If Kenwright lowered the asking price...

[Foot Long Hot Dog]

Is that cheers 100% sincere?

I'm not the only person in this thread to "misinterpret" what you said and I'm not the only person you've told off for not understanding it ... I guess it's possible we're all morons ... but at some point perhaps it's time to consider you aren't doing a great job explaining it?

It was sincere when I posted it after reading that it maybe isn't now

Try reading it again & this time focus on the word 'leveraged'

Oh & btw no-one else mis-understood that point

Cheers

 

[njligernj]

It was sincere when I posted it after reading that it maybe isn't now Try reading it again & this time focus on the word 'leveraged' Oh & btw no-one else mis-understood that point Cheers

Even if I accepted your scenario that still doesn't address point A from my post. Regardless this plan might not warrant this in-depth an analysis but since you asked: I understand what you think leveraged means and I still disagree with you ... here's why ...

A leveraged buyout is not magic. If we accept the notion that BK and company would sell for 25m I'm pretty sure they are going to want to get 25m in actual money. So where does that money come from? Everton doesn't have 25m in cash reserves so the 25m will be a liability on Everton's books in name only -- the 25m in real money is still coming out of that person's pocket. If you are hoping the banks will help out I'm sure they'd be thrilled to hear about how this person is planning on paying back the loan by deliberately reducing the team's competitive ability and jeopardizing its PL status ... you know seeing as how they already hold 50m odd of our debt which would be impossible to pay back if we were a Championship team.

No investor in their right mind will want to touch junk bonds of a team which just sold for 25m which has (now) 75m in debt and the plan for recouping the cost is a firesale of assets. I don't believe the banks or investors will want to be involved (you'd have to offer such high interest that you'd be better off carrying it yourself) so the 25m IS indeed coming from that person's bank account (if only for a month or two in a best case scenario) meaning my point about better things to do with 25m still holds true. If you think the banks would help out then we'll have to agree to disagree and move on.

I understand your plan involved having that paid off from player sales but there is time and cost involved in selling off players. If we assume the buyer gets the team in the summer and gets full ownership on day one of the window then maybe they can buy and sell all the players required in one window (although you wouldn't get close to fair market value once it became obvious what was going on).

Also why are these cheaper replacement players wanting to play for a team which is clearly not worried about doing well? I'd suggest our replacement players would be quite low quality.

I don't know the status of our player's contracts but sometimes players have a loyalty bonus -- if they aren't transfer listed by request then we owe them some amount of money. Throw in agent fees, bonuses and all the other costs involved (in both sales and the lower end replacement players we're buying) so you might need to get 60-65m in order to clear 50m. (Plus there is still an opportunity cost on what that 25m could be earning elsewhere.)

Even if we don't get relegated we'd get a lot less from a lower league finish. We'd look like a team in free-fall. Then the banks come for a meeting about the 50m in debt and how, due to the lack of stability in the club, they are going to have to start calling in some of the debt.

So ... why would anyone think that was a good way to make some quick cash? It would be a minor miracle to pull that off and retain PL status and operate at break-even financially ... turning a profit any time soon would be next to impossible (and if nobody wants to buy the club NOW they most certainly won't want to buy that Everton).

Once again ... I can think of a thousand better plans for 25m (even if that 25m is only tied up for a month or two in a best case scenario) than that. So overall I'm not too worried about that scenario if the board lowered the asking price.

... or am I still misunderstanding something?

 

[Jacko93]

Pretty sure you'd enjoy this book Jacko

Can I not just watch the DVD instead?

 

[Foot Long Hot Dog]

Even if I accepted your scenario that still doesn't address point A from my post. Regardless this plan might not warrant this in-depth an analysis but since you asked: I understand what you think leveraged means and I still disagree with you ... here's why ...

A leveraged buyout is not magic. If we accept the notion that BK and company would sell for 25m I'm pretty sure they are going to want to get 25m in actual money. So where does that money come from? Everton doesn't have 25m in cash reserves so the 25m will be a liability on Everton's books in name only -- the 25m in real money is still coming out of that person's pocket. If you are hoping the banks will help out I'm sure they'd be thrilled to hear about how this person is planning on paying back the loan by deliberately reducing the team's competitive ability and jeopardizing its PL status ... you know seeing as how they already hold 50m odd of our debt which would be impossible to pay back if we were a Championship team.

No investor in their right mind will want to touch junk bonds of a team which just sold for 25m which has (now) 75m in debt and the plan for recouping the cost is a firesale of assets. I don't believe the banks or investors will want to be involved (you'd have to offer such high interest that you'd be better off carrying it yourself) so the 25m IS indeed coming from that person's bank account (if only for a month or two in a best case scenario) meaning my point about better things to do with 25m still holds true. If you think the banks would help out then we'll have to agree to disagree and move on.

I understand your plan involved having that paid off from player sales but there is time and cost involved in selling off players. If we assume the buyer gets the team in the summer and gets full ownership on day one of the window then maybe they can buy and sell all the players required in one window (although you wouldn't get close to fair market value once it became obvious what was going on).

Also why are these cheaper replacement players wanting to play for a team which is clearly not worried about doing well? I'd suggest our replacement players would be quite low quality.

I don't know the status of our player's contracts but sometimes players have a loyalty bonus -- if they aren't transfer listed by request then we owe them some amount of money. Throw in agent fees, bonuses and all the other costs involved (in both sales and the lower end replacement players we're buying) so you might need to get 60-65m in order to clear 50m. (Plus there is still an opportunity cost on what that 25m could be earning elsewhere.)

Even if we don't get relegated we'd get a lot less from a lower league finish. We'd look like a team in free-fall. Then the banks come for a meeting about the 50m in debt and how, due to the lack of stability in the club, they are going to have to start calling in some of the debt.

So ... why would anyone think that was a good way to make some quick cash? It would be a minor miracle to pull that off and retain PL status and operate at break-even financially ... turning a profit any time soon would be next to impossible (and if nobody wants to buy the club NOW they most certainly won't want to buy that Everton).

Once again ... I can think of a thousand better plans for 25m (even if that 25m is only tied up for a month or two in a best case scenario) than that. So overall I'm not too worried about that scenario if the board lowered the asking price.

... or am I still misunderstanding something?

If you can't understand why someone would consider tying up £25M cash for a short timeframe in order that they can asset strip a business & in effect pay for their equity stake, thus taking control of the business for effectively nothing - then there's no point in discussing it further.

I only created that scenario to demonstrate why the current owners wouldn't sell at the suggested £80M including debt price tag, that another poster had worked out was where he thought it should be, as it's grossly undervaluing a business that has 4 or 5 times the net £25M of intangible assets (albeit the balance sheet doesn't reflect this)

Oh & btw if you can think of better plans for £25M, who do you think is ever going to buy EFC then & at what price?

 

[Chang Elephant]

Can I not just watch the DVD instead?

Course, just remember it's not real life.

 

[njligernj]

If you can't understand why someone would consider tying up £25M cash for a short timeframe in order that they can asset strip a business & in effect pay for their equity stake, thus taking control of the business for effectively nothing - then there's no point in discussing it further.

You have obtained control of a business with 50m in debt and then asset stripped it thereby reducing your revenue by a considerable amount (lost fans, lost PL income etc). What's your next move?

I only created that scenario to demonstrate why the current owners wouldn't sell at the suggested £80M including debt price tag, that another poster had worked out was where he thought it should be, as it's grossly undervaluing a business that has 4 or 5 times the net £25M of intangible assets (albeit the balance sheet doesn't reflect this)

You didn't mention paying off the 50m debt too. How is he doing that and hoping to recoup his investment?

Oh & btw if you can think of better plans for £25M, who do you think is ever going to buy EFC then & at what price?

Your scenario is a bad idea because that person is potentially getting the team relegated and having way less income. I'd hope a new owner wouldn't do that and that changes a lot of the math.

 

[Jacko93]

Course, just remember it's not real life.

Having never read/seen it, i have no idea what your going on about though, and, to be fair, i probably never will read/see it. I'll just assume your being funny.

 

[Foot Long Hot Dog]

You have obtained control of a business with 50m in debt and then asset stripped it thereby reducing your revenue by a considerable amount (lost fans, lost PL income etc). What's your next move?

You didn't mention paying off the 50m debt too. How is he doing that and hoping to recoup his investment?

Your scenario is a bad idea because that person is potentially getting the team relegated and having way less income. I'd hope a new owner wouldn't do that and that changes a lot of the math.

Oh for the love of God, move away from the minutiae of the example & think about the principle of what I'm saying.

You have a football club with a squad (intangible assets) that are worth anywhere between £80-125M (dependant on your viewpoint) then why would you allow the business to be sold at £25M plus the debt, which COULD (note COULD) allow somebody to asset strip the business if they saw fit?

 

[njligernj]

Not related to the below (well kind of): I wonder if the banks have to approve new owners too?

Oh for the love of God, move away from the minutiae of the example & think about the principle of what I'm saying.

It's not minutiae it's facts which make the scenario you are outlining almost impossible to pull off.

You have a football club with a squad (intangible assets) that are worth anywhere between £80-125M (dependant on your viewpoint) then why would you allow the business to be sold at £25M plus the debt, which COULD (note COULD) allow somebody to asset strip the business if they saw fit?

The "COULD" is like 1%. Some of your examples seemed to suggest they wanted to acquire the team for "free" and continue operations (which means the state of the squad after doing so is relevant). If we're talking about completely folding the business ... if we take the low end of the asset valuation there is zero wiggle room -- you'd owe almost 80m (debt + acquisition cost) so you'd own a team with no players and have made no profit.

At 125m for the assets you'd maybe clear a profit if you instantly folded the team (assuming you got fair market value for players -- which you would not -- and all the fees and loyalty payments weren't too expensive). Assuming your plan was to shut the team down you could maybe clear a bit of cash at this high end valuation ... but I still don't think it'd be worth the risk for anyone so again I'm not too worried about it.

 

[Foot Long Hot Dog]

It's not minutiae it's facts which make the scenario you are outlining almost impossible to pull off.

Firstly, it's not impossible to pull off, it's perfectly plausible, especially if you carried it out over a longer timespan, but you're seemingly that hooked on minutiae you're not looking at the principle of what I'm saying, in relation to the overall valuation of the business. I'll leave it there, thanks.

 

[njligernj]

Firstly, it's not impossible to pull off, it's perfectly plausible, especially if you carried it out over a longer timespan

Especially? Over a longer timespan it's even more difficult. You have less revenue each year and the loans get called in. Even if that doesn't happen (which it would) a longer timespan means more interest on all that debt you're carrying and reduced values on all the players whose contracts are running down (not to mention keeping higher wages on the books when revenue is almost certainly reduced from lower league positions and dwindling attendance) ... but I guess that's the "minutiae" again?

but you're seemingly that hooked on minutiae you're not looking at the principle of what I'm saying, in relation to the overall valuation of the business.

Stop deflecting it like I don't understand what you're saying -- I get it and I've outlined point by point why I disagree completely. Your supposition is 25m+debt is too low a price because someone could make money at a 25m asking price by dissolving the club (or in some variants of your argument keeping it running with cheaper players) and selling off players. I ran the numbers and I disagree. That's not minutiae ... it's your entire point.

At the low end of valuations (80m) you'd make nothing. Maybe you'd make a little if you think we have 125m in assets and those assets hold their value despite an obvious fire-sale.

I don't think that kind of scaremongering is accurate -- even at a 25m asking price I don't think we have anything to fear. I do not believe they'd sell to such a person and even if someone wanted to lie to gain control and then go back on his word I don't think anyone would bother going through all that trouble and creating all that ill-will for what I calculate as relatively meagre gains (with a fairly high risk of ruin) once you pay off the asking price, all the debt, all the player/agent fees etc. ... not to mention the lawsuits, personal safety concerns and reputation management. I just don't think it's worth worrying about even if they did put a "very low" valuation on the club like 25m.

I'll leave it there, thanks.

Oh good I have the last word ... flapjacks!

The main point of all of this is to say (to all those who fear a sale not just Mr. Hot Dog): don't be so afraid. There isn't a Venky under your bed. The best (possibly only) way to make money with EFC which does not involve improving our results on the pitch is to aim for 15-17th finishes in the league with the lowest possible payroll. It's a very dangerous game (and you'd have to allow for lower attendance and TV money), the margins are super thin (we'd be finishing near the bottom before you even had the debt and acquisition paid off completely) and I don't think anyone would bother. Someone might buy us who wants to improve our lot and instead makes it worse because they are bad at football stuff ... but that's a different matter.

 

[njligernj]

... and just for the record Foot Long I'm not mad at you -- well ... maybe a little annoyed that you won't admit I'm right -- or going over the top on minutiae. I actually thought this was a fairly interesting thought experiment* ("could you make money by selling off the assets of this business at a 25m cost?") so I ran through the logic. I guess we disagree on the conclusions but it was fairly interesting (likely to me and me alone) to run the numbers in a very broad sense and see if it worked out or not.

*I'm aware "thought experiment" is the type of thing horrible people say.

 

[Allezfan]

The best (possibly only) way to make money with EFC which does not involve improving our results on the pitch is to aim for 15-17th finishes in the league with the lowest possible payroll. It's a very dangerous game (and you'd have to allow for lower attendance and TV money), the margins are super thin (we'd be finishing near the bottom before you even had the debt and acquisition paid off completely) and I don't think anyone would bother. Someone might buy us who wants to improve our lot and instead makes it worse because they are bad at football stuff ... but that's a different matter.

Agree entirely with this.

The only way to make real money out of football is by selling a club for more than you bought it for and that requires on the field improvement. People mostly buy football clubs for prestige reasons rather than to make money. It's just so much easier to make money elsewhere.

 

[EFC NY]

Agree entirely with this.

The only way to make real money out of football is by selling a club for more than you bought it for and that requires on the field improvement. People mostly buy football clubs for prestige reasons rather than to make money. It's just so much easier to make money elsewhere.

Exactly. Big time professional sports teams are toys for the rich. Teams that are owned by persons who are capable of viewing it as such, and do, in fact, view it as such, have a significant competitive advantage in leagues that lack salary caps or similar salary equating schemes. If our prospective new owners are driven mostly by the nuts and bolts of profit creation, we have already lost, since we already are the kings of 7th place as is.

 

[zirc]

It helps a lot but I want the owners to hire the correct manager as well, that is one of their most important responsibilities.

I'd rather be us than QPR, Villa, Newcastle, Sunderland, Stoke or anyone else that finishes regularly below us whilst spending money.
Hell even City when they had Hughes were s**t. The manager is as important as the money.. We need both.
I'd hate to be taken over, bin 50mil on players, and then go down because we got in Tony Adams to manage them.

We're about to have neither.