The Everton Board Thread (Inc. Bill Kenwright / Blue Union)

[Sharpys top lip]

I think both are true, we are over priced but we are also a very poor prospect to buy as a business..
Buying Everton even for free will still cost you plenty of millions to do anything with, you need 50mil to just stand still in terms of players, a new stadium or complete refurb, several projects have been put on hold that should be completed and then you are still potentially either losing money, breaking even or making a profit small enough it could take decades to pay back your intitial outley (certainly it would be financially more viable just dumping a few hundred mil in the bank and getting the interest back).. Add a daft 130mil asking price on top and the fact that you don't even end up owning the whole club because only a certain amount of shares are available and I can understand a lack of a big queue to buy us to be honest.

OK i get this but why??

Why was City & Chelsea a good option, why noy us?

[Del]

OK i get this but why??

Why was City & Chelsea a good option, why noy us?

City had a brand new ground free of charge and Chelsea are based in London

[nigelcoyb]

I found this interesting reading:

I've been involved in the purchase and sale of private companies for a good few years and, believe me; the complexities of these transactions shouldn't be underestimated. Putting a structure together that works for all parties, making the tax ?work?, trying to get financing (especially when banks aren't lending) and negotiating with buyers/sellers (and their lawyers, accountants and bankers) and (heaven forbid) the Government can be a logistical minefield.

However, in my experience, any difficulty can be overcome (yes, even the Government) and the most complex transactions can be executed as long as everyone agrees on one thing: Price. And, for me, herein lies the problem.

I think even the most financially illiterate individuals could come to the conclusion that if Everton was put on the market this afternoon for £1, we would have new owners by tea time, such would be the appetite to own one of the oldest, most prestigious and famous football clubs in the world, currently in a secure position in the most lucrative league in the world (for now).

Following that logic must bring you to the natural conclusion that Everton's ?fair value? lies somewhere between £1 and the current asking price. You see, the above complexities can delay a sale by six months, maybe a year, but assets that have been on the market? for ten years and have not been sold are over valued by the vendor. To borrow an Americanism, it's economics 101?.

The devil is in the detail (valuation)

I'm not going to bore everyone with the finer points of valuation because, to be honest, it's irrelevant and I've already bored you enough. You show me a private company valuation (including one of my own) and I?ll show you why it?s inaccurate. The reason for this is that they are all subjective and built on the architect?s assumptions.

However, two areas that always get focussed on in private sales, without fail, are: The level of debt at the point of sale and the historical lack of capital expenditure.

The reasons for this are that they will both be netted from the total value of the business or ?enterprise value? when arriving at the all important number, the amount of cash that will change hands at completion or ?purchase consideration?.

Leverage: Everybody's friend except the vendor

Debt (and debt-like-items eg, historical transfer fees outstanding) gets knocked-off the enterprise value because it's how the vendor has chosen to fund the business expansion (stop laughing at the back). He could have used his own cash (equity) after all.

We don't know what Everton's debt is today but at 31 May 2011 it was £47.7M. Let's be kind and assume that the outstanding debt is now £35M due to player sales (which might not have gone to the bank depending on your choice of newspaper) and wage reductions. I'm also ignoring debt-like-items here as they would only be uncovered during due diligence but I've seen buyers try to include onerous finance leases in here too!

That's a £35M reduction in purchase price before we've even started.

The Old Lady

The buyer is acquiring the right to the future cash profits of the business (that?s right, I said profit). This number is always estimated using EBITDA (earnings before interest, tax and amortisation) but after taking the required level capital expenditure into account i.e., all businesses need a certain level of capex and this will impact (reduce) the return a buyer can make on his investment.

Here comes the incumbent shareholders? second issue: There has been no investment in capex since the Park End stand was built with the proceeds of Alan Ball's sale to Arsenal. This means that a buyer is going to need a large out-flow of post-acquisition cash in order to keep the business in its current state, never mind fund expansion. The buyer will add up the historical level of under-spend and knock it off the purchase price.

To be honest, this number is difficult to estimate for obvious reasons, but the Board has suggested in the past that Goodison needs substantial investment to avoid a safety certificate revocation. Again, let's be kind and assume that £20m of investment is required to keep Goodison and its limited corporate facilities in working order. Remember, this isn't money for a new stadium (which might also be needed) it's money that really should have been spent already.

For those of you thinking I've overestimated this number, remember that there has also been significant under-spend on the playing side too. We are effectively renting players.

The final reckoning

You don't need to be Warren Buffet to see that (based on my rudimentary assessment) a buyer could be looking for a £55M (maybe more) reduction in purchase consideration before even discussing enterprise value i.e., even if you conclude that the business is valued at £80M based on its potential future profits, the outgoing shareholders would only get £25M.

In conclusion, it's my view that the main reason the club hasn't been sold to date is price. I don?t really see how it can be anything else.

ps I don't think the value of the business is anywhere near £80M given that all you're effectively buying is a tired, ageing brand and the right to incur future losses, but that's a story for another day. Remember that, based on the above, the shareholders need a valuation of £55M to sell the club for £1.

Simply excellent post.

This, or variant of, should be posted on all EFC websites and a mailshot to all press outlets commenced, it is bereft of ranting plus it is professional, READABLE! and very informative.

Well done Mick truly great work.

[Tex]

basically we will NEVER get taken over unless kenwright and co change their current position

Its quite simple, STOP going to the games and buying merchandise and the board will know that they have to sell. Everybody who is complaining about Kenwright but still giving your hard earned money to them is stupid to say the least.

Every year I import about £500 worth of merchandise and I've decided that this year or any year that this board is in charge or it doesnt change its ways, I refuse to spend another penny.

[steken1]

Its quite simple, STOP going to the games and buying merchandise and the board will know that they have to sell. Everybody who is complaining about Kenwright but still giving your hard earned money to them is stupid to say the least.

Every year I import about £500 worth of merchandise and I've decided that this year or any year that this board is in charge or it doesnt change its ways, I refuse to spend another penny.

Saying to men (and women) who go the match "just stop going" is like saying to Pavarotti "just don't have a slice Pav" It's not as easy as it sounds.

I understand your point completely but there's no way on earth I wouldn't go.

[pfim]

Its quite simple, STOP going to the games and buying merchandise and the board will know that they have to sell. Everybody who is complaining about Kenwright but still giving your hard earned money to them is stupid to say the least.

Every year I import about £500 worth of merchandise and I've decided that this year or any year that this board is in charge or it doesnt change its ways, I refuse to spend another penny.

Only way to hurt them for sure. Don't know that it really makes a sale more likely. May make an insolvency more likely.

[Sharpys top lip]

City had a brand new ground free of charge and Chelsea are based in London

Sorry, not what i meant.

Who fault is it were not a good option any more??

Why are we not a good option?

No assets?

Future profits already morgadged...

[bourneblue]

The above valuation can be applied to most football clubs,with a few notable exceptions.
To make a profit from any football club is a very difficult undertaking, as an investment it makes little or no business sense.
Unless a buyer can be found with unlimited financial resources, then challenging for the premiership title and European glory,is but a distant dream.
Take a look at City and Chelsea for the financial resources needed, to achieve this aim.

[Del]

Sorry, not what i meant.

Who fault is it were not a good option any more??

Why are we not a good option?

No assets?

Future profits already morgadged...

Kings Dock cost us the most lad

If we had a new ground we would have had a buyer

[mzone16]

Kings Dock cost us the most lad

If we had a new ground we would have had a buyer

I still fume about kings dock...aarrgghh

[Sharpys top lip]

Kings Dock cost us the most lad

If we had a new ground we would have had a buyer

Totaly agree. What happened to the ring fenced money??

I'll tell you what. Gregg was going to stump the money up for our part of the deal. But kenwright gradually had to lose controll of the club to Gregg.

kenwright decided he couldnt let go of the club even thou it would have been the best thig that could have happened to us. Just look at the echo arena, could have been new Goodison!!

For this, i will always hate Kenwright.

[steken1]

Totaly agree. What happened to the ring fenced money??

I'll tell you what. Gregg was going to stump the money up for our part of the deal. But kenwright gradually had to lose controll of the club to Gregg.

kenwright decided he couldnt let go of the club even thou it would have been the best thig that could have happened to us. Just look at the echo arena, could have been new Goodison!!

For this, i will always hate Kenwright.

I don't know a single Evertonian that doesn't feel sick every time they go past.

[Cena]

Yeh but lads, we wouldn't of had Justin Bieber or Radio City Live if it hadn't of been an Echo Arena, be grateful lads,

[Ihaters]

Sorry, not what i meant.

Who fault is it were not a good option any more??

Why are we not a good option?

No assets?

Future profits already morgadged...

Its the board that built up that debt, however they did it to pay the wages for players required to turn a very poor team into european challenging one.
I have no problem with that, we tried we failed, we did it as safely as we could. Can't forgive them for the lies, or KD but the debt was done to get Moyes the best players we could and I can forgive the board for having to sell fringe players to clear it, we still have a far better team than when they took over.
Its the boards fault we are not a good option because they should of sold a long time ago but back then we weren't exactly inundated with top quality offers because we were in debt and fighting relegation.

[Chang Elephant]

Its the board that built up that debt, however they did it to pay the wages for players required to turn a very poor team into european challenging one.

Why can't the business sustain the relatively modest outlay it makes on wages/purchases in comparison with other clubs without building debt ? Is there any remote possibility this could relate to poor management of the business by the board ?
It's a shocking concept admittedly.....

[bourneblue]

The Kings Dock deal collapsed in April 2003.
Paul Gregg didn't fall out with Kenwright until August 2004.

[Watch this space]

Simply excellent post.

This, or variant of, should be posted on all EFC websites and a mailshot to all press outlets commenced, it is bereft of ranting plus it is professional, READABLE! and very informative.

Well done Mick truly great work.

Can we get this out there to the journos.....

[bourneblue]

The Kings Dock deal collapsed in April 2003.
Paul Gregg didn't fall out with Kenwright until August 2004.

The Kings Dock deal fell apart with Gregg in the middle of it all. I seem recall some disquiet over 'excessive consultancy fees' paid to Gregg's companies at the time.

His subsequent takeover at Sheffield Wednesday also fell apart, because he refused to co-operate with the Sheffield Wednesday Supporters Trust that held 10% of the shares of the club.

Also, in terms of match-going at Goodison, Paul Gregg was just as much an armchair as Earl was. At least Earl has an excuse as he lives abroad. Gregg attended a handful of games at Goodison in 6 years involved with the club, with many months/sometimes years between attending matches. He only lived in Oxford.

[bourneblue]

http://www.toffeeweb.com/club/business/agms/agm_02.asp

[Del]

I wish I hadent mentioned the Kings Dock now because I get a horrible sick feeling in the pit of my stomach any time its mentioned or I read something about it

Getting that ground would have changed the future of our club beyond anything we can imagine, Just picture going the match on a Saturday and drinking around the Albert Dock then bouncing straight into town after it, Imagine tourists visting the city and seeing the stadium, How many would buy tickets for the match, How many would get a box for a game, We would have been the folkal point of the city and without a doubt in my mind we would have had people fighting to buy us