Wednesday, March 14, 2007

How Will A Bid For City Be Structured And Financed?

How will a bid for City be structured and financed? That is a question only a few people would know the answer to and that is assuming that there are suitors out there still interested in buying our Club.

Until a formal bid is made and accepted by the board, City's 6,500 shareholders will not know the details of any bid. Down the road, it is well known that the Glazers funded their bid with a lot of debt. The most recent club to accept a bid is Liverpool and whilst it was assumed that a lot of cash would be used it now transpires that this is not the case. David Conn's article in the Guardian today looks at how the Liverpool takeover has been structured and financed, you can read it here

What lies in store for our great Club? Who knows, we will have to wait and see what develops.


At 8:20 am, Blogger St Petersburg Blue said...

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At 7:33 am, Blogger St Petersburg Blue said...

Liverpool, United - two peas in the same pod in my eyes. Two foreign owned English football 'franchises', as their new owners like to say.

As City fans, we all need to make a call about what we want for our football club: a football club, or a franchise. Is it possible to have a football club that is a franchise?

Here the MCFC Supporters' Trust has an important function in terms of scrutinising any potential investment and subsequent financing of bids, and in terms of researching models of ownership and issues surrounding constitutional status.

I say emphatically, a Manchester club cannot retain its identity and core social and community values whilst under the control of American owners. One argument often put forward is that foreign ownership is 'inevitable'.

The Barcelona model, owned by the fans, highly competitive, financially secure, suggests that it is possible to operate effectively without selling our club's soul. I'd like the supporters Trust to aim higher than just representation on the Board and fully investigate a fans' buyout, which in the case of City, isn't as far-fetched as it seems, especially if the right financial expertise is acting on behalf of the fans. In fact, it is entirely possible (edited 15/3/06)

At 11:39 am, Blogger Buy City plc said...

St Petersburg Blue,

I am definitely with you on taking on the ownership of the club wholly by the fans, rather than let 'outside' interests steal our soul.

To all intents and purposes the takeovers we are linked with appear to involve forms of leveraged buyout (LBO) - whereby the buyer uses equity in the club (company) to take over control. i.e. The assets of the company are used to fund the purchase. An anomaly of corporate structures throughout the capitalized world is by doing this, according to Modigliani-Miller theorem - whether the club (or any company) is structured using equity or debt - its value is not affected. Models to more or lesser extent that are being used by utd and Liverpool. These involve LBOs based on future TV revenues and ability to borrow against the assets in the club, as do many companies. The concern with many LBOs is that they precipitate asset stripping.

Assuming LBOs are the case in point, I believe we, as fans, with the organization of bodies such as that the Trust is hoping to achieve, have a superb opportunity to put the club into the professional control of fans passionate about City. Why let someone else walk in and do it? City have the kind of assets to borrow against with the stadium's lease being professionally valued at £153m in last year's report and accounts. I would expect the due diligence processes that are, allegedly, underway to be heavily investigating this as an option to borrow against - as well as delaying any decision on Premiership status for gaining access to pots of TV revenue.

The difference with a LBO from City supporting interests are clear. I believe it should not matter what division we play in to want control. I do not believe we will go down. However, it should not affect ambitions to run our own club. That is where we, as supporters, have an advantage over buyers focussed purely on financial or other aspects outside supporting City would bring. Obviously, relegation would have a devastating effect. It would also affect the share price and, therefore, purchase price; as well as the means to repay. However, whichever division and subsequent revenue stream we followed, the owners, such as a body like the Trust, would always have the interests of the fans and community at heart.

Assuming a LBO is not the means of takeover, I still feel that the club would be better served in the hands of its supporters. I would rather keep our soul and leverage the assets through taking on repayable debt ourselves. Any City fan with 'real' money would have surely been in by now? As Dave Boyle and the guest speakers at the inaugural Trust meeting were keen to point out, a football club is more than just a business that generates profit. It is a 'generational thing', Dave Boyle. Football is not a 'normal business', Sean Hamil speaker from Celtic. As supporters we have a chance to build on those sentiments and those that I read many of us feel, see Steve Kay's findings McVittee 1308.

Whilst finance needs proper and close attention there are other factors to consider for a football club, and Manchester City Football Club in particular. My own take on that is a vision I have set out before in McVittee:

having a belief that we can be number one;
playing in front of passionate fans with whom players bond (not least by attending Supporters' Clubs meetings as well as playing with their heart and soul everytime they feel the pride of pulling on the City jersey, to name two);
supporting the communities we work with;
and developing sportsmen and women of the future.

That is the type of vision I believe can only be addressed by City fans who are not wholly concerned with money.

Anxieties over 'saddling' the club with debt should be balanced with maximizing its long term potential. e.g. the opportunity we had to buy DvB at £2m, and choosing not to raise the cash against standing still, and now, falling behind. SWP, Flitcroft, Stewart, Barnes ad nauseam are more examples from the past that we have come to regret. A longer term financial vision might have let us keep players of this ilk as well as our dignity. Finance is merely a means of achieving our own dreams as to how far the club can go. Whilst there are obvious constraints, we should maximize our assets and limit the cases of losing players who should have made 500 appearances in the Blue shirt. If leveraging is one of them, I'd take it.


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