I’m not a big football fan—I don’t even understand the offside rule—but I’m somewhat concerned about the finances of football clubs in the UK, especially Manchester United, after watching Panorama this week. Apart from anything else, United is part of the culture, heritage and landscape of Manchester, and no doubt provides a boost to the local economy in terms of direct and indirect employment (591 people are employed directly by Manchester United, according to its latest set of accounts). So, I have a plan to buy the club, albeit with some help.
No matter how often the Glazers might say ‘the club’s not for sale’, the reality is that there will be a price which they will accept, because they’re businessmen and not die-hard United supporters. Furthermore, they have outstanding debt with interest rates of 16.25%, and it would make good business sense to clear that if they can.
Let’s assume that the Glazers would sell for £2bn, which is £500m more than the last offer by the Red Knights and a considerable gain on what the Glazers originally paid for the club (roughly £800m, of which £500m was debt). Assume also that the number of United fans in the UK is 150,000 (10,000 less than the membership of the Manchester United Supporters Trust) and we require an average contribution of approximately £13,400 per supporter. That might sound like a lot of money, but there are some extremely rich United fans out there who could probably contribute a few million each, if not more. A season ticket also costs £500-£900+ for adults, so if supporters can scrape that together every year they can probably put a bit more towards buying the club. These figures assume that you want to buy the club outright in cash—if the deal was part-funded by debt then the amount required per supporter could drop considerably.
The first stage is therefore to ask supporters (and potential investors) to pay their money into a trust fund whose ultimate aim is to purchase the club. The trust would keep their money on deposit across a variety of highly liquid instruments (i.e. mainly cash, possibly a few gilts), so supporters could get their money back if need be, albeit with a short notice period. The interest would be placed in a separate account and used to pay the running costs of the trust, such as basic administration, preparation of accounts, compliance with FSA regulations etc. Only around £1m of capital would be required for the interest to be sufficient to pay for someone to run the business part-time. Any leftover interest would be held as working capital for the club once it was purchased.
The cost to the supporters is that they gain no interest on the money they put into the trust fund, but given the low rates of interest on savings accounts at the moment they wouldn’t be losing much. The trust would effectively operate as a notice savings account paying 0% interest. As the trust wouldn’t be spending any of the capital, only the interest, there shouldn’t be any worries about a run on the trust, because it would be able to meet all demands for repayment. The lack of interest would also put off speculators and hedge funds, as they wouldn’t get a quick return on their investment.
Once a purchase price has been agreed, you incorporate a public limited company and issue 200m shares with a value of £10 each (or any other split which adds up to £2bn), which would be divided amongst supporters based on the amount they put into the trust. This company would then be the vehicle to purchase the club and hold all of its assets. Personally I’d prefer a more co-operative structure for a football club, with one member one vote, but that might not go down well with those who put in substantial sums of money. If the club can’t be purchased after a set amount of time, say five years, the trust is wound up, the money is returned to the supporters, and any leftover interest is donated to a nominated charity.
The club would probably remain as a public limited company after purchase, but it could be unquoted to save on listing costs. In other words, you’d be able to buy and sell shares and perform rights issues, but you wouldn’t need to pay fees to the London Stock Exchange or some other listing body. This has the advantage of discouraging speculators and hedge funds, because the lack of liquidity would make it difficult to build a large stake over a short period of time. If you wanted to be doubly secure, you could set up a new trust (as a company limited by guarantee) to which supporters could donate their shares in the knowledge that the trust would not sell them, and therefore ensure the club’s independence in perpetuity.
Given that the club is currently profitable even when debt payments are included—the 2009 accounts show an operating profit of £47m, excluding the £80m sale of Ronaldo—it shouldn’t be too difficult to keep it on a sound financial footing if the purchase included paying off all the club’s debt. It might even be possible to pay a dividend after a few years under new management.
I’m aware that something along these lines has been tried before with the Phoenix Fund, but it seems to have flopped—and was too unambitious to begin with (they aimed to raise £50m in 3 years, which is not even close to what would be required to purchase the club). I think the idea has potential though. Getting publicity would be easy—stick out a press release and the Manchester Evening News would no doubt lap it up, after which point you’ve got interviews on Channel M, BBC Radio 5 Live, North West Tonight etc. Finding a local MP to put down an Early Day Motion supporting the move wouldn’t be difficult—what’s not to like about showing constituents that you’re working to save the local club from indebted destruction by foreign owners? (I exaggerate somewhat, but I’m sure that’s how politicians would present it).
No doubt there would be legal issues to deal with, and financial expertise would be required, but there are probably enough football-mad United supporters working at the various legal firms in Manchester that you could get most of that done pro-bono. I almost reckon it’s worth a punt…