Investors to target Championship
The Financial Times runs some good pieces of analysis on the business side of football, although invariably they seem to rely quite heavily on quotes from the admittedly authoritative and very well informed Dan Jones of Deloitte Sports Business.
There is an article in today's Companies and Markets session which I had to read three times before I thought I had understood it and even now I am not sure. Part of the problem is that the headline 'Would-be football club buyers get cold feet' draws the reader in, but does not really describe the content of the article. If one reads the body of the article, it is evident that some of them may have got cold feet, but others would like to warm their hands from the glow of the Premiership.
However, there aren't many good Premiership prospects available. One is Everton, but it is argued that the cost of a new stadium is a big drawback there. It is pointed out that no Premiership clubs have changed hands since Venky's bought Blackburn in 2010. Yet over a five year period from 2003-8 12 clubs changed hands while they were in the Premier League, four of them twice over.
The appetite for a trophy asset is still there. The financial crisis has killed off debt-fuelled deals like those at Liverpool and Manchester United, but as Dan Jones points out, if you are buying with your own assets and wealth you are not necessarily affected by the financial crisis. Of course, your investment only starts with the purchase. This only reinforces the case for paying less and buying potential in the Championship, particularly when you factor in the uncertainty arising from financial fair play.
Among the examples are the Malaysian takeover and rebranding of Cardiff City; the Thai acquisition of Leicester City; the Gulf takeover of Leeds (now expected to take another three weeks); and the Italian job at Watford. Indeed, some of the most attractive targets have already gone or are not available, leading the rumour mill to focus on less fashionable clubs like Charlton Athletic.
Of course, another option is to look abroad as Qatar has done with Paris Saint-Germain or more recently AC Milan. That can give you a route into the Champions League, but only Spain rivals England in terms of its domestic league. Indeed, the Championship is ranked fifth in the world among football leagues.
Another curious feature of the article is that focuses on assorted Americans saying why they won't buy into the Premiership, essentially because there is no salary cap. It is also clear that people like Merritt Paulson, the owner of Portland Timbers, or Shalid Khan, owner of the Jacksonville Jaguars NFL team are really only interested in the Premiership.
Buyers are most likely to come from emerging or oil-rich countries: as well as the Gulf states, Malaysia and Thailand, the list would certainly include China, (South) Korea and Russia, but not India given the experience of Venky's. I would also be very surprised to see any bidders from the emerging countries of Latin America (Brazil, Chile and Mexico) and I think that applies to South Africa as well.
One counter argument to the 'buy more cheaply and develop' model is that the outcome of games is more uncertain in the second tier than in the first. Compared with other sport franchises, this increases the risk, but it does not reduce the appetite.