Bobby4Mayor
Well-Known Member
From Canada's The Score:
http://blogs.thescore.com/footyblog/2011/02/25/a-financial-tale-of-two-uniteds/
In reading about football over the years, I’ve come across a few funny words. Agbonlahor. Zhirkov. McManaman. And now, Ebitda.
So who’s that do you ask? A hot new Arsenal prospect? An up-and-coming manager in non-league football? Nope. It’s–you guessed it, I’m sure–Earnings Before Interest, Taxes, Depreciation and Amortization.
Now before you click away thinking you’ve stumbled on the Financial Times op-ed by mistake, you should be aware that Ebitda is a big deal, and is one of the key elements in the recent rumoured £1.5 billion bid for Manchester United by the al-Thani family in Qatar (yes, that footballing nation with oodles of history in the game as FIFA and Barcelona have recently reminded us). Anxious United fans eager to see the present American owners the Glazer family finally go away (or stay because “better the enemy you know”) should read Andy Green’s brilliant Guardian op-ed this morning and figure out why Ebitda is so important in determining whether £1.5 billion is “enough” to get the Glazers to sell. As of writing, it doesn’t seem to be.
Now perhaps you’re naive and think you’re just a football fan, not an accountant. What do these things possibly have to do with Manchester United winning trophies and being awesome? Well, quite a lot actually. You see, when the Glazers bought the club, they essentially started a fun game of financial chicken called “leveraging.” They hoped they could hold out just long enough until a buyer offers them a valuation for the club that will let them turn a profit on the money they borrowed to invest. Here’s Green:
Such is the nature of leveraged buyouts; the buyer makes money by putting in place a relatively small amount of equity (in the Glazers’ case no more than £272m of the £831m total price paid) in the hope that the value of the asset will rise, leaving them a handsome profit.
This brilliant plan was based on a few assumptions, like Manchester United continuing to be totally awesome, getting lots of fans, and raking in loads of money from domestic TV deals. Well as Green points out, Sir Alex will be retiring soon, apparently United didn’t sell out all its season tickets this season for the first time in ages, and the money from domestic TV deals is drying up. If United can’t keep winning on the pitch, their profitability will plummet as less people care to watch, and the Glazers will be stuck with a devalued club they borrowed a lot of money to purchase. That is very, very bad for United, its fans, and football in general.
This is the nature of modern football; it’s not enough to take the time to read Zonal Marking anymore, you need to bone up on your Economics 101. If that depresses you to no end, there’s another, far more compelling football finance story to tell you about today. It’s from another Manchester area club with the word “United” in the name: FC United of Manchester of the Evo Stik Premier League, seven tiers down from that other Premier League (replace Evo Stik with Barclay’s and you’ve got the idea).
The club is a Glazer family invention, indirectly at least. In 2005, Man United fans disgusted at the American takeover formed the own club while the prawn sandwich brigade laughed and laughed. That is until FCUM jumped three divisions in three years. Now they’re on the cusp of moving from their ground in Bury to Newton Heath, the original birthplace (and name) of Manchester United, and they need your help via their Community Share scheme to do it. As the site explains:
The cost of the ground and community facilities at Ten Acres Lane…is £3.5m. In a move that is unique in English football, we are aiming to raise £1.5m through an issue of Community Shares.
FC United is one of only ten projects being supported by Coops UK and central government through the Community Share Scheme designed to enable cooperative organisations like FC United to raise finance from our communities to support expansion and development much more effectively than through traditional methods such as bank borrowing.
No Ponzi schemes, no shadowy investors, just the old and easy understand economics of “let’s all pitch in and buy a football ground.” The deadline for joining the program is February 28th. If you’re waiting for a reason to get on board, I suggest keeping an eye on these back-and-forth United bid rumours. They’ll give you plenty of motivation to invest generously. Considering the club’s meteoric rise, you’d be silly not to buy now. If you can’t afford the £200 minimum, you could always borrow some money, pay it back when the club reaches League One and keep the profit. I just thought of that.
http://blogs.thescore.com/footyblog/2011/02/25/a-financial-tale-of-two-uniteds/
In reading about football over the years, I’ve come across a few funny words. Agbonlahor. Zhirkov. McManaman. And now, Ebitda.
So who’s that do you ask? A hot new Arsenal prospect? An up-and-coming manager in non-league football? Nope. It’s–you guessed it, I’m sure–Earnings Before Interest, Taxes, Depreciation and Amortization.
Now before you click away thinking you’ve stumbled on the Financial Times op-ed by mistake, you should be aware that Ebitda is a big deal, and is one of the key elements in the recent rumoured £1.5 billion bid for Manchester United by the al-Thani family in Qatar (yes, that footballing nation with oodles of history in the game as FIFA and Barcelona have recently reminded us). Anxious United fans eager to see the present American owners the Glazer family finally go away (or stay because “better the enemy you know”) should read Andy Green’s brilliant Guardian op-ed this morning and figure out why Ebitda is so important in determining whether £1.5 billion is “enough” to get the Glazers to sell. As of writing, it doesn’t seem to be.
Now perhaps you’re naive and think you’re just a football fan, not an accountant. What do these things possibly have to do with Manchester United winning trophies and being awesome? Well, quite a lot actually. You see, when the Glazers bought the club, they essentially started a fun game of financial chicken called “leveraging.” They hoped they could hold out just long enough until a buyer offers them a valuation for the club that will let them turn a profit on the money they borrowed to invest. Here’s Green:
Such is the nature of leveraged buyouts; the buyer makes money by putting in place a relatively small amount of equity (in the Glazers’ case no more than £272m of the £831m total price paid) in the hope that the value of the asset will rise, leaving them a handsome profit.
This brilliant plan was based on a few assumptions, like Manchester United continuing to be totally awesome, getting lots of fans, and raking in loads of money from domestic TV deals. Well as Green points out, Sir Alex will be retiring soon, apparently United didn’t sell out all its season tickets this season for the first time in ages, and the money from domestic TV deals is drying up. If United can’t keep winning on the pitch, their profitability will plummet as less people care to watch, and the Glazers will be stuck with a devalued club they borrowed a lot of money to purchase. That is very, very bad for United, its fans, and football in general.
This is the nature of modern football; it’s not enough to take the time to read Zonal Marking anymore, you need to bone up on your Economics 101. If that depresses you to no end, there’s another, far more compelling football finance story to tell you about today. It’s from another Manchester area club with the word “United” in the name: FC United of Manchester of the Evo Stik Premier League, seven tiers down from that other Premier League (replace Evo Stik with Barclay’s and you’ve got the idea).
The club is a Glazer family invention, indirectly at least. In 2005, Man United fans disgusted at the American takeover formed the own club while the prawn sandwich brigade laughed and laughed. That is until FCUM jumped three divisions in three years. Now they’re on the cusp of moving from their ground in Bury to Newton Heath, the original birthplace (and name) of Manchester United, and they need your help via their Community Share scheme to do it. As the site explains:
The cost of the ground and community facilities at Ten Acres Lane…is £3.5m. In a move that is unique in English football, we are aiming to raise £1.5m through an issue of Community Shares.
FC United is one of only ten projects being supported by Coops UK and central government through the Community Share Scheme designed to enable cooperative organisations like FC United to raise finance from our communities to support expansion and development much more effectively than through traditional methods such as bank borrowing.
No Ponzi schemes, no shadowy investors, just the old and easy understand economics of “let’s all pitch in and buy a football ground.” The deadline for joining the program is February 28th. If you’re waiting for a reason to get on board, I suggest keeping an eye on these back-and-forth United bid rumours. They’ll give you plenty of motivation to invest generously. Considering the club’s meteoric rise, you’d be silly not to buy now. If you can’t afford the £200 minimum, you could always borrow some money, pay it back when the club reaches League One and keep the profit. I just thought of that.