So in the words of Leo Gehts *shrugs shoulders hands up* "ok, ok, ok, ok, ok!".
I have stated time and time again that I am H&G neutral. Despite this I continue to be accused of being pro H&G and 'sticking up for them'. This is not true! However, on reading my posts (and being honest with myself) I can see why this opinion may have been formed by some.
I was also told that I don't offer a balanced opinion, just my own. Again, hands up, I used the wrong terminology. I try to offer a balanced argument. For example some people say that a calculator is no good as a dictionary, while I like to say its no good for looking up words but really good for working out sums.
I was also told that I don't offer a balanced opinion, just my own. Again, hands up, I used the wrong terminology. I try to offer a balanced argument. For example some people say that a calculator is no good as a dictionary, while I like to say its no good for looking up words but really good for working out sums.
By the same token this post should not be seen as me changing my opinion of our owners, it remains neutral. But I've sat down with one target in mind - to look at what H&G have done wrong and what has gone wrong since their takeover. After all there is a reason why I'm not pro H&G isn't there? So I'll try and explain in more detail why I'm not pro H&G. I will though try and continue to balance my arguments, as that's my way and I believe the most effective way of reaching agreement.
Let's get the boring regurgitated stuff out of the way first. They decided to make a mockery of the entire club with their very public spat and approach to Klinsmann. This was quite a culture shock for most Liverpool fans as Moores and Parry, while not being the greatest commercially in my opinion, had conducted themselves 'behind closed doors'. Despite the current public face of H&G appearing to be one of unity no one really knows if they are at peace with each other or how long that peace may last. Internal politics are prevalent within most organisations across the world, some are minor skirmishes while others turn out to be full blown hostile takeovers. The full blown ones very rarely lead to long term peace or stability while all parties remain (and I speak from first hand experience - but that's another story).
Now one of the problems is the media (as usual) who very quickly targeted into the H&G skirmish and have possibly, as they do with other things, blown it out of proportion. So we don't really know exactly how major their fall out was or how genuine their current public unity is. Although the interview of Tom Hicks would indicate it was pretty major! This should be of genuine concern to all stakeholders as I doubt longer term stability can be guaranteed if there are still problems in their working relationship.
The Klinsmann situation baffles me to some degree. However, none of us really know how much political noise Rafa was making at the time. We do know that he had very clear ideas about how to take the club forward (from a footballing perspective) which included overhauling the entire footballing structure from grass roots scouting up to the first team. A process which is now under way. Again, these kind of politics are seen all the time in businesses and it would appear that Rafa is happy with how things have turned out. I believe he is still committed to the cause and I've not heard him complaining about a lack of transfer funds. He knows he still has a lot of 'fan power' and as such I believe if he wasn't happy we would know about it. It's not like he has ever been shy is it?
The owners though have to hold up their hands and admit to these mistakes. As I said earlier these kind of things happen in organisations all over the world. They are very rarely played out in the media though and there is really no need for it to happen, if managed correctly.
So what else have they done wrong? Well there is no getting away from the fact that we are in more debt than we have ever been. I have always looked at this from a business perspective and as such have accepted the leveraged assets as a way of getting things done. Especially given the comparison against the other top 4 clubs (as I posted here 'LFC - Sinking in a sea of debt?').
I guess though that (at its peak) debts of up to c. £350m are scary to most people. We are talking huge amounts of money owed to banking institutions. I have never accepted the fact that they lied about 'never putting debts onto the club' as I posted in the blame game part one. However, the possibility that they have been disingenuous exists. I find it hard to believe that they never planned to borrow to move the club forward. Indeed they have a track record of borrowing against a company's assets to drive growth. I guess the real question is, had they been up front from the start would there be peace, or would the disgruntlement have just started sooner?
I guess though that (at its peak) debts of up to c. £350m are scary to most people. We are talking huge amounts of money owed to banking institutions. I have never accepted the fact that they lied about 'never putting debts onto the club' as I posted in the blame game part one. However, the possibility that they have been disingenuous exists. I find it hard to believe that they never planned to borrow to move the club forward. Indeed they have a track record of borrowing against a company's assets to drive growth. I guess the real question is, had they been up front from the start would there be peace, or would the disgruntlement have just started sooner?
I truly believe there was every intention to build a new stadium as it was integral to driving revenues. The timing of the credit crunch and how it affected our banks fits too neatly for us to dismiss the credit crunch as the real reason why our stadium is on hold. They were foolish though to offer any time scale on starting the stadium when they did (especially one so short). They surely already had in mind that the initial plans would not be acceptable to their longer term plans. So why not just come out, there and then, and say so.
The real problem of their own making, as happened on the pitch last season, was our expectations were raised to an all time high. We went from being a club living within its means to all of a sudden not being owned by one wealthy man but two. While one of them was wealthy by 'normal' standards the other, well he was a billionaire and had appeared in Forbes' top 100 rich list. This was it wasn't it? Superstar players, a new stadium and success, back to the good old days. Then the players started coming in and our expectations go even higher and this is it.... here we go... players, loans, stadium, credit crunch... screech... crash!
At the time of the takeover I'm pretty sure not many fans had done any research on our new owners. They've done plenty now and the way they make their millions becomes clear. They leverage a businesses assets to drive growth quickly. This had become increasingly common business practice across the world during the borrowing frenzy seen over the last decade. The Glazer deal was probably the first high profile sporting takeover utilising this method of borrowing within the UK. However, their borrowing was to simply buy the club without the need to immediately drive revenue increases.
Interestingly while the protesters in Manchester have been quiet recently there do appear to be rumblings again. The discontent 'up the road' may soon return to the fore and the chants of too much debt, interest payments, no star player purchases and those damn Americans will return. For two so vehemently rival clubs the similarities between us and them is astonishing!
In business you start up and you achieve growth. That growth drives revenues which in turn increases profits. You can then take those profits out of the business or reinvest to provide more growth, revenues and thus profits. Business owners who reinvest quite often have an exit strategy, for on completion of driving the value within the business. Once they have increased the value of the business and the brand they can then 'cash in'.
The recent 'lending frenzy' allowed an easier way to get to the 'cashing in' stage. Instead of using profits to drive growth you in essence borrow future profits allowing for accelerated growth which in turn drives revenue increases quicker. There is a certain amount of logic in doing this. You don't tie up personal cash, which instead you use as tacit security for the banks. That is to say the banks feel secure in lending money to H&G because they know of their wealth. By not requiring the use of your own funds you can spread your risks and grow several businesses at once.
But there is a downfall to operating this way, which we have seen. There appears to be a lack of commitment to the business from the owners. In simple terms they appear to have nothing to lose. If Liverpool Football Club fails it won't affect their bank balances. This creates the suspicion we are seeing from some fans. Especially when you consider where our expectations were. Fans want to see that debt, if we have to have it, mean something by way of new players and stadia.
There is nothing wrong with a football club having debts to drive growth. Indeed when our debts are less than half of our direct competitors (comparing apples with apples) it could be said we are in a healthy position financially speaking. A few people have come on and said they don't care about comparing us this way, despite there being a quite logical reason for doing so.
There is a very simplified argument doing the rounds about our debts, but the debts are a realistic component of growth for any business. The problem is the commitment, or lack of it, and not the debts. If H&G had match funded our debts from their personal wealth, instead of using it as 'tacit security' I doubt there would be a problem. They would have shown their commitment and we would have a stadium underway or half the debts. But in my opinion it is the lack of commitment and not the debts which is the underlying problem.
There is nothing wrong with a football club having debts to drive growth. Indeed when our debts are less than half of our direct competitors (comparing apples with apples) it could be said we are in a healthy position financially speaking. A few people have come on and said they don't care about comparing us this way, despite there being a quite logical reason for doing so.
There is a very simplified argument doing the rounds about our debts, but the debts are a realistic component of growth for any business. The problem is the commitment, or lack of it, and not the debts. If H&G had match funded our debts from their personal wealth, instead of using it as 'tacit security' I doubt there would be a problem. They would have shown their commitment and we would have a stadium underway or half the debts. But in my opinion it is the lack of commitment and not the debts which is the underlying problem.
The other problem with the whole situation, as I have said in the past, is the real lack of communication from the club. Now in fairness to H&G, we can't tell them to wind their necks in one moment (when they're plastered all over the papers) and then tell us everything that's going on the next. However, throughout this whole situation there appears to be a lack of information about the future direction of the club. What is the strategy?
I know that Spirit of Shankly have met with the senior management of the club but not all of us are members. I found some useful information from the meeting minutes, so why not publish them on the LFC website? This by the way isn't a dig at SOS, who I have stated on several occasions I have respect for, but they don't necessarily represent the views of the entire LFC fan base. The club should be communicating with all of us through the medium which is already in place.
I know that Spirit of Shankly have met with the senior management of the club but not all of us are members. I found some useful information from the meeting minutes, so why not publish them on the LFC website? This by the way isn't a dig at SOS, who I have stated on several occasions I have respect for, but they don't necessarily represent the views of the entire LFC fan base. The club should be communicating with all of us through the medium which is already in place.
So in summary they have:
Played political games within the organisation
Been unrealistic about some of their plans
Inappropriately treated some staff (Rafa - Klinsmann fiasco)
Possibly been disingenuous - in that they will have presumably known their plans at the outset
Shown a lack of commitment by using debt instead of personal finance
Haven't communicated effectively
My opinion - (it's not right or wrong, it's an opinion)
These are all symptoms of the problem rather than actually being the problem. The problem is Liverpool FC has become a fully fledged business. A business which uses modern business practices and takes risks in order to increase the return on investment. Think back to the origins of football clubs. They were generally community driven and the football clubs were an integral part of their local community. How times have changed! The 6 problems I have noted above are all part of business. Within businesses most or all of them, depending on the business, are encountered on a regular basis.
There has been a change in modern time football in that football clubs turnover and make serious amounts of money. This pushes football clubs into the business arena and with each push there is a pull effect from the football club's community origins. While I would imagine Spirit of Shankly has members from all around the world, I suspect the core of its membership is from the local areas. These are the people who are most affected by this pull effect and they are quite rightly upset, confused and in need of answers; which are not forthcoming.
Hicks and Gillette are fully fledged hard nosed businessmen. They have made hundreds of millions by being this way. They no doubt have a very clear plan and exit strategy. Due to years of control under a management team, which didn't take advantage of the vast commercial possibilities, they saw the clear opportunity Liverpool FC represented. The most successful team in British football and all of this unrealised commercial potential. Unrealised potential means hundreds of millions of pounds in this case. Do they have an emotive tie to the club? I doubt it. They are businessmen who saw an opportunity and are taking it. The good thing out of all this is that the true value can only be realised by achieving on and off the pitch success. So H&G must invest in both.
For all of those fans though who have an emotive tie to the club, who do care about the club from more than a financial perspective, it's hard to see it being pulled away from its community roots. It's even harder to see the risks being taken to get to the exit strategy of H&G, for great financial reward, without the financial commitment. I say 'without the financial commitment', none of us actually know whether personal guarantees have been given on the loans for Kop Holdings.
So why am I neutral?
Well as a business (and I admit I do tend to look at things from this perspective) they are running it very, very well. The business is not, as far as we can see, in any danger of collapse and is not reliant on H&G for the long term (which is an important point to me). Yes it has debts but there is supposedly only actually £105m against the club itself. Which for the progress we have made is actually a good deal for LFC. This level of debt would be attractive to a new buyer should Kop Holdings collapse. Also consider what £105m is in relation to the assets it's secured against, especially the playing squad.
The debts when H&G came in were c.£45m so what does £60m buy? New players of a quality which are a step up from Moores/Parry signings, investment in the academy and youth set up, increased wages for star players, remaining 50% share in LFC.tv and the 'soft costs' for the new stadium. I won't go through the Kop Holdings debts again here (refer to blame game part one). We have also significantly improved commercially and the push towards the exit strategy is well and truly under way.
We can't force a change of ownership and if we could I don't know who else we would want to come in. Another businessman would be, well... another businessman. A sugar daddy would take risks and leave us dependant on him in the long term, a la Abramovich.
I'm not convinced fan ownership is the way to go as it would put too much pressure on results (we've already seen the knee jerkers at work this season). Yet at the same time this is the clearest way to push the club back to its community roots. However, I believe that business expertise and backing is required to make us truly competitive in the global environment.
Do I have a suggestion?
Well kind of. For the best benefit of the club as a whole I would like to see a mixture of community and business working together. I'd like to see some of the club owned by businesses and some by fans. I don't particularly think the club is served very well by being owned privately by one or two individuals as any businessman is going to be trying to make their millions at 'exit time'. Millions which could be ploughed into the club.
There will be even greater resentment of H&G when they do leave with their bags of cash, but this is private enterprise and that's what makes the world turn money wise. It's just impinging on more emotive enterprises these days. Let's be honest you don't care who owns Tesco or even your local grocery store or how many billions any of them make. But you have an emotive tie to your football club and we can't just go to Asda if we don't like it can we!
The best answer to me is through an already existing method. Float the business on the stock exchange and have this joint collaboration between fans and business. The owners can still keep a good, but not controlling, majority and the rest of the business can be owned through faceless organisations and the fans. But I doubt it will happen. The owners quite clearly have a plan and I doubt much will get in the way of that plan, and they do own the club after all.
Final thought
One final thought and yes for this bit, for humanity, I will stick up for them. H&G are human, they are not evil dictators and they do not deserve some of the things which are apparently happening to them (hate mail, abuse etc.).
They are businessmen and what they are doing is what business people do day in and day out. They make millions and billions of pounds for themselves. They have a certain skill set to do this that not everyone has. At the same time they employ people, they give to charity, they pay taxes, they fund local community projects and they fund the local community through rates etc.
This is today's society and the way in which it works. We have every right to be worried or angry but for every hate letter or email and for every hurled insult you weaken your position. Some people think this is the only way to get through to them. It is the wrongest and most in-appropriate way to get through to them.
If I was them and had no emotive tie to the club I know what I'd be thinking from a business perspective. I'd be thinking 'screw you, I'm going to stay here in America and I'm going to squeeze every last penny out of this club and I don't care what state I leave it in. You want to see greedy capitalist behaviour well here it comes.'
If you want them out of Anfield you should tread carefully and you should think and re-think your plans until you are certain you are heading along the right path. Strategically and politically every step must be fully considered and all implications weighed up. We all have limits and as businessmen you are more likely to push H&G past theirs, rather than get them to tuck their tails between their legs and disappear. Until they've made a return on their investment of course.
These are all symptoms of the problem rather than actually being the problem. The problem is Liverpool FC has become a fully fledged business. A business which uses modern business practices and takes risks in order to increase the return on investment. Think back to the origins of football clubs. They were generally community driven and the football clubs were an integral part of their local community. How times have changed! The 6 problems I have noted above are all part of business. Within businesses most or all of them, depending on the business, are encountered on a regular basis.
There has been a change in modern time football in that football clubs turnover and make serious amounts of money. This pushes football clubs into the business arena and with each push there is a pull effect from the football club's community origins. While I would imagine Spirit of Shankly has members from all around the world, I suspect the core of its membership is from the local areas. These are the people who are most affected by this pull effect and they are quite rightly upset, confused and in need of answers; which are not forthcoming.
Hicks and Gillette are fully fledged hard nosed businessmen. They have made hundreds of millions by being this way. They no doubt have a very clear plan and exit strategy. Due to years of control under a management team, which didn't take advantage of the vast commercial possibilities, they saw the clear opportunity Liverpool FC represented. The most successful team in British football and all of this unrealised commercial potential. Unrealised potential means hundreds of millions of pounds in this case. Do they have an emotive tie to the club? I doubt it. They are businessmen who saw an opportunity and are taking it. The good thing out of all this is that the true value can only be realised by achieving on and off the pitch success. So H&G must invest in both.
For all of those fans though who have an emotive tie to the club, who do care about the club from more than a financial perspective, it's hard to see it being pulled away from its community roots. It's even harder to see the risks being taken to get to the exit strategy of H&G, for great financial reward, without the financial commitment. I say 'without the financial commitment', none of us actually know whether personal guarantees have been given on the loans for Kop Holdings.
So why am I neutral?
Well as a business (and I admit I do tend to look at things from this perspective) they are running it very, very well. The business is not, as far as we can see, in any danger of collapse and is not reliant on H&G for the long term (which is an important point to me). Yes it has debts but there is supposedly only actually £105m against the club itself. Which for the progress we have made is actually a good deal for LFC. This level of debt would be attractive to a new buyer should Kop Holdings collapse. Also consider what £105m is in relation to the assets it's secured against, especially the playing squad.
The debts when H&G came in were c.£45m so what does £60m buy? New players of a quality which are a step up from Moores/Parry signings, investment in the academy and youth set up, increased wages for star players, remaining 50% share in LFC.tv and the 'soft costs' for the new stadium. I won't go through the Kop Holdings debts again here (refer to blame game part one). We have also significantly improved commercially and the push towards the exit strategy is well and truly under way.
We can't force a change of ownership and if we could I don't know who else we would want to come in. Another businessman would be, well... another businessman. A sugar daddy would take risks and leave us dependant on him in the long term, a la Abramovich.
I'm not convinced fan ownership is the way to go as it would put too much pressure on results (we've already seen the knee jerkers at work this season). Yet at the same time this is the clearest way to push the club back to its community roots. However, I believe that business expertise and backing is required to make us truly competitive in the global environment.
Do I have a suggestion?
Well kind of. For the best benefit of the club as a whole I would like to see a mixture of community and business working together. I'd like to see some of the club owned by businesses and some by fans. I don't particularly think the club is served very well by being owned privately by one or two individuals as any businessman is going to be trying to make their millions at 'exit time'. Millions which could be ploughed into the club.
There will be even greater resentment of H&G when they do leave with their bags of cash, but this is private enterprise and that's what makes the world turn money wise. It's just impinging on more emotive enterprises these days. Let's be honest you don't care who owns Tesco or even your local grocery store or how many billions any of them make. But you have an emotive tie to your football club and we can't just go to Asda if we don't like it can we!
The best answer to me is through an already existing method. Float the business on the stock exchange and have this joint collaboration between fans and business. The owners can still keep a good, but not controlling, majority and the rest of the business can be owned through faceless organisations and the fans. But I doubt it will happen. The owners quite clearly have a plan and I doubt much will get in the way of that plan, and they do own the club after all.
Final thought
One final thought and yes for this bit, for humanity, I will stick up for them. H&G are human, they are not evil dictators and they do not deserve some of the things which are apparently happening to them (hate mail, abuse etc.).
They are businessmen and what they are doing is what business people do day in and day out. They make millions and billions of pounds for themselves. They have a certain skill set to do this that not everyone has. At the same time they employ people, they give to charity, they pay taxes, they fund local community projects and they fund the local community through rates etc.
This is today's society and the way in which it works. We have every right to be worried or angry but for every hate letter or email and for every hurled insult you weaken your position. Some people think this is the only way to get through to them. It is the wrongest and most in-appropriate way to get through to them.
If I was them and had no emotive tie to the club I know what I'd be thinking from a business perspective. I'd be thinking 'screw you, I'm going to stay here in America and I'm going to squeeze every last penny out of this club and I don't care what state I leave it in. You want to see greedy capitalist behaviour well here it comes.'
If you want them out of Anfield you should tread carefully and you should think and re-think your plans until you are certain you are heading along the right path. Strategically and politically every step must be fully considered and all implications weighed up. We all have limits and as businessmen you are more likely to push H&G past theirs, rather than get them to tuck their tails between their legs and disappear. Until they've made a return on their investment of course.
2 comments:
Alright mate,
One thing - on Rafa you say: "...and I've not heard him complaining about a lack of transfer funds."
I think there's a reason for this and my guess is a gagging clause in the last contract he signed.
For me, there have been some strange transfer moves that for a manager of Rafa's standing would be bordering on negligence if they were solely down to him.
But I don't think they have been.
Anyone could see we needed a further signing up front in the summer - and I believe Rafa intended to make one. He hinted very strongly in one of his press conferences this season that he expected another signing but, crucially, didn't go into why that didn't happen.
People can draw their own conclusions, but look too at the signing of Kyrgiakos. Bargain basement...and after we'd been linked with Turner, Shawcross and Upson.
Turner in particular was wanted. And Rafa wasn't allowed to pay £4m for him.
Hi Mate,
I see what you're saying and it's certainly possible. Although, he never struck me as the kind of guy to keep quiet (when upset about something) under any circumstances. :-)
I think the lack of player acquisitions are down to the banks insisting on the £60m re-payment. Which is a worry when you consider there potential exposure to Dubai (as per my Dubai post).
One thing I'm not sure about, which you may be able to shine light on. When we negotiated new contracts for Torres and Gerrard do they get a re-signing fee? If so is this where the bulk of the £20m in the summer went? Not saying it is, just wondering.
It will be interesting to see what happens in January. Anyone can see that we need another option up front. There seems to be a pressure point building and I wonder whether H&G will show some commitment. Especially after both cashing in on assets in the US.
If we have to go bargain / loan shopping I quite like the idea of Van Nistelroy who, I think, can play goal poacher when Torres is injured or behind him, holding up the ball and then distributing wide or through.
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