Silence Could Kill Us

Posted: July 5, 2010 by mcdonaldtaf in Business, Finance, Liverpool FC
Tags: , , , ,

Despite the recent claims of Martin Broughton – that we are somewhere near the verge of being sold, in some sort of e-bay-esque situation, I sense we have never been further away from new owners. When you look at the current situation and the not so subtle hinting of a value from Tom Hicks, the size of any investment becomes abundantly clear. £800m is fanciful but I’m pretty sure that Hicks and Gillett will want to hold out for at least the £500m they have reportedly been offered before. Then there will be squad re-building (and the prices of star players are only going one way) plus a new stadium to build. All in, you’re probably looking at a £1bn investment. That really narrows down potential suitors pretty quickly, doesn’t it?

Then consider what, other than the brand and historical success, you are actually buying. From a business perspective you are buying a club which lost money in their last audited accounts, have two years of a ‘material uncertainty’ hanging over their heads and a balance sheet underpinned with £50m of ‘stadium development costs’. How important are those costs? Well if you remove the value of them from the club’s balance sheet the club becomes insolvent. This is why I get a bit annoyed when Martin Broughton talks about only taking on a new owner who’ll ‘commit to the new stadium’. To be fair they’ll have little choice in the matter, unless of course they want to stomach a huge loss on day one! Then add in the newly appearing ‘material uncertainties’ of merchandise boycotts, sponsorship damage and increasing fan unhappiness and I think any investor will need some convincing, or their heads testing, to pay out £1bn.

The other big question which persists is why anyone would buy the club, paying over the odds, at this point. We keep being told there are interested parties, but I’m a little unsure why any of them will show their hand at this time. Any negotiator or businessman worth their salt will see the club being squeezed from every angle, and as the club gets squeezed the value will drop. I was taught something a long time ago about negotiation, never be afraid of silence. If you’re negotiating you shouldn’t feel the need to fill silence with noise or show your hand too soon. I suspect that our potential bidders are doing just that. After the noise of Tom Hicks they are quietly sat back, arms folded… waiting.

I’m afraid Martin Broughton’s statement about the auction had a hint of desperation about it to me. It was almost like he was trying to shout over Hicks “we’re up for sale, ignore him and come and talk to me. I can do you a deal.” They remind me of market traders (and not the wall street types), although they would normally shout over their competitors, not each other. No doubt Mr. Broughton is fully aware of how Christian Purslow’s failure to attract investment has tarnished his reputation (at least among the fan base); I wonder if he has yet questioned his decision to step into the Anfield battle.. I mean boardroom yet?

Silence could kill us though, it could also make us the laughing-stock of the Premier League. The longer the silence continues the more financial danger the club ends up in. Mounting interest payments, debts rolling up and reducing revenues can only end up in one disastrous result. The other option is to sell off the crown jewels of the club, reduce the debts to a manageable level and allow the club to sit in silence, waiting for an investor to speak first. Neither going into administration or settling for mid-table mediocrity (at best) are appealing to me. In the meantime Hicks will keep shouting, Broughton will keep trying to shout over him and those who can afford the club will sit there… silently, waiting to mop up the mess the current custodians leave behind. Which ever way the club goes, and they seem to be aiming for mid-table medicority, it will be an investment at a figure much less that £1bn.

Edit (06/07/10): I am aware of a forming opinion which says that the club is in de-facto administration. In short (and in all likelihood) that Hicks and Gillett may have not met one of their loan covenants. RBS would therefore be in overall control of the club but have not pushed it into formal administration – which would be a nightmare for all stakeholders. In the spirit of fairness I think it is fair to point out that if this is true then a sale becomes a lot more achievable as the total investment would drop significantly. However there remain some unanswered questions including why sack Rafa Benitez and appoint Hodgson for three years, why not make this public aware, are we expected to believe that Hicks and Gillett’s silence is them giving up and wouldn’t the Premier League and/or FA be asking questions? There is also the interview with Tony Evans yesterday (Sports Editor for the Times) who I am assured is a loyal red and not prone to bullsh*t.

I’m keeping a sceptical open mind. Until we know who is pulling the strings I’m afraid none of us will be any the wiser.

  1. Guy Mains says:

    I thought I was the only one who thinks mid table is the best we can expect.

  2. Brendan says:

    On an entirely different scale but, still, having watched my local club Cork City destroyed by two successive disastrous takeovers, I’d say there’s nothing more crucial for Liverpool now than the fans standing up and making themselves counted. Again, it was on a much smaller scale, but the parallels between the attitudes of Cork City supporters then and Liverpool supporters now is uncanny – the whole white knight/any day now syndrome and so on.

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