Remember standing on a milk crate and watching your heroes getting pummelled by Halifax Town? Sam Metcalf does. Here he finds out just why our American cousins started investing in Midlands football clubs and how the deals industry is scoring through a rash of takeovers.
A beaming Tom Glick sits in front of me, like the anchorman of a glossy US current affairs show and runs me through his ‘true fan’ script.
Here he is, sat in one of the executive boxes at Pride Park and he fits in perfectly. Derby County might have been relegated earlier than anyone before in Premiership history, but it’s almost as though the people that work there haven’t realised. For them, the takeover last October by US-based General Sports & Entertainment (GSE, of which Glick is president) for £50m, marks the start of a brave new era.
Mind you, Leicester City thought that when Milan Mandaric took over…
“There’s 124 years of history here,” says Glick beaming from ear to ear, “but the set-up was dysfunctional. We saw an opportunity to step in and change that.”
Glick admits Derby County wasn’t the first club he looked at, but he was charmed by the city. “We saw what was going on in Derby and saw that the place was doing so well in terms of growth,” he says. “We saw an opportunity for GSE to be part of something bigger – and there’s no bigger stage than the English Premier League.”
Through the doublespeak it’s obvious that Glick wants to use Derby County’s relatively high standing in the English football pecking order to maximise profits for GSE. Why not? He’s a businessman and profit is the name of the game. But it’s hard to believe that he really has the fans’ best interests at heart.
Paul Ellis, partner at PKF, has seen it all before. A fan of Nottingham Forest, he knows the top people at County, and is chairman of the Supporters Club.
He says: “The Americans that have come in and taken over at places like Derby and Aston Villa, they can only be there for one thing: to sell for a profit a few years down the line.
“Many like the buzz and the glamour of owning a top-level club, but I think you have to realise what their ultimate motives are.
“I’m not saying it’s a case of short-termism by these investors – they might be able to love the club upwards, but so many people have been burnt when investing in football clubs. It’s a gamble, and not a normal business proposition because you have very little control about what goes on down on the pitch.”
Roman Abramovich might disagree with that, but many fans would undoubtedly echo Ellis’s cynicism.
The Derby deal was a truly local affair. For around four months a team of finance and property lawyers from East Midlands law firm Geldards worked on the largest deal completed by the firm in the last financial year.
Acting on behalf of the former owners, the Geldards team was led by head of corporate finance Andrew Borkowski, who admitted that conducting such a large transatlantic deal wasn’t straightforward. Only in the crazy world of Premier League football could a deal have the backing of Walt Disney, but that’s what GSE could boast.
He says: “Derby County started looking at refinancing the club in August 2007 and, after reviewing several options decided to pursue the deal with GSE in November. The talks involved nine different shareholders of the club as well as prospective buyers – it wasn’t just a case of a straightforward deal between two companies.
“Add to this the difficulties of conducting talks across nine different time zones and it became the most challenging and complex deal of the year.”
David Hull, corporate partner for Hammonds, who has been involved in two big deals at West Midlands clubs, agrees that football is a very queer business to be involved in indeed.
He says: “There is now a dichotomy between the local supporter and the armchair viewer on the other side of the world. Football clubs are run by professionals as businesses with increased levels of professionalism both on and off the pitch.
“In so many ways football clubs are run unlike any other business. They have an irrational customer base willing to come back time and time again no matter how bad the product is, with no great emotional attachment.”
Glick was apparently initially impressed with the way Derby County owned much of the land around Pride Park, and he will undoubtedly make use of this. But many sporting venues have billed themselves as multi-purpose without truly living up to the name.
Most football grounds boast add-on conference and banqueting, which go some way to supporting the main business activity, but they are – according to a major leisure figure – largely a thing of the past.
Daniel Gidney has been the chief executive of the Ricoh Arena in Coventry for nearly two years and is convinced that the true multi-income streamed stadia are the only way forward.
He was not involved in the planning and building of the £113m Coventry complex but has been handed the job of taking forward its business activities. He believes the Ricoh is a perfect example of the importance of diversifying a business to attract visitors from a wide range of sectors – and should act as an industry model.
Gidney says: “Unless a stadium is supporting a truly international sports team, such as Manchester United or Arsenal – it has to have a multi-use approach and I think the Ricoh has proved the model.
“We want to expose the Ricoh to as varied a client base as possible, be that football fans, concert goers and even worshippers, and we believe that it is now firmly established in the UK. We’re moving on to the next stage of our business plan by encouraging more businesses from overseas.”
Former Coventry City player Ray Ranson formed his SISU consortium to take over the club last year, and was immediately faced with a £38m debt. Coventry City Football Club, of course, does not own the Ricoh – that honour belongs to a firm called Arena Coventry.
Ranson has been involved in an innovative plan to make the stadium cashless. The scheme will be rolled out in full from next season and fans will be offered payment cards that can be topped up with cash by the ticket holder to buy food and drink at kiosks throughout the concourses. Ranson says the scheme is all about restructuring the club’s finances and taking a greater share of match-day revenue.
He says: “These cards will lead to less queuing. We are confident the cashless payment cards will give fans more time to watch the football and improve the overall match day experience.”
Ranson is something of an anomaly as far as those who have invested in larger clubs lately, which most of the cash coming in from overseas.
Hull thinks this is only a natural progression, saying: “Almost half the Premier League clubs are owned by foreign owners, and football is now a global brand. The recent controversy surrounding the proposed 39th game by the Premier League is just one of the unexpected consequences of the increasing globalisation of football.”
Hull advised Aston Villa on its recommended £62.6m takeover by another American Randy Lerner in July 2006 and the acquisition by Hong Kong’s Grand Top of a 29.9 per cent stake in Birmingham City, as well as deals outside of the Midlands such as the takeover by Dr Thaksin Shinawatra of Manchester for £81.6m.
He says: “It’s clear to me that the football message has spread throughout the world. All three clubs I’ve worked with have one thing in common: wealthy individuals, whether from the US, Hong Kong and Thailand, all want to be part of the sporting franchise that is the Premier League.”
Mark Arthur, chief executive of Nottingham Forest, is one to stick up for the new breed of super-rich owners.
He says: “I don’t think the foreign owners of these clubs are opportunists or cynical, but I do think there’s something to be gained from an owner integrating him or herself into a community.
“I suppose we’re lucky in that, although our owner Nigel Doughty doesn’t live in Nottingham any more, he’s local and he cares passionately about what happens to the team and to the area. He has brought in Newark as a Forest fan and the club is very important to him.”
Doughty, the chairman and co-founder of private equity firm Doughty Hanson & Co lest we forget, now lives in Surrey, but Ellis believes the Forest owner is at the helm of one of the most financially secure clubs in the Midlands.
“If we look at things logically,” he says, “then I think Forest are the best-placed club. They have virtually no bank debt. If you look at the other clubs, which have been taken over recently, Derby have large levels of debt and at Leicester it really depends on whether they beat the drop or not.
“Of all the clubs that have received overseas investment, then I think Villa are probably the best long-term bet; the foundations there seem sound.”
The opportunities now open to the likes of Derby County and Aston Villa – both American investments – place them at the forefront of the changes affecting football, which is now one of the most global of brands. It’s almost as if what happens on the pitch is irrelevant…