Correspondent Danny O’Neill sparked an interesting debate in the comments below his recent love letter to Schalke 04 (‘[A Look Abroad](/submissions/46085.html)’, 21st June).
Could the ownership model in German football — a 51:49 split between fans and corporate interests — have offered Everton a route forward, post-Moshiri? Could it have delivered the clever and difficult financial engineering The Friedkin Group deployed to save our club from ruin?
The answer, as you’d expect, is nuanced.
The level, nature and complexity of Everton’s debt structures and obligations when TFG stepped in would tax the grey matter of the brightest lawyers and accountants. With such folk on tap, our new owners instigated a complex financial re-structuring that reduced the club’s debt by £575 million.
Better still, the remaining liabilities — still an eye-watering £468.5 million by the time the work was complete — were placed on a lower-cost footing. A 30-year mortgage for the stadium and a rolling credit facility are said to have saved us £19.2 million per year in debt servicing — enough to buy us Hayden Hackney.
TFG then transferred ownership of our women’s team to a related business within its empire, adding £49.2 million to the men’s club’s coffers.
The cost in terms of legal and financial advice to make all this happen is said to have exceeded £22 million. A rollcall of some of the country’s finest legal minds, including Slaughter and May and Pinsent Masons, have been put to work, notified to the Premier League as part of the club’s reporting obligations.
All very impressive, and just what I’d expect from a multi-billion-dollar corporate entity like TFG. To lean on the Friedkin family’s Texan heritage, our club is certainly not their first rodeo.
The question becomes, could we Evertonians have delivered that ourselves? Could we have engineered the work and funded it to the point that we controlled 51 per cent of its equity?
There’s a ‘yes’ and a ‘no’ here, in my view.
The ‘yes’ comes from knowing plenty of smart Evertonians that run large businesses and who are entirely comfortable with the financial and legal mechanisms at play here. Two of them, Andy Bell and George Downing, stepped forward during the dying embers of Moshiri’s reign with significant financial support and, it is widely understood, a willingness to go further should necessity (or peril) demand it. TFG’s re-organisational approach is meat and drink to two such experienced businessmen.
So that’s settled, then: Evertonians have the organisational ‘smarts’ to pull off a TFG-esque restructuring.Which just leaves the money.
Let’s assume for a moment that a wealthy Evertonian, in a moment of financial largesse, decides to fund 49 per cent of Everton’s debt restructuring to give us mere mortals the opportunity to fund the balance and acquire our 51 per cent controlling stake. Setting aside the likelihood of such generosity, what would that have required of your average Blue?
In short, we’d have had to have stumped up £304.47 million between us all. Bearing in mind that this was pre-Bramley Moore, let us assume all 31,000 season ticket holders and 17,000 official club members at the time agreed to buy into the club.
Done equally, that would have required us to find £6,343.13 each. Not an insurmountable figure, but it would be foolish to assume that we all have that sitting around looking for a home — not to mention partners who’d be happy to see us write the cheque. And with many season ticket holders being pensioners, children and young adults, it’s clear that the burden would fall disproportionately on a smaller number of Blues.
Which means that some several (or even tens) of thousands of those 48,000 would have opted out of taking their full entitlement, requiring a share offer that allowed for a minimum investment and additional shares for those with the readies to invest more. Which is where the uncertainty creeps in. What would happen if the share offer was under-subscribed? How do we sustain the German model whilst clearing the identified debt?
This, of course, is before we get to the trickier issue of subsequent cash calls to fund investment and expansion. You might have six grand to buy your initial shares, but how much do you have left in the family kitty to contribute towards buying a decent striker? And will your other half sign it off every season?If shareholdings can’t be diluted beyond 51 per cent, then we’re back to the club gradually growing its indebtedness — and look where that nearly led us.
You can run a Premier League club at a profit — per Newcastle United during Mike Ashley’s tenure — but to do so requires minimal investment in the transfers needed to satisfy our desire to compete for trophies. As the barcodes learned, therein lies genuine peril: relegation, which they suffered under Ashley for wont of proper investment in the playing side of the business.
Fan ownership clearly works, but only to a point — and it comes with the sort of built-in imbalances that so frustrate us now under the new Squad Cost Ratio. Might it just consign us to a future where the 1980s could never be repeated? After all, in Germany it has resulted in a virtual monopoly, with the wealthiest club dominating proceedings, with Bayern Munich winning 21 of the 30 available domestic trophies in the last ten seasons.Imagine Manchester United, with its shiny new 100,000 seater stadium and larger, wealthier fan base (read ‘shareholder base’), hoovering up trophies at this rate. Or worse, that lot up the hill in Mordor doing likewise.Doesn’t bear thinking about.
I’m going to give our current ownership model — and owners — time to bed in and do their thing. Credit has to be due to them for how they rescued us from the brink and their early work growing our income through commercial deals and exploitation of our stadium. There’s more to come, once concerts come on stream, for example, and as we grow our income, so we can invest more in transfer fees and player wages.
Good on the Germans, Danny, but for better or worse I’ll stick with billionaire owners who might — just might — come good.
_Dougal Paver and his teenage children have 3 season tickets in the West Stand.Paver’s first game was a hard-fought 2-0 win against Middlesbrough on 9th September 1978.To no-one’s surprise, Terry Darracott was booked._
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