Tuesday, May 31, 2011

Arsenal's Transfer Budget

The end to the football season could not have come quickly enough for Arsenal fans, as their team once again failed to maintain its challenge for honours, falling away to a disappointing fourth place after being Manchester United’s main challengers for so many months. Those of a more artistic persuasion might well have reflected on the words of TS Eliot, “This is the way the world ends, not with a bang but a whimper”, while baseball aficionados might have opted for Yogi Berra’s classic, “It's déjà vu all over again.”

Arsenal’s form declined so much that they only won once in their last seven Premier League games, though with typical contrariness that was against the champions, and lost three times to the might of Bolton Wanderers, Stoke City and Aston Villa. Six points in seven matches is unlikely to bring the long awaited silverware, in fact, it’s relegation form. Little wonder that Arsenal fans exhorted the club to spend some money during the away trip to Fulham, though their message was delivered with a great deal more earthiness.

It has become abundantly clear that Arsenal need to strengthen the side during this summer’s transfer window, adding some experience and steel to the young talents already there. Manager Arsène Wenger has confirmed that there are “resources available” and that he intends to be “very active” in the transfer market, but it is unclear exactly how much the club could afford to spend.

"Robin Van Persie - there is value in the market"

Fans would be little wiser from reading the newspapers, as they have provided a variety of figures. In the last month alone, the Mail on Sunday warned that Wenger would only have £30 million, but the Sunday Express spoke of a £50 million war chest. Falling neatly in the middle, the Daily Telegraph thought that £40 million sounded about right. The only thing that they had in common was a complete lack of explanation of how they had arrived at their figures. Of course, one of them could well be correct, but that’s almost certainly more by luck than judgment.

To be fair, the club has not exactly helped them with their assessments with Wenger saying that he did not know how much was available either, though he added, “The only thing I can say is that the club is in a healthy financial situation and, if needed, we can make a big transfer.”

Unfortunately, this sounds horribly like the noises coming out of the club last year, when chief executive Ivan Gazidis stated, “We have money available to invest in the transfer market when we can identify the right players to add into the mix that add something to the squad.” Even old school chairman Peter Hill-Wood was at it, “We have got more money than we’ve had for a long, long time and we would like to spend it. But we want to spend it sensibly. There is plenty of cash, although not in comparison to Manchester City.”

"Cesc Fabregas - will he stay or will he go?"

However, all this bravado didn’t add up to a tin of beans with the only arrivals being the inexperienced Laurent Koscielny, the disastrous Sebastien Squillaci and Marouane Chamakh (on a free transfer).

Clearly, Arsenal would be foolish to show their hand to other clubs by divulging the size of their transfer budget, but it might be instructive to some fans if we try to make a reasoned estimate of what they could spend, if only to manage expectations.

The first thing to say is that the club actually does have a formal war chest in the shape of the ring-fenced Transfer Proceeds Account (TPA). As a condition of the Emirates Stadium financing deal, the 2006 bond prospectus clearly states that 70% of net sale proceeds must be deposited into the TPA and only used for certain specified reasons including players. The idea is that this protects lenders by ensuring that the club continues to invest in its core asset, i.e. the playing squad, either by buying new players or extending existing contracts.

"Another bargain basement buy"

However, what most people do not appreciate is that this account can also be used for other purposes, such as purchasing other football assets or prepayment of debt, so it’s not absolutely guaranteed that these funds will be used on players. Therefore, it’s not a straightforward exercise to work out how much money remains in the TPA.

Many point to the money received from the £40 million sales of Emmanuel Adebayor and Kolo Toure to Manchester City in 2009, suggesting that this means that at least £28 million should be in the account, but there have been reasonably pricy purchases since then (Vermaelen £10 million, Koscielny £10 million and Squillaci £4 million) and, as we have seen, money could also have been legitimately spent on developing the stadium or academy. In other words, the TPA is no more than a useful indicator of the money available, though the highly respected Arsenal Supporters’ Trust (AST) have estimated a figure of £27 million here.

Perhaps the best starting point for an analysis of Arsenal’s transfer fund is the actual cash balance, which was £110 million in the last published accounts (as at 30 November 2010). The club is keen to emphasise the seasonal nature of cash flows, e.g. money taken from season ticket renewals at the beginning of summer will be used to pay expenses over the next few months, with Gazidis stating, “We are not sitting on a cash balance of over £100 million. We need operating money over the course of the year.”

That’s absolutely correct, but if we look at Arsenal’s cash balances over the last few years, it is clear that the trend has been upwards, rising from £53 million in November 2006 to £110 million in November 2010. Furthermore, the cash balance every May has been around £25 million higher than the previous November, so the current figure should be even higher than the most recent accounts.

In other words, Arsenal’s executive hierarchy might be accused of being a little conservative here, though they do have to maintain £23 million as debt service reserves for the stadium financing, which would mean a net balance of £87 million.

In fact, Arsenal’s ability to generate free cash flow has been very impressive, considering that: (1) most of the cash for the commercial deals with Nike and Emirates was paid upfront; (2) they have also managed to repay all the property debt incurred for the Highbury Square property development (just under £140 million).

Given all these factors, it is virtually impossible to work out how much cash is available without making a few assumptions, so that’s exactly what we are going to do. First, let’s assume that the club requires £42 million for expenses in the second half of the financial year (net of receipts), which is based on the £35 million estimate made a year ago by the good folk at the AST, who are closer to Arsenal’s accounts than anyone else, which I have increased by a prudent 20% primarily to reflect the cost of higher wages. That would leave us with net cash of £45 million.

"Jack Wilshere - a great argument for the youth policy"

We should also deduct transfer fees still owed to other clubs, which are listed in the accounts as £13 million, though Arsenal are also owed £1 million. Given that these other creditors cover both the amounts owed within a year and beyond, it’s safe to estimate a net payable of £10 million in the next 12 months. The club also has contingent liabilities of £14 million, where payments are made based on certain conditions being met, such as number of appearances for the first team or a player’s country, but these are considered less likely, so I have excluded them from our calculation.

So, deducting the £10 million for transfer fees still owed would reduce the net cash to £35 million. Maybe the gentlemen of the press do know something after all, as that is not too far away from the estimates I discovered earlier.

However, Arsenal still have an ace up the sleeve, which is the money they can expect to receive from property sales. Chairman Peter Hill-Wood has confirmed that the property business is now debt-free, so all future sales proceeds (less costs to complete) will boost the cash position. The club has not provided an estimate of how much this will be worth beyond stating, “The next few years will see the accumulation of a fairly significant cash windfall for the Group”, which is accounting speak for a lot of money.

"Arshavin - back to Russia with Love?"

There are two elements to this: (1) the remaining 35 apartments at Highbury Square (620 of 655 have already been sold); (2) other developments acquired as part of the stadium move, including the market housing at Queensland Road (with planning permission for 375 apartments), Hornsey Road and Holloway Road.

Again, we cannot be certain how much these are worth, but we can take an educated guess. Based on the price achieved in the first half of 2010 for Highbury Square (£22.5 million for 50 apartments), we would calculate £15.8 million. Using a similar calculation for 2009 (£96.6 million for 261 apartments), the sum received would be £13 million. An average of the two would imply around £14 million.

It’s even more difficult to place a value on the other developments, but I note that the social housing element of Queensland Road brought in £23 million last year.

In total, the accounts include development property at a cost of £28.2 million, but formally state that the directors consider the net realisable value to be “greater than their book value.” Using a 50% uplift, based on previous transactions, would suggest a value of £42 million, which is very close to the £45 million estimate made by the AST a year ago.

If we assume that the remaining Highbury Square apartments are sold reasonably quickly, we could add £14 million to the £35 million transfer fund we calculated earlier, giving a total of £49 million. Let’s be generous and call it £50 million. OK, there are a few assumptions behind this figure, but these are based on a degree of logic.

That does not include any money from the other property developments, which should be worth around another £30 million (£45 million total less £15 million assumed for Highbury Square). Although that is unlikely to be available for a while, it should under-pin any money laid out this summer.

Given this safety blanket, it is reasonable to ask why Arsenal are still so cautious in the transfer market. After all, everyone knows that they make huge profits, right? Last year, Arsenal reported a record profit before tax of £56 million, but this was no flash in the pan, as they also averaged £41 million in the previous two seasons.

Truly impressive, especially if you consider that only three other Premier League clubs made profits in 2009/10 and all of those were significantly lower than Arsenal: Wolverhampton Wanderers £9 million, WBA £0.5 million and Birmingham £0.1 million. However, while a strong balance sheet is laudable, that cannot be the club’s primary objective, as Hill-Wood admitted, “Our business goal is not to generate profits as such, but rather to grow the club’s revenues, so that they can be re-invested in the team and the long-term success of the club.”

Furthermore, if you look under the bonnet, there are some underlying issues that suggest that the financial picture is not quite so wonderful as it has been painted. In fact, if you exclude the £11 million property profit and the £38 million made from player sales, then the remaining football profit in 2009/10 would only be £7 million. That’s still very respectable, especially as it is net of £14 million interest payments, but the interims really bring the ongoing challenges to the fore.

For the first six months of 2010/11, the club actually made a loss of £6 million, largely because property profits fell to £3 million, while the profit on player sales sharply declined to £4 million, mainly from the sale of Eduardo to Shakhtar Donetsk. In fact, the pure football business produced a loss of £13 million.

To be fair, part of that is due to timing differences with two less home games than the previous season and TV merit payments, but it does suggest that the business model is not quite as robust as previously thought. There has been an undue reliance on player sales with an average £25 million a year being generated from this activity since 2006. Good business, but it makes it hard to build a winning team.

Like every other football club, Arsenal have also had to contend with explosive growth in the wage bill, which has risen from £83 million to £111 million in just four years. This “increased investment in football wages” has further increased the payroll by £4.5 million in the first six months of 2010/11, reflecting a deliberate policy of renegotiating contracts. As Wenger’s budget covers both transfers and wages, just because money is available to him does not necessarily mean that he will use it to purchase new players. Indeed, there is already talk of extending the contracts of Samir Nasri, Gael Clichy and Johan Djourou this summer.

Arsenal’s wage bill of £111 million is still substantially less than Chelsea (£173 million), Manchester City (£133 million) and Manchester United (£132 million), but it is also a lot higher than the chasing pack. In particular, it is a hefty £44 million more than Tottenham (£67 million), who finished just one place lower in the Premier League.

This sometimes comes as a surprise to many fans, given Arsenal’s well-publicised sustainable model, but is due to a couple of factors. They have a large squad and, while the wages at the top end might not be the highest, the fringe players like Denilson and Rosicky are handsomely awarded, as are the young players.

This is a policy that is worth reviewing, as a degree of complacency would appear to have set in at this level and some judicious pruning of the dead wood could free up wages for a couple of genuine world class talents. In addition, it would be worth introducing a higher element of performance-related pay to concentrate the collective mind on striving to win trophies.

Clearly, wages are a massively significant factor when it comes to signing new players, even though that great sage Jamie Redknapp has ludicrously asserted that “you can’t get cheaper than a free transfer.” For example, Marouane Chamakh cost the Gunners nothing when he arrived from Bordeaux, but a five-year deal on a reported £50,000 a week represents a £12.5 million commitment. That said, any increase in the wage bill from incoming players could be largely met by the reductions from departing players, so this argument cuts both ways.

There would also appear to be scope for some cost cutting elsewhere, as the annual costs of £55m for “other operating charges”, i.e. excluding salaries and amortisation, are on the high side. Unfortunately, the club does not provide much detail for these costs, but they must include items like stadium operating costs, travel and training. On its own, the absolute figure is fairly meaningless, but it accounts for 27% of Arsenal’s total costs, which is a higher proportion than any of the other leading Premier League clubs with the others ranging from 18-23%.

One area that has really restricted Arsenal’s ability to operate at the higher end of the transfer market is their woeful commercial income of £44 million, which lags way behind the rest of Europe’s elite. According to Deloitte’s Money League, Bayern Munich £142 million and Real Madrid £123 million generate three times as much revenue from such activity, while Manchester United have announced that they will break the £100 million barrier this year.

Arsenal’s weakness arises from the fact they had to tie themselves into long-term deals to provide security for the stadium financing, which arguably made sense at the time, but recent deals by other clubs have highlighted the lost opportunities. The Emirates deal was worth £90 million, covering 15 years of stadium naming rights (£42 million) running until 2020/21 and 8 years of shirt sponsorship (£48 million) until 2013/14. Similarly, the club signed a 7-year kit supplier deal with Nike for £55 million until 2011/12, but that has since been extended by 3 years until 2013/14.

So, following step-ups, the shirt sponsorship deal is reportedly worth £5.5 million a season, which compares highly unfavourably to the £20 million earned by Liverpool from Standard Chartered and Manchester United from Aon. It’s the same story with the kit deal, which now delivers £8 million a season, compared to the £25 million deal recently announced by Liverpool with Warrior Sports and the £25.4 million paid to Manchester United by Nike (yes, the same company that pays Arsenal much less).

It’s not overly dramatic to say that Arsenal leave over £30 million a season on the table, because of their poor commercial deals, which is the equivalent of one great player a season.

Arsenal’s new owner Stan Kroenke has said that he “intends to use his experience to help Arsenal continue to grow its global brand”, including persuading Wenger to take his side on a pre-season tour to Asia, but he might also consider whether it would be worth buying out these punitive commercial contracts, as Chelsea did a few years ago.

Arsenal have restructured their commercial team at great expense, recruiting Tom Fox from the NBA in August 2009, but to be perfectly candid they have not delivered much to date. In fact, commercial revenue actually fell £4 million in 2009/10. They might argue that their hands are tied with the long-term deals, but if that is the case, what was the point in hiring such costly executives? In any case, they should be able to work freely on secondary sponsor deals, which has been an important source of United’s impressive growth. When the interim results were announced, Gazidis said that fans would “begin to see some results over the next year” – let’s hope so.

Another factor that could impinge on Arsenal’s spending plans is the imminent arrival of UEFA’s Financial Fair Play regulations, which aim to force clubs to live within their means. Over the next two seasons, a club will only be allowed to make an aggregate loss of €45 million, but that assumes that the owner covers the loss, which has not been the modus operandi at Arsenal to date. Otherwise, the acceptable deviation is only €5 million.

In other words, if Arsenal opted to accept a few losses while they spent big on transfers, FFP might present them with some problems, even though they would be able to exclude costs incurred for the academy and stadium construction. Given the manager’s frequent criticisms of financial doping, such a move must be considered highly unlikely, but we are exploring all possibilities here.

Even Wenger mentioned that his policy might be about to change: “The market will be hyperactive because everyone believes financial fair play will happen soon. So we are quickly doing the last buying before the stores will be closed. And for the first time for a while, I will be very active too.” Although this is encouraging news to many fans, it is a little worrying to us financial types, as it implies that Wenger does not full appreciate that the resulting amortisation from buying new players will be included in UEFA’s break-even calculation – somewhat surprising, as he has a master’s degree in economics.

More positively, what could Arsenal do to enhance their spending power?

The most obvious tactic would be to sell some under-performing players and add that money to the transfer fund. Arsenal are well-versed in this art, being the only leading club to make money from buying and selling players in the era of foreign ownership (starting from the arrival of Roman Abramovich at Chelsea). Since 2003/04, Arsenal have net proceeds of £3 million, while Chelsea and Manchester City have spent almost £400 million. The “Redknapp factor” has helped Spurs spend £132 million in the same period, though his predecessors were no slouches in this department.

Most Arsenal fans would agree that there’s no shortage of candidates that could depart with minimal impact, though the most likely to go are Denilson and Nicklas Bendtner, who have both openly spoken of their desire to leave and could raise around £16 million. Others might also be given a nudge, like the inconsistent Diaby, the erratic Eboue, the dreadful Manuel Almunia and Tomas Rosicky, whose best days are sadly behind him.

One potential difficulty would be finding clubs willing to match their exorbitant salaries, but there are ways and means. Of course, these players would have to be replaced, though I reckon this could be done more cost effectively, especially if cheaper, hungrier youngsters like Henri Lansbury, Francis Coquelin and Benik Afobe return from their loan spells. That would also ensure that the club did not fall foul of the Premier League homegrown player rule.

"When will Silent Stan become Stan the Man?"

This would represent a fairly radical change in policy from Wenger, who has been quoted in the past as not wanting to introduce too many new players at the same time, but the performances in the last few weeks of the season were so dispiriting that he might just throw caution to the wind. That might also include the sale of one or more of the team’s stars, like Cesc Fabregas, Andrei Arshavin or Samir Nasri, which would release substantial funds for a major rebuild. Personally, I wouldn’t bet on this, but nor would I be hugely surprised if it did come to pass.

There is another aspect of how transfers work that is not always fully appreciated, namely many fees are not paid upfront, but in stages. In this way, a club might only have to lay out, say, £8 million immediately for a £24 million player with the other two slices being paid over the next two years. This is fairly standard practice on the continent, which was why Barcelona owed Arsenal so much money for so long for Henry and Hleb (though they don’t any more). That’s one way of “increasing” a club’s transfer fund, but this method should be used with discretion, otherwise you might just be storing up problems for the future.

On a similar theme, Arsenal could also take on more debt, as the balance sheet is very strong. Some supporters erroneously believe that the club is now debt-free, as they have paid off all the property development debt, but it is true that they have managed to reduce their gross debt to £263 million, which effectively represents the long-term “mortgage” on the Emirates stadium. Given that the gross debt has been reduced from the £411 million peak in 2008, there is clearly some room to manoeuvre here.

On the other hand, this would be a great opportunity for Stan Kroenke to make an immediate impact at the club by paying off this debt early in order to reduce the cost of servicing these loans (around £19 million a year including £5 million of capital repayment). The money saved could then be used to improve the squad. Frankly, given Kroenke’s praise for Arsenal’s self-sustaining model, this does not seem too likely, but other club owners have been known to go down this path.

Even though Kroenke is one of the wealthiest men on the planet, he gives every sign of being a careful investor, waiting for Arsenal to flourish under UEFA’s Financial Fair Play restrictions. His motto for the time being appears to be no major change, which would militate against the club embarking on a spending spree this summer. That said, he would like to be associated with a winning club, so there might be some encouragement for the manager to act more decisively when pursuing a new player.

In any case, we do know that Arsenal will benefit from some revenue growth , as they expect to generate £4.5 million from the deeply unpopular 6.5% increase in ticket prices for next season. Although part of this is down to the 2.5% VAT rise, the remaining inflationary increase is a bitter pill to swallow for fans that already pay the highest prices in world football.

In the business world, price increases are often considered the path of least resistance, and football club owners are proving increasingly happy to adopt the same approach, as their “customers” have the fiercest brand loyalty around. After all, an Arsenal fan is hardly likely to switch his allegiance to Spurs.

Arsenal’s fifth place in Deloitte’s Money League owes a great deal to their £94 million match day income, which is only surpassed by Real Madrid and Manchester United. In fact, 42% of Arsenal’s total revenue comes from match day, far higher than any other club, emphasising how reliant they are on their fans (including the “prawn sandwich brigade”), though it also serves to underline how feeble the commercial income is. Among the top 20 clubs in the Money League, only Aston Villa earn a lower proportion of their revenue from commercial activities.

In addition, the Premier League’s new TV deal, running from 2010 to 2013, is much higher than the previous contract following the significant increase in overseas rights. Hence, Arsenal’s distribution in 2010/11 has increased by £4.5 million to £56.3 million, even though they finished one place lower in the Premier League.

However, that also reinforces the importance of a team succeeding on the pitch from the financial perspective.

Not only has Arsenal’s deterioration in April and May devastated the club’s fans, but it has also hurt their bank balance. The immediate impact of dropping from second to fourth place means that their Premier League merit payment is £1.5 million lower, but the damage does not stop there, as it also has an effect on money from next season’s Champions League.

"No need to buy a new keeper after Szczesny's emergence"

The revenue distribution from UEFA comprises participation fees, prize money plus an allocation of the market (TV) pool, which is split 50% between progress in the Champions League and 50% based on the club’s finish in the previous season’s Premier League.

For England, assuming that four clubs reach the group stages, the latter element is divided as follows: 40% to club finishing first in Premier League, 30% for second, 20% for third and 10% for fourth. This year, that process resulted in the club finishing second in 2008/09 (Manchester United) receiving £10.6 million, while the club that finished fourth (Spurs) got £3.5 million – a difference of £7.1 million. This will be mitigated to some extent by the gate receipts from Arsenal’s qualifying match, but that brings other potential problems.

Speaking of the Champions League, Arsenal’s failure to win the group last season, due to pitiful defeats against Shakhtar Donetsk and Braga also cost them dear. First, each win in the group stage is worth €800,000, while a draw brings a club €400,000. Then, if Arsenal had won the group and avoided Barcelona, they might well have reached the quarter-finals, which would have been worth another €3.3 million prize money and €1.3 million from the market pool progress allocation. Let’s assume Arsenal had pulled their collective finger out, drawn the last two group games and reached the quarter-final. That would have been worth an additional €5.4 million (or £4.6 million).

This is all very theoretical, but the point remains valid: a little more effort on the pitch would have brought higher financial rewards, which might just have avoided the need to raise ticket prices. Go figure, Arsenal fans.

Of course, the doomsday scenario is that Arsenal don’t actually qualify for the Champions League group stages. They will be seeded, but could still draw an awkward opponent at an inconvenient stage of their preparation, so it’s far from guaranteed that they will get through – yet another drawback of finishing fourth. If they don’t make it, they will lose out on at least £25 million, not including additional gate receipts.

Arsenal’s bond prospectus confirmed that more revenue could be generated from commercial deals if the team does the business on the pitch: “AFC can earn additional bonus payments depending on the performance of the first team.” Apart from such uplifts in existing deals, it is evident that sponsors like to be associated with winners, so this should also be a consideration when it comes to deciding how much to spend on buying new players. That ignores the increase in shirt sales and other merchandising that normally results from a club having a world-class player or two on its books.

Given the revenue shortfalls from a relative lack of success, another way of looking at Arsenal’s transfer policy is to ask whether the club can afford not to spend, especially as others seem happy to buy their way to success. The traditional “Sky Four” has been gate-crashed by the extremely wealthy Manchester City and the big-spending Tottenham, so Arsenal can no longer take for granted that they will secure the lucrative Champions League qualification every season. Besides, on the form of the last few weeks, I’m not sure that Arsenal could approach any match with a great deal of confidence.

"Nik Bendtner - must be worth £10m of someone's money"

However, there is no doubt that this Arsenal team does have potential, as evidenced by rousing victories over Barcelona, Chelsea and Manchester United, so it’s not entirely unreasonable when Wenger said that it would be “completely stupid” to make significant changes to the squad this summer. He has argued that he does not want to “kill” his young players’ development, “If I go out and buy players, then Jack Wilshere does not come through”, which may be true, but there are other players in the Arsenal team that do not possess the same ability, nor demonstrate the young Englishman’s desire on the pitch.

There do seem to be some mixed messages coming out of North London these days. On the one hand, Wenger attributes his unwillingness to spend to a profoundly held belief in his policy, “You cannot come to a conclusion that this team needs a massive change. We are there, but because we have not won trophies, people destroy us completely.” However, this sounds terribly similar to his words last summer, when he argued, “I feel we have made huge steps forward this year compared to last year.”

On the other hand, he sometimes implies that his hands are tied financially, “Even if people say you have to spend money, we have to be realistic. We can’t buy players for £50 million. That is a fact.” However, there are several arguments against this perspective: (a) few sensible supporters want Arsenal to spend that much on one player; (b) very good players can be bought for much smaller sums, e.g. Mesut Ozil, Nuri Sahin and Rafael Van der Vaart; (c) as we have seen, money is available to improve the squad, probably around £50 million.

"Thomas Vermaelen - like a new signing"

Indeed, Wenger himself seemed to suggest that was the case, saying that the club has the resources to secure the services of a top talent. While his priority might be to keep his star players, he has also admitted that he wants to strengthen, though this does not necessarily imply lots of comings and goings, “It’s not the number, it’s the quality.” That might not be such a bad outcome for Arsenal fans. If the club does manage to buy 3-4 proven, world class players with the requisite winning mentality, that could make an enormous difference to such a young team.

For many years Wenger was effectively fighting with one arm tied behind his back, due to the financial constraints imposed by building the new stadium, but the club now has sufficient funds available to spend again, albeit not at stratospheric levels, without compromising its sustainable model. They need to do something, because one thing is certain: if you keep doing the same thing, you’ll keep getting the same results.

Monday, May 23, 2011

Liverpool's Future Strategy

If ever a football club’s season could be described as the proverbial “game of two halves” that would be the one experienced by Liverpool fans this year. Following Roy Hodgson’s appointment as manager last July as the replacement for the popular Rafael Benitez, the Reds endured their worst league start in more than 50 years, falling into the relegation zone in October after a dismal home defeat to newly promoted Blackpool.

Hodgson’s grim tenure came to an end in January, when he was replaced by Kenny Dalglish, who inspired a revival that took Liverpool back up the table to sixth place. Moreover, the team threw off the shackles and played some sparkling football, including wins over Manchester United, Chelsea and Manchester City. Although Dalglish’s record in his previous reign on the Mersey was highly impressive, winning three league titles and two FA Cups, some had expressed doubts about the Scot’s credentials, as he had not managed a club for more than a decade and he was initially appointed on a temporary basis.

However, the mood at Anfield has clearly taken a massive turn for the better and virtually all of the non-believers have now been converted. Thus, it was no surprise that Dalglish was duly confirmed as permanent manager a couple of weeks ago, when he was given a three-year contract along with his first team coach Steve Clarke. As new owner John W Henry said, “Kenny is a legendary figure, both as a supremely gifted footballer and successful manager.”

"John W Henry - the man with a plan"

The new ownership is, of course, the other vital change to occur at Liverpool during this momentous season with New England Sports Ventures (NESV) taking over from the reviled pair of Tom Hicks and George Gillett last October. Well known for its stewardship of the Boston Red Sox, one of the most famous baseball teams, and involvement in NASCAR, the company has now changed its name to the Fenway Sports Group (FSG), but the key executives remain the same. As far as Liverpool are concerned that means John W Henry, the principal owner, and Tom Werner, the chairman, who both hold 50% of the voting rights in the football club.

They look like a good fit for Liverpool, as explained by the club’s former chairman Martin Broughton, “New England have a lot of experience in developing, investing in and taking Boston Red Sox - as the closest parallel - from being a club with a wonderful history, a wonderful tradition that had lost the winning way, and bringing it back to being a winner.” In fact, after buying the Red Sox in 2002, NESV delivered success just two years later, as they won the World Series in 2004, ending an 86-year wait for honours, and then repeating the feat in 2007.

On the face of it, they could not be more different to their unpopular predecessors, Hicks and Gillett, who saddled Liverpool with a mountain of debt when they bought the club in March 2007. Ever since then, the Reds had been on a financial knife edge. Even though the eternally optimistic former managing director Christian Purslow claimed that he could not “conceive of a situation where Liverpool Football Club could go into administration”, the reality was that the choice had been taken out of his hands.

"Luis Suarez - happy days"

The club’s bank loans were due for repayment in January 2010, but the club failed to make the £250 million payment, and the club only survived when the bank extended the date first to March and then by a further seven months to October to facilitate the sale of the club. Liverpool’s auditors KPMG had gone public with their concern over the level of debt the previous year, when they described the issue as “a material uncertainty which may cast significant doubt on the group’s and parent company’s ability to continue as a going concern.”

UEFA were also well aware of Liverpool’s financial difficulties. Last month William Gaillard, Senior Advisor to UEFA President Michel Platini, spoke about them, while warning football dignitaries of the dangers of leveraged buy-outs, “The club has been rescued, thank God, but it was a close call. They suddenly found themselves being owned by two failed banks that had been taken over by governments.”

In fact, the Royal Bank of Scotland (or indeed Wachovia) could have put the club into administration (with a nine point penalty) at any time in the last few months of the Hicks and Gillett regime. Importantly, this meant that RBS could dictate terms, allowing them to place Purslow and commercial director Ian Ayre on a reconstituted board, while stipulating that the owners could no longer appoint new representatives to the board. This meant that when the decision to sell the club was taken, Hicks and Gillett no longer had a majority, so could be outvoted by the other board members.

"Keep calm and Carra on"

Even though he is from Texas, Tom Hicks did not know when to “fold them” and tried to block the sale, describing the transaction as “an epic swindle at the hands of rogue corporate directors.” So RBS brought a legal action before the High Court to obtain a judgment on the ability of the new board to complete the sale to NESV, which they duly won. Even the elegant Broughton could not resist putting the boot in, describing the former owners’ actions as “a flagrant abuse of their undertakings.”

Acting on behalf of the club, Barclays Capital had contacted 130 potential investors, but only two bids had been received before the deadline with NESV’s winning out. They paid a total of £300 million for the club: £218 million for the equity, effectively the amount that Hicks and Gillett owed to RBS, and £83 million to assume responsibility for other debts. This was a pretty good outcome for the club, as the acquisition debt was wiped out, leaving NESV with more funds to spend on the football side of the club – and it had the added bonus of serving up a side order of schadenfreude, as Hicks and Gillett lost their £144 million investment.

The last accounts published under the old administration reflected the club’s financial shortcomings, as they reported a £20 million loss, which was £6 million worse than the previous year, even though profit on player sales rose dramatically from £4 million to £23 million, mainly due to the sale of Xabi Alonso to Real Madrid. The wage bill climbed an incredible 18% to £113 million, which was much higher than the 4% revenue growth.

That said, for the last two years, Liverpool have only made a small loss before interest payments, £2.3 million in 2010 and £3.5 million in 2009, but the impact of interest on the loans that Hicks and Gillett took out to buy the club has been hugely detrimental with net interest payable increasing from £13 million last year to £18 million in 2010.

However, that’s not the whole story, as these are only the accounts for The Liverpool Football Club and Athletic Grounds Limited, while the majority of the club’s debt was held in the holding company. Unfortunately, the 2010 accounts for Kop Football (Holdings) Limited, the largest group company incorporated in the UK, have not yet been published, but we do know that the net interest payable at that level in 2009 was a whopping £40 million, leading to a net loss for the group of £55 million. If we make the reasonable assumption that the level of interest in 2010 is the same, this would mean that the club had paid around £125 million of interest during Hicks and Gillett’s unhappy reign.

Another interesting point is the large amounts paid out for changes in management, which amounts to £12 million in the last two years, including around £8 million for Rafael Benitez and his coaching staff in 2010 and £3 million compensation for directors’ loss of office in 2009 (reportedly Rick Parry).

In fact, Liverpool have only made a profit once in the last five years, specifically 2008, when they registered an £8 million surplus, largely due to £22 million profit on player sales, after a number of experienced players were moved on (Crouch, Sissoko, Carson, Riise and Guthrie). However, the new Premier League deal was also an important contributory factor, leading to a £16 million rise in television revenue.

Like all football clubs, the additional riches provided by the ever-increasing TV deals has been a critical factor in Liverpool’s revenue growth, contributing almost half (£29 million) of the £64 million rise in turnover since 2005. However, the fastest growing activity is commercial income, which has risen an impressive 68% in the same period. Match day revenue has also grown from £33 million to £43 million, but remained relatively flat compared to the other revenue streams. On the plus side, Liverpool’s revenue is fairly evenly distributed among the three main revenue streams, which means that they are not unduly reliant on one area.

There are a couple of ways to look at Liverpool’s revenue of £185 million. On the one hand, this puts them in a more than respectable ninth place in the Deloitte’s Money League, which ranks clubs in order of revenue, but, on the other hand, they are still a long way behind the clubs at the top of the (money) tree. In particular, the Spanish giants generate considerably more income with Real Madrid and Barcelona earning £359 million and £326 million respectively, approaching twice as much as the Reds. Moreover, bitter rivals Manchester United earn £100 million more than Liverpool every season, which is a considerable competitive advantage.

Furthermore, Liverpool dropped a place in the Money League last season and can expect a further decline next year, as they will not have the benefit of Champions League revenue, while Manchester City’s commercial revenue is likely to climb again under their Middle East owners. This would mean that four English clubs will receive more money than Liverpool (United, Arsenal, Chelsea and City), which would be a concern, unless the new owners can address the club’s weaknesses.

One obvious issue is the wage bill, which has soared to £114 million, up from £96 million the previous year, mainly due to contract extensions. This has increased the important wages to turnover ratio to 62%, the first time that it has gone above 60% in that period. In fairness, this is still below UEFA’s recommended maximum limit of 70% and is much better than most other clubs in the Premier League, notably big-spending Manchester City (107%) and Chelsea (82%). What is worrying, however, is that performance on the pitch has worsened, while the wage bill has risen, which is the opposite of what usually happens in football, culminating in the team failing to qualify for the lucrative Champions League.

That was then, this is now.

The recently appointed managing director, Ian Ayre, described the results as “a footnote in our history”, as he suggested that the club was now “moving forward.” It is entirely appropriate that we concentrate on the new owners’ future strategy, not least because John W Henry made his fortune as a futures trader.

Actually, I say “fortune”, but everything’s relative. While his estimated worth of £375 million might be enormously impressive to the proverbial man in the street, it’s small change compared to the billions owned by other prominent owners of football clubs, such as Sheikh Mansour, Roman Abramovich, Stan Kroenke and even the Glazers. It’s actually even lower than the likes of Peter Coates at Stoke City and David Sullivan at West Ham.

Therefore, Liverpool fans should not expect a classic sugar daddy. Instead they have got a group of savvy businessmen with proven expertise and a superlative record in sports management. Nevertheless, the new owners will still need to access substantial funds in order to strengthen the squad and address the stadium situation (either build a new stadium or redevelop Anfield), so the obvious question is how will this be financed? Liverpool fans would not want to see the club take on large levels of debt once again, so Henry’s team really has to address the club’s faltering business model.

Although we are not privy to their strategic plan, we can make some fairly good guesses at where they will try to turn around Liverpool’s finances, based on their announcements to date, which I have attempted to summarise in a 15-point plan.

1. Put your shirt on it

While discussing the most recent financial results, Ian Ayre stated, “We have had significant commercial growth since these accounts were published.” He can point to the shirt sponsorship deal with Standard Chartered starting next season, which “can generate up to £81 million” over four years. Although it is understood that some of this may be performance related, this implies £20 million per annum, which is £12.5 million higher than the current deal with Carlsberg. This is in line with Manchester United’s Aon deal, but Barcelona’s £25 million deal with the Qatar Foundation has raised the bar again - even higher than Bayern Munich’s £24 million deal with Deutsche Telekom.

Last month it was reported that Liverpool had secured a £25 million kit deal with Warrior Sports, a subsidiary of New Balance, from the 2012/13 season, though this has not been officially confirmed. This is an example of the synergy that FSG can bring to the party, as Warrior recently announced a deal to manufacture kit for the Red Sox. The deal would more than double the amount received from Adidas, who currently pay £12 million a year. Although the press reported this as a record for English football, it is actually slightly lower than Manchester United’s Nike deal, which had a contractual step-up from £23.3 million to £25.4 million this season, but it’s still a mighty impressive increase.

In total, the two shirt deals will deliver a substantial revenue increase of around £25 million a season (Standard Chartered £12.5 million, Warrior £13 million).

2. Going global

Liverpool’s commercial income of £62 million is already pretty good, being sixth highest in the Money League, though it is only half the amount earned by Bayern Munich and Real Madrid and it actually fell last year if you consider that LiverpoolFC TV Ltd was brought in-house in July 2009. In fact, Liverpool sell more shirts than any other club except Madrid, Barcelona and United.

An important element of the club’s strategy is therefore to “leverage the club’s global following to deliver revenue growth”, which Tom Werner emphasised, “We consider Liverpool to have untapped potential globally.” This is clearly one of the key drivers for American investors, as explained by Don Gerber, head of Major League Soccer, “There’s a belief that there’s a valuable global franchise with these clubs.”

In particular, Werner has stated that the club is focused on Asia (“The support the club has there is already considerable”), hence the pre-season tour to China and South Korea. However, this has lead to club sponsor Standard Chartered, who make much of their income in Asia, somewhat crassly suggesting that they would like Liverpool to sign players from that region, citing the example of Park Ji-Sung at United.

Liverpool fans would have been equally perplexed at the news that basketball star LeBron James had bought a stake in the club, but this is part of his marketing deal with FSG and has helped raise Liverpool’s profile in the States.

More worrying is Ian Ayre’s apparent support for the 39th game, a proposal to play an extra round of Premier League matches at neutral venues outside England: “We have a duty to fans around the world to give them access to the product.” I’m not sure that the fans on the Kop would necessarily agree with that sentiment.

3. Nothing succeeds like success

While it is true that success on the pitch should lead to financial strength, this is not always the case, which is amply demonstrated by the distribution of Premier League revenue. In Liverpool’s case, their share of the revenue only fell £2.3 million in 2009/10 to £48 million, even though they dropped from second to seventh place.

This is because of how the Premier League distribution model works with half of the domestic money and all of the overseas rights being split evenly among the 20 clubs. It’s true that 50% of the domestic rights are still up for grabs, but that does not make a big difference for the leading clubs: (a) 25% is for merit payments with each place in the league worth £800,000; (b) 25% is paid in facility fees, based on how often a club is shown live on television, which will always be a lot for a club like Liverpool.

However, the key point here is that a club’s revenue will effectively go up by default, simply from its presence in the Premier League, as each new TV deal increases the size of the pot available to distribute. The three-year deal for 2004-2007 was worth £1.45 billion, while 2007-10 rose to £2.5 billion and the latest contract for 2010-13 is worth an incredible £3.4 billion. Figures have not yet been released for 2010/11, but the increase for Liverpool will be at least £7 million.

4. We are the champions

The relatively small difference between the leading clubs in terms of Premier League distributions only emphasises the importance to Liverpool of qualifying for the Champions League. Last season the Reds earned £26 million from this competition, even though they were eliminated at the group stage, supplemented by £3 million after parachuting into the Europa League and reaching the semi-finals. That figure does not include extra gate receipts or higher payments from success clauses in commercial deals.

Liverpool’s failure to qualify for Europe’s flagship tournament for the last two seasons has cost them dearly. Given that UEFA’s prize money has been increasing on the back of higher TV deals, all in all, it’s probably now worth at least £35 million a season. It is therefore imperative that Liverpool reclaim their traditional place among Europe’s elite.

5. The revolution will be televised

While TV rights as a whole have been rising, the really interesting aspect is that overseas fans that have been behind the explosive growth with the revenue doubling each time the rights are re-negotiated: 2001-04 £178 million, 2004-07 £325 million, 2007-10 £625 million and 2010-13 £1.4 billion.

As Steve McMahon, the former Liverpool player turned executive at the Singapore-based Profitable Group, said, “It is a global game. The television figures when Liverpool or Manchester United play are 600 or 700 million.” These figures dwarf the Super Bowl, hence the interest of American investors in the Premier League.

This is particularly relevant to Liverpool, as FSG have substantial expertise in this sphere, owning 80% of New England Sports Network, a regional cable television network, while Tom Werner is an experienced television producer. Although English football clubs have clearly benefited from television money, they are strictly amateurs compared to their cousins across the water. To give an idea of the size of the prize, the value of the New York Yankees’ official cable network is three times as high as the club itself.

Perhaps the most intriguing question is how Premier League clubs react to new technology. To date, digital rights have been treated as little more than an afterthought to the main TV deal, but the emergence of fast, broadband networks might just be the catalyst for clubs to interact directly with fans, when revenue could potentially explode.

6. A fair day’s work for a fair day’s pay

On completing due diligence, John W Henry said that Liverpool’s wage bill was one of “a number of unpleasant shocks”. Specifically, he thought that it was a huge payroll for a squad with little depth. It stands to reason that the £114 million wage bill should be reduced, especially when you consider that it is so much higher than Tottenham’s £67 million. That does not imply a “slash and burn” approach, more a case of the club getting better value for money, as Henry explained, “We have to be more efficient. When we spend a dollar, it has to be wisely. We cannot afford player contracts that do not make long-term sense.”

7. Steady as she goes

One obvious way to cut costs would be to stop sacking managers. Including the £7.3 million reportedly paid to Roy Hodgson (after just six months), this adds up to the best part of £20 million in the last three years. Encouragingly, Henry said, “Our goal in Liverpool is to create the kind of stability that the Red Sox enjoy. We are committed to building for the long-term.” That said, Tom Werner did say that he saw “no reason why Roy can’t be our coach this year and in the future” only two months before he was given his P45, though, in fairness, Hodgson was not FSG’s appointment. The new owners will also try to bring continuity by adopting the director of football model, which has not always been successful in England, but has worked very well at clubs like Lyon.

"Cheer up, Fernando. You just made Liverpool £50m"

8. The art of the deal

One possibility that would help reduce the wage bill is offloading players who are no longer wanted. We can anticipate Liverpool selling the likes of Jovanovic, Poulsen and Aurelio at generous prices in order to get them off the books. There are also quite a few players currently out on loan that are likely to leave, including Aquilani, Konchesky and Degen.

Such sales have a triple whammy effect, as they also reduce player amortisation, which is on the high side at Liverpool, and potentially bring in a profit on sale (if the sales price is higher than the remaining value in the accounts). Liverpool will report a very high profit on sale in this year’s accounts, mainly due to the £50 million sale of Fernando Torres to Chelsea, but also Javier Mascherano to Barcelona for £17 million and Ryan Babel to Hoffenheim for £6 million, and next year’s profit could also be on the high side if the new owners clean house.

Babel is a good example of how this works in accounting terms. Purchased from Ajax in 2007 on a five-year contract for £11.5 million, you would assume that his £6 million sale in January would have produced a loss. In total, that would be correct, but in this year’s accounts the club will actually show a £2.6 million profit, as the player’s value in the books had been written-down to £3.4 million (£11.5 million cost less 3.5 years amortisation at £2.3 million a year).

9. Can’t buy me love

Liverpool have effectively been a selling club during the Hicks and Gillett era with the net spend dramatically slowing down after their arrival. Some have speculated that the new owners will be equally cautious, referring to FSG’s belief in the application of statistical analysis made famous by Moneyball, Michael Lewis’ best seller about the innovative methods adopted by Billy Beane at the Oakland Athletics baseball club. However, there is a bit more to their transfer market strategy, as explained by Larry Lucchino, president and CEO of the Red Sox, who said that they “take some of the quantitative analysis approaches and overlay them with the resource advantages of our market.”

In other words, they have used their financial muscle to complement best value purchases by also spending big on the right players. It’s more like the Barcelona method, rather than the Arsenal strategy they have publicly praised. Henry underlined this willingness to splash the cash when necessary by pointing out that the Red Sox had been second in spending over the last decade in major league baseball.

"Andy Carroll - big fee for a big man"

A more obvious example occurred in January when Liverpool paid £35 million for Andy Carroll and £23 million for Luis Suarez. Incidentally, Henry has explained that the seemingly exorbitant Carroll fee still fits in with FSG’s principles, as they were happy to pay this, as long as they secured £15 million more when selling Torres.

With all the likely ins and outs, my guess is that Liverpool fans and director of football Damien Comolli can expect a very busy summer in the transfer market.

10. Give youth a chance

So FSG’s preferred model is one with top quality stars supplemented by home grown youngsters, as outlined by Henry, “We have been successful through spending and through securing and developing young players.” Tom Werner added, “We certainly feel we can do a better job bringing in more players that are home grown”, as he promised to invest in the scouting network.

This makes complete sense in the Financial Fair Play era, as youth development costs are excluded from UEFA’s break-even calculation. In addition, any profit on the sale of players that don’t quite make it at Liverpool is useful in balancing the books.

In fairness, the academy set up by Rafa Benitez is already prospering with many players involved in first team action this season (Jay Spearing, Martin Kelly, John Flanagan and Jack Robinson). Last month, the progress was endorsed by no fewer than seven Liverpool youngsters being named in England’s Under-19 squad, following the selection of four players in the Under-17 squad.

11. Grounds for hope

Although Anfield is a wonderfully atmospheric old ground, its capacity is only 45,400, which is much less than Old Trafford (76,000) and The Emirates (60,400). Liverpool’s match day revenue of £43 million is less than half of Manchester United (£100 million) and Arsenal (£94 million), while even Chelsea, whose Stamford Bridge ground is even smaller (41,800), generate more than them (£67 million). Liverpool only earn around £1.6 million from each home match, which is significantly less than United (£3.6 million) and Arsenal (£3.5 million).

The previous owners felt that the only way to increase match day income was to build a new stadium, but they put the plans for Stanley Park on hold, due to the economic crisis. However, FSG are also looking at the option of redeveloping Anfield. The Red Sox chief operating officer Sam Kennedy summed up the situation, “We have the expertise for building new and renovating old, and both options are definitely still on the table.”

The ownership built new stadiums in Baltimore and San Diego, but perhaps more pertinently redeveloped Fenway Park, the iconic Red Sox stadium, applying creative techniques such as more seats, concessions, advertising and corporate hospitality, which increased match day income by 50%.

Given that the accounts state that nearly £50 million of previously capitalised stadium development costs are “highly likely” to be written-off, the implication is that the preference is for redevelopment at Anfield, not least because Henry admitted that the previous stadium move proposals “just didn’t make any economic sense or they would have been built.”

Whichever route is taken, it will still cost a lot of money, e.g. the Fenway Park renovation cost north of £200 million. As the costs are so high, the possibility of ground sharing with Everton cannot be ruled out, but the counter-argument is that any future revenue would also have to be shared.

"Pepe Reina has his say"

12. You’ll never walk alone

The downside of staying at Anfield is that fans are likely to have to pay more for their tickets. To compensate for the revenue shortfall at the Red Sox, ticket prices have rocketed in Boston. Indeed, season tickets next season have already gone up 6.5%, though 2.5% of that is to cover the VAT increase, with the cheapest tickets on the Kop now costing £725, the most expensive £802. Surprisingly, the entry level tickets are more expensive than any other team in the Premier League except Arsenal, according to a survey by Sporting Intelligence. This is on top of significant price increases last season.

13. What’s in a name?

Ian Ayre has confirmed that Liverpool would actively look for a stadium naming rights partner – but only if they move to a new stadium. Not many English clubs have succeeded in securing naming rights, but it is more common in America and could provide up to £10 million a season, maybe more with FSG’s contacts.

14. Never was so much owed by so many to so few

Liverpool’s debt had reached shocking levels under the previous unwanted regime. Although there was “only” £123 million net debt in the football club, the full picture was revealed in the holding company where debt had grown to over £400 million, including £280 million owed to the banks, which had surged after the bank applied penalty fees for the loan extension, and £144 million owed to Hicks and Gillett.

The really good news is that Henry has confirmed that the change in ownership has removed all the debt except for £37 million for development work on the proposed new stadium, which is part of a £92 million credit facility agreed with RBS. Normal working capital requirements mean that £87 million of this had been used by 31 January this year.

This is enormously significant to the club’s finances, as the prohibitively expensive annual interest payments of £40 million have been drastically reduced to just £3 million, which means that Liverpool are “able to invest more in the team rather than servicing debt” according to Ian Ayre.

Of course, debt could substantially rise again for future stadium developments, but Henry does not appear overly concerned, “I think fans will understand that stadium debt is different from acquisition debt.”

"Steven Gerrard reflects on the first half of the season"

15. All’s fair in love and war

John W Henry has praised UEFA’s forthcoming Financial Fair Play rules that aim to make clubs live within their means, while curbing excessive spending, “UEFA is doing a great thing in making clubs sustainable and that’s good news for us.” In fact, UEFA’s William Gaillard claimed that the main reason why Henry (and indeed Thomas di Benedetto at Roma) had invested in European football was the new regulations, as “they make a much more predictable environment, more similar to what they are used to in American sport.”

Although the new owner is concerned that other clubs might seek to find ways around the rules, especially after Chelsea’s massive spending spree in the January transfer window, this will not be the Liverpool way: “We've always spent money we've generated rather than deficit spending and that will be the case in Liverpool. It's up to us to generate enough revenue to be successful over the long term. We will not deviate from that.”

So, FSG have plenty to offer in their play book, but some have wondered whether their proficiency in American sports will mean much in England. Turning round the Red Sox is one thing, but Liverpool football club is (quite literally) a different ball game. While Liverpool share many similarities with the Red Sox, such as a glorious history, passionate fanbase, small stadium and, er, they both play in red, there are also quite a few differences in the two sports.

"Lucas and Meireles reinvigorated by King Kenny"

In particular, Premier League football clubs do not have a salary cap, have to deal with powerful agents and need to worry about the threat of relegation. That last point may not apply to Liverpool, but at the other end of the table they are concerned with the financial consequences of missing out on the Champions League. It is also fair to say that Boston is a wealthier city than Liverpool, so FSG’s strategy of raising ticket prices may not be appropriate on the Mersey, though you have to think that the new owners are too smart to squeeze the orange too hard.

Of course, an owner’s nationality should not be an issue. As Martin Broughton said, “There’s nothing wrong with being American. Ask Sunderland, Ellis Short is a great owner there. Wherever you come from you need the right people. These are the right people.” There might be a nagging concern that they will not bring the same level of commitment to Liverpool as to their American franchise, but if that were the case, it begs the question of why they would get involved in the first place.

Fundamentally, they are businessmen, who will have been attracted by Liverpool’s “fire sale” price and enormous potential, but Henry has said that investors in sports franchises are not in it for the money, “I don’t think you go into sport to make a profit.” He has asserted that all the money NESV has made in baseball has been ploughed back into the Red Sox, be it the team or the club’s infrastructure. Ultimately, money can be made from football if and when the value of the club appreciates, but that is likely to mean a long-term investment.

"Anfield of Dreams"

Let’s not forget that Liverpool football club is one of football’s great institutions with an incredible history: winning the Champions League and European Cup five times, the English League championship eighteen times and the FA Cup seven times. In business terms, it remains one of the leading sports brands, with the club competing in the most watched domestic league on the planet.

Arguably, John W Henry has got himself a bargain here, though there is much to do to strengthen the club’s business model. As the club’s sponsor said, “I don’t think English Premier League clubs know how valuable they are.” If Henry can help instill the winning mentality back into Liverpool, as his group did with the Red Sox, this could be a licence to print money. Of course, the fans are more interested in whether the team does the business on the pitch. Over to you, Kenny.

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