FootBiz newsletter #2: Liverpool contract extensions, CFG share issue and investing in Rangers

Welcome to the FootBiz newsletter. Edition 2! And unlike the first one, which people mainly found via the web, there are hundreds of you receiving this in your inbox as it’s supposed to be - so welcome back. 

One obvious favour to ask of people here: should you be enjoying the content then please do tell people about us. It’s the fastest and, quite honestly, nicest way to grow.

This week we’ll have deep dives on the finances of the transfer window as Premier League clubs pass £30bn in spending, we will try and fix arguably the worst-run club on the planet, FC Barcelona, we try to tell you several things you don’t know about getting transfers done, we try to make sense of Chelsea, dig into the Scottish Premiership as an investment and much more! 

As ever, the two newsletters per week will be free to read but if you take out a subscription (starting from £2.99) you’ll get all the analysis from our experts.

Table of Contents

• Liv a little

• Other contract clocks ticking down

• Chelsea’s risky business

• The Price of Football podcast

• Subscribe to FootBiz

• M&A murmurs

• Scottish football as an investment

• CFG raise £210m with share issue

• In case you missed it….

This international break we are stumbling into after transfer deadline day has traditionally been an absolute dead zone in the calendar. After the frenetic peak of the window closing and scrambling around for deals, you have some international fixtures that (largely due to being so far away from anything meaningful) are usually inconsequential and devoid of any spark or energy.

I asked a few different club execs what they were planning on doing for the next couple of weeks, assuming they’d be off on holidays. Far from it. The window is still open in a number of leagues, many clubs still have players to offload and/or new signings to try and assimilate. Others said their focus now was on new contracts for players who have stayed, with the pendulum of leverage beginning to swing towards the player as soon as there are less than two years remaining on a deal. 

So maybe not as quiet a period as we were expecting. But plenty of content for you to get stuck into regardless. 

Liv a little

Speaking of which…

Once the deadline passed, the intriguing sub-plots with Liverpool were always going to be which affiliate club they end up pursuing and how they handle the expiring contracts of a number of star players. Author Jonathan Wilson had already noted how the contract situation would “magnify every miffed moment” this season in the Guardian. 

Well, Mohamed Salah made the first move on Sunday as he brought his own negotiation into the public thanks to the Sky Sports microphones. 

Liverpool’s institutional reorganisation in the wake of Jurgen Klopp’s departure meant some of the club’s biggest sporting decisions were placed on the back-burner until the new structure had been confirmed. Michael Edwards has now returned, this time as group CEO for football, and Richard Hughes as sporting director to sit above head coach Arne Slot.

Trent Alexander-Arnold (25 years old), Virgil van Dijk (33) and Salah (32) all have less than 12 months remaining on their current deals and would be free to negotiate a Bosman with clubs outside the Premier League from January. 

Losing Alexander-Arnold for free would be a disaster. His TransferMarkt valuation (admittedly an inexact science) is €70m but you’d imagine he’d have a healthy market and Real Madrid have been linked with the England international. At his age, with his talent, he has all the leverage against his boyhood club but, surely, would be the deal they’re most desperate to get done?

Van Dijk and Salah are both over 30, which often scares clubs off from offering lengthy extensions, but are also both continuing to perform at a high level. Neither would be short of lucrative offers if Liverpool do not extend them before they hit the open market, so they will not come cheap.

Which is why Salah somewhat intentionally used the aftermath of his brilliant performance against Manchester United to spark conversation around his future. 

“As you know it’s my last year in the club,” he said, live on Sky Sports.  

“I just wanna enjoy it, I don’t wanna think about it. No-one in the club has talked to me yet about a contract, so I say it’s my last season. 

“It’s not up to me… but no one has spoken to me at the club”.

While so much of the external focus tends to be on transfers, Edwards and Hughes are now charged with retaining three of Liverpool’s best players, iconic players for a generation of the club’s fans, while contractual leverage slips through their hands like sand every day. 

These are three tightrope negotiations that the pair would have preferred to remain quiet. 

An impossible job with stakes so high, players this good and a club so big. 

“Get your business done early,” says one sporting executive, “but your extensions done earlier.”

Other contract clocks ticking down

Liverpool’s trio stand out but Kevin De Bruyne will also surely sign an extension soon?

Other noteworthy players with less than 12 months to go on their current deals, according to publicly available information: Heung-min Son, Harry Maguire, Thomas Partey, Jorginho, Callum Wilson and Ilkay Gundogan.

Players the right side of 30 whose deals are expiring, per TransferMarkt, include: Denzel Dumfries, Paulo Dybala, Amad Diallo, Andriy Lunin, Tariq Lamptey and Sean Longstaff

Chelsea’s risky business

Behind the paywall: inside the Blues’ strategy under Clearlake

So the viral post goes, there is one main character on Twitter every day, the goal is to never be it.

Chelsea seemed determined to be the main character of the summer’s transfer window, with an eye-popping volume of deals guided by brain-scrambling rationale.

In an off-season where clubs worked out how to exploit loopholes in the PSR system and traded players with that in mind, Clearlake went even further to avoid punishment for the Blues, selling two hotels and their women’s team to other companies under the same umbrella.

Whether they got away with doing so is another question entirely, but the fact is Chelsea keep taking risk after risk after risk under their new ownership - at some point they need to start paying off or things could get ugly.

Matt Hughes tries to make sense of the new Chelsea in his latest piece.

The Price of Football podcast

Football finance in your ears

FootBiz contributor and football finance expert Kieran Maguire will be back later this week with a look back at Premier League transfer spending.

In the interim, the Price of Football can keep you occupied as Kevin Day and Kieran look at the rise in wages and agents’ fees in relation to the Bosman ruling, as well as looking at the accuracy of attendance reports.

Listen or download here.

Subscribe to FootBiz

This newsletter will be one of two weekly newsletters that are free for the time being, but the rest of our analysis and comment will be behind the paywall.

Subscriptions start at just £2.99 per month! You can’t buy anything for that these days, so consider joining FootBiz.

M&A murmurs

This will be a regular segment discussing the latest around clubs that have sold or potential transactions

On the pitch it was a humiliating defeat for Rangers, but whispers at the Old Firm this weekend continued to focus on a potential purchase of the Glasgow giants.

As reported by our very own Matt Hughes recently, an American group is looking at a £150m buyout of the Ibrox club. 

Rangers is owned by a number of smaller shareholders (with no individual holding over the 14% owned by David King) so it’s a more complex deal than average that requires a lot of corralling, and more akin to how some of the traditional Spanish clubs (Sevilla, Real Betis) are currently structured. Effective control could be achieved without getting to an especially high threshold, depending on which parties could sell. 

Priced at a multiple of ~1.8x revenue and around the valuation of an upper Championship/lower Premier League club there is an obvious attraction, especially with the potential for consistent entry to the Uefa Champions League where prize money remains significant for all clubs - but especially those outside the top leagues. 

Scottish football as an investment

So what’s the play?

According to most investment figures I have spoken to, Scottish football is a very binary investment thesis. 

The first is: Can you buy Celtic or Rangers, run the sporting side more efficiently and expand the brand internationally while securing Champions League football every year? 

If so, then great. You’re likely growing revenues and the asset value while creating some sort of player trading engine, though the fee ceiling for players leaving Scotland these days looks to be around the £29m Brighton paid Celtic for Matt O’Riley this month - equivalent to the sort of ceiling we see in the Belgian Pro League or Austrian Bundesliga despite the SPL being weaker. The league will need to do its part in growing the TV rights packages but the real key is European football and player trading.

The concern is that there isn’t much more growth available for these two giants, but assuming the continental qualification piece is taken care of, there’s nearly always going to be a path to consistent, sizable revenues. 

The league itself is cause for concern though. Uefa coefficients - which decide how many teams qualify for European competitions and which tier of competition - have Scotland as the 17th strongest league, behind Switzerland and Austria. They will also lose two very strong seasons (including 21/22 when Rangers were Europa League runners-up) from their five-year calculation over the next couple of years. European qualification could become more difficult if Scottish clubs don’t start performing on the continental stage right now. (Scotland’s Coefficient covers this diligently for those who want to dig deeper)

Talk of expanding the league to 16 teams seems dead in the water after the struggles that the Danish league had, something that SPFL chief executive Neil Doncaster confirmed in interviews this week. Simplistically, the TV rights are dependent on four Old Firm games and a few Edinburgh derbies every year, so diluting that TV offering to allow four smaller clubs into the league is a non-starter in pragmatic, financial terms and wouldn’t get the necessary votes.

Which leads us to the second investment thesis in Scotland, which is effectively ‘can you become the third team in Scotland?’

Scottish Premiership teams currently feed into Uefa competitions as follows: 

1. Champions League - league phase

2. Champions League - third qualifying round (league route: win two two-legged ties to qualify; possible 2024 opponents included Fenerbahce, Lille, Dynamo Kiev, Red Bull Salzburg)

3. Europa League - playoff round (win one two-legged tie to qualify for league phase) 

4. Europa League - second qualifying round (win three two-legged ties to qualify for league phase, opportunity to qualify for Conference League)

5. Conference League - second qualifying round (win three two-legged ties to qualify for league phase)

The revenue gap between the Old Firm and the rest remains an unbridgeable chasm though. 

In 2022/23, the last season for which we have complete figures, Celtic made £31m in Uefa revenue and Rangers made £21m. No Scottish club qualified for the Europa League and Hearts got £5m for a group stage exit from the Conference. Every other Scottish club was making do with domestic TV revenue only, while Celtic (~£50m) and Rangers (~£40m) also dwarf other Scottish teams’ matchday revenues, with third-placed Hearts taking in about £6m per year from ticketing and other gameday activity. The rest make fractions of that.

While several clubs would tell you they’re the third-biggest in the country - most obviously Hearts, Aberdeen and Hibernian - no team has cemented the spot in sporting terms. 

It is notable that those three clubs combined with Dundee and Dundee United in 2021 to commision a Deloitte report into the SPFL and its distribution of revenues, desperate to find ways to chase down the big two.

They managed to force the league into significant changes and the creation of an “innovation and strategy group” to attempt to transform the SPFL from essentially an administrative function that organises football leagues to a commercial operation that focuses on growing revenues and selling broadcast rights for ever greater sums to more and more territories. 

Assuming that is successful, we return to the question of whether you could pick up one of the mid-level clubs like Kilmarnock or Dundee, both of whom have ~15,000-seater stadiums and a shot of unseating the Edinburgh clubs, and consistently finish third while also getting through continental qualification. Without trying to replicate Wrexham, can you build a compelling narrative out of such a passionate footballing country and the struggles of a town against the hulking giants of the Old Firm? Most crucially, is it a story you can make resonate beyond Scottish borders?

Regardless of any uplift in commercial revenue, the investment ultimately becomes a test of your operations and sporting department. Can you recruit well, sell to Celtic, Rangers and English clubs for big profits and re-invest them smartly?

The best case moonshot remains what data darlings Union Saint-Gilloise have achieved in Belgium, finishing above Club Brugge and Anderlecht on a significantly smaller budget. It is possible, but the revenue gap is not as dramatic in Belgium as in Scotland. 

In some ways it’s the ultimate challenge.

The downside case also has to factor in the possibility of any sort of Super League organiser deciding that Rangers and Celtic’s brands and support are so great that they would add value, even though there is no guarantee the Glasgow pair would be tempted by a lucrative breakaway competition. It is a remote chance, but should not be ignored.

Either way, Rangers is a story we’ll be following very closely should they transact. 

If you have a view on anything in today’s newsletter, or any of our content, please get in touch! You can simply reply to this email and the best responses will be published.

CFG raise £210m with share issue

City Football Group (CFG), the parent company of Manchester City and a slew of other clubs bearing their branding across the globe, raised £210m by issuing 23,788,002 new preference shares priced at £8.83 each.

The issue takes the group's valuation to nearly £5.5bn. Abu Dhabi United Group owns 81% of CFG, with private equity giants Silver Lake (18%) and CITIC (1%), an investment group owned by the Chinese state holding the rest.

“It’s almost as if they’re preparing for some sort of large outlay” quipped one hack.

In case you missed it….

There’s tons of FootBiz content from last week, including:

• Lawyer Daniel Geey on the increase he is seeing this summer in buyback clauses, matching rights and other options in transfers

• John Textor’s quest to buy Everton and - finally - float Eagle Football Group on the New York Stock Exchange remains one of football’s wildest ongoing stories

• New rules intended to safeguard clubs from financial risks are being skirted by wily accountants - how this summer became the summer of the loophole, by Kieran Maguire

• How scouts are used in recruitment now data has “won the war”