the same side of the fence as Liverpool if you wouldn’t count them cashing in on C Ronaldo.

  6. So these two guys come in, burden the franchise with debt and want to sell now. What is this a video game?

    As to the John’s comment, what changed? I’d guess Gerrard did. Last year, when L’Pool needed a goal, he saw to it. That just didn’t materialize this year, for whatever reason.

  7. Hicks and Gillete are experienced and good owners?? Hicks put Corinthians in bankruptcy in Brazil, has had the Rangers taken out of his control by the MLB, and the Stars are receiving float payments from the NHL. He sounds like he knows how to run a franchise into the ground!!! While Gillete was forced to sell the Canadiens.

  8. The first thing the new owners should do is give Tom Werner, John Henry and Larry Lucchino (owners of the Boston Red Sox) a phone call.

    Now I have never been to Anfield, but it sounds like Liverpool are in a very similar situation to the Red Sox back in 2003/2004 in regards to Fenway Park. Namely playing in an aging, under sized stadium that also has oodles of history pouring from every crack and tons of fan appreciation.

    The Sox have done wonders renovating Fenway and creating new revenue streams out of thin air, and with some imagination I’m guessing Liverpool could do the same. Basically having their cake and eating it too – old historic Anfield with revenue similar to some of the newer stadiums.

  9. Eric,

    Below are the figures based on net spend for a season compared to the other teams in the Prem.

    “Rafa’s yearly totals register at 13.9% (including a £14.2m signing, Cissé, who was actually signed by Houllier), 6.9%, 6.3%, 12.5% and 1.6%, with the current season standing at a miniscule 0.2%. Indeed, strip out Cissé’s fee and Benítez’s total in his first season was yet again below the 7% mark.

    “Even the one big outlay during his tenure – the season the Americans briefly looked like they might stump up the money that was required – the net figure (12.5%) still fell below those registered that year by Sunderland, Spurs and Manchester City.”

    The top 3 big spenders this season, in net terms? Manchester City, Chelsea and Birmingham – who just happen to be in better shape than last season (while Manchester United, who sold better players than they brought in, to make a net profit, are clearly not as strong.)

    “The drop in overall spending has meant that City’s 2009/10 outlay rockets by comparison – to a truly astonishing 113% of the Premier League’s net spend. (This is due to the fact that, when combined, the other 19 teams in total had a Net INFLOW of £11.7m, mainly due to the sales of Ronaldo and Alonso to Spain, whereas City spent £99.5m, resulting in a net spend for the EPL of £87.8m.)

    “At the other end of the scale, Chelsea, after two seasons of virtually insignificant Net spend [when they somewhat ‘stagnated’], once again return to the top two, with a figure of 29.6%. City are clearly the new richest team on the block, but they also had a long way to go to catch up with Chelsea’s previous squad investment.

    “Behind Chelsea come Birmingham (27.6%), Aston Villa (22.9%), Sunderland (19%), Wolves (17.8%), Stoke (15.3%) and Everton (11%). Liverpool sit way back in 12th, with just 0.2%.”

    Again all of this information is availble

  10. Eric,

    Further figures for your review.

    Anyone who says “Liverpool spent £40m” this season misses the point that out went Alonso, Arbeloa and Hyypia (plus Voronin and Dossena) for the same amount. Given that both Arbeloa and Hyypia left for below their actual worth (due to freedom of contract issues), Liverpool lost more than £40m worth of talent.


  11. Matthew –

    This one season is not the issue. The issue is during Rafa’s career at Liverpool:

    Season Players In Players Out Net Expenditure
    2009/2010 £40,000,000 £41,100,000 -£1,100,000
    2008/2009 £40,300,000 £30,750,000 £9,550,000
    2007/2008 £22,500,000 £19,900,000 £2,600,000
    2006/2007 £44,800,000 £13,630,000 £31,170,000
    2005/2006 £36,900,000 £9,500,000 £27,400,000
    2004/2005 £25,550,000 £10,500,000 £15,050,000

    Season Players In Players Out Net Expenditure
    2009/2010 £10,000,000 £41,000,000 -£31,000,000
    2008/2009 £30,800,000 £15,800,000 £15,000,000
    2007/2008 £13,200,000 £9,500,000 £3,700,000
    2006/2007 £11,900,000 £27,600,000 -£15,700,000
    2005/2006 £32,350,000 £13,700,000 £18,650,000
    2004/2005 £10,000,000 £2,600,000 £7,400,000

    Season Players In Players Out Net Expenditure
    2009/2010 £19,000,000 £83,500,000 -£64,500,000
    2008/2009 £30,750,000 £0 £30,750,000
    2007/2008 £0 £19,500,000 -£19,500,000
    2006/2007 £35,600,000 £15,200,000 £20,400,000
    2005/2006 £17,500,000 £6,500,000 £11,000,000
    2004/2005 £20,000,000 £3,800,000 £16,200,000
    Even if you ignore the windfall on Ronolado, Rafa has still spent more than anyone wlse over the past 6 years outside of Chelsea and man City.

  12. Eric,

    An average of 14mil a year net spend. Has taken a team that didn’t often qualify for CL to a team that last year was ranked number 1 in europe and finished with the hightest points total ever acheived to not win the title. Has signed a goalie that will win his four consecutive golden glove all with fighting owners. Yeah what a disappointment. Oh by the way MAN U, ARSENAL, and CHELSEA spend less to maintain a squad where as Tot., ManC, LIVERPOOL, and AstonV are required to purchase big to take the next step. i cant believe with the information above you still feal Benitez is the problem. I am still glad we had this discussion because now your readers with the information about can make an educated conclusion about our manager with numbers to back it up.

    Thank you

  13. Eric,

    can I ask whether you understand football finance in England? I don’t mean to be rude, but I’m one of those ‘singing, crying’ fans you mention and I’m not sure you’re quite getting the issue here or understand the situation.

    If you send me a private e-mail with contact details, I’ll draft up something factual for you to use in any future piece you do about Liverpool. Can appreciate the difficulty of speculating about a football team when you don’t have the facts or any knowledge of the club, so let me know if I can help out.

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