Burnley: Here Come The Americans
English football’s most infamous LBO, of course, came at Old Trafford a little over a decade and a half ago. Since the Glazer family carried out its own highly successful coup in taking over Manchester United, there has been considerable criticism of this sort of purchase, but buying Manchester United through an LBO is a very different beast to buying Burnley by the same means. Manchester United found themselves up to their necks in a debt which hadn’t benefitted the club in any way whatsoever, and with the owners funnelling money out of the club in the form of dividends at an eye-watering rate.
Yet Manchester United, as a business, have been big enough to cope with all of this. A global fanbase, ever-spiralling television revenues and one of the highest commercial incomes in the world have facilitated this, albeit at the cost of success on the pitch since the retirement of Alex Ferguson in 2013. Anger over the amount of money taken out of the club is valid. The five years to 2020 showed Manchester United having paid out £120m in interest charges, as well as an additional £89m in dividends.
And these figures aren’t the worst that can be seen in the club’s accounts since the Glazers took over. In the last ten years the club has spent £838m on financing – £488m in interest payments, £251m in debt repayments and £99m dividends. It’s always worth reminding ourselves when faced with eye-wateringly high numbers such as these that Manchester United, as a football club, have not benefitted in the slightest from this. Every single last penny of this has ultimately been paid to enrich the Glazers and their blue chip investors.
Details of the Burnley takeover have mentioned more modest sums of money, but they still raise significant concerns about the structure of the takeover. New owners ALK Capital are believed to have paid in the region of £150 million for an 84% shareholding in the club, but it has also been reporting that ALK have only put in around £15 million – a feeble 10% of the total cost of the purchase – of its own money, with the rest having come from MSD Capital, the private equity firm which manages the fortune of the tech billionaire Michael Dell, and approximately £55 million from Burnley’s own bank account. The loan amount has been reported as being between £60m and £80m, at an interest rate of more than 10%. Such an amount would cost the club at least around £7m a year in interest alone, roughly the amount that the club makes in gate receipts alone per season.
In other words, Burnley have paid around half of their entire Premier League television revenue for an entire season, just to allow themselves to be purchased by “investors” who’ve actually only “invested” a tiny proportion of the cost of the takeover. If we didn’t already know that this sort of business takeover was legal, many of us would likely assume that it wasn’t, and that can hardly be a considered a strong look for anybody concerned. Of course, with Manchester United the club’s vast income means that there is a certain amount of leeway in terms of being able to manage such state of affairs. Burnley, however, are not Manchester United.
To be clear, Burnley’s financial position has not been disastrous in recent years, indeed they’ve been amongst the best run Premier League clubs from a financial point of view, over the last few seasons. In their annual accounts to the year ending June 2019, the club reported a profit of £4.3m, and the year before that the club reported a profit of £36.6m which was largely fuelled by the sales of Andre Gray and Michael Keane to Watford and Everton respectively. But the club will have been hit hard by having had to play behind closed doors since March last year, and now former chairman Mike Garlick confirmed last year that the club could lose £50million if the season didn’t re-start and with no clear date set at the time for the start of this season. We have yet to see how events since then have come to impact upon the club’s accounts, but it seems unlikely that the answer to that question will be a positive one.
The really concerning thing about the Burnley takeover, though, is how the club manages this should they be relegated from the Premier League. The club has spent six of the last seven seasons in the top division, but only a fool would seek to argue that the club will now enjoy perpetual Premier League football. At the time of writing, they are in 16th place in the Premier League, two places and five points above the relegation positions, and there doesn’t seem to be an obvious explanation as to how the club would cope with losing £7m a year in interest payments alone should it find itself back in the Championship. Will Michael Dell step in, under such circumstances?
The new owners, of course, have come out fighting over this. New chairman Alan Pace told the Mail at the start of the year that “To be super clear, this is not Moneyball”, but the new owners are certainly data-driven, and it seems as likely as not that algorithms will end up being a not inconsiderable part of the club’s future policies for signing new players. Indeed, Pace had to spend a considerable amount of time pacifying the concerns of some Burnley supporters.
He was also keen to point out that ALK have a further three payments to make, all in the short term, and that should they fail to make those they have agreed to hand the club back to its previous shareholders, including Mike Garlick. This, of course, addresses short-term concerns about the viability of the takeover, but it doesn’t address the question of what the specific benefit of all of this is to Burnley supporters. After all, we can all clearly see that the benefits are to ALK and the soon-to-be former owners of the club of structuring the sale this way. What is less clear is how all of this puts Burnley Football Club a stronger position than they have been for the last few seasons.
Of course, nobody yet knows what this new ownership will look like in the wild yet, but football supporters have become increasingly resilient to the hyperbolic claims of new owners over the years because they so seldom deliver on them. Only time will tell us whether Burnley FC can be rebranded for a global audience, or whether the large debt and cash drainage that the club has undertaken in order to push this takeover through will prove to have benefits that no-one has yet taken into account. Maybe we’ll all have a better idea by the end of the January transfer window or, perhaps considering that the shit would only likely start hitting the fan upon relegation from the Premier League, perhaps we won’t.