Burnleys takeover leaves club 90 million in debt

[cambridgeshire canary 6,675]

https://www.theguardian.com/football/2021/feb/02/burnley-us-takeover-has-left-club-90m-worse-off-and-loaded-with-debt?CMP=Share_AndroidApp_Other

 

Why aren't we Bur-

 

Wait

[PurpleCanary 5,554]

7 minutes ago, cambridgeshire canary said:

https://www.theguardian.com/football/2021/feb/02/burnley-us-takeover-has-left-club-90m-worse-off-and-loaded-with-debt?CMP=Share_AndroidApp_Other

 

Why aren't we Bur-

 

Wait

It is a salutary read. One aspect David Conn doesn't go into that much (not surprisngly, since there is so much financial detail to explain) is that the takeover is based on the notion that Burnley has great potential to grow commercially. Really? Perhaps the new owner genuinely believes that, but it looks like another example of the triumph of wishful thinking over business reality.

[wcorkcanary 4,329]

Just look at Man u , 500 odd million borrowed, already 1-billion paid back......and they dont say whether or not its paid off the loan. Mental absolutely mental.

[Van wink 2,994]

Chickens home to coming roost.

[Fuzzar 1,702]

I can honestly say, regardless of their financial situation, that I've never wished us to be Burnley.

[Canary Wundaboy 1,358]

That will only end one way, badly.

[cambridgeshire canary 6,675]

18 minutes ago, Canary Wundaboy said:

That will only end one way, badly.

Burnley/Forest/Derby/Ipswich/Sunderland all being stuck in the 3rd divison a few years from now is going to be both amusing and pretty sad

[DraytonBoy 142]

The piece actually says they're £90 million worse off, given that they had cash reserves of over £40 million at the end of the last financial year that would leave a current debt level of around £50 million. With tv money of £100 million+ and one of the lowest wage bills in the PL I don't see they're in too bad a position providing they stay up which is looking likely so overall it's not too bad an investment, what is perhaps questionable is the method of financing the takeover.  

[Feedthewolf 4,844]

I just don't see how this can end in anything other than failure. They're an unfashionable club, playing unfashionable football, in a decrepit and small stadium, in an area saturated with tons of professional clubs. They're on an upswing at the moment, but as soon as they fall out of the top flight (which they will, sooner or later) they'll end up in a world of trouble. Even if Dyche stays, it'll happen eventually.

The best-case scenario is that they invest in the academy and move to a sustainable model like ours, or at least buy young talent to sell on (a la Maddison, Buendia, Godfrey, Redmond).

[It's Character Forming 1,160]

In the US it looks to me their mainstream pro sports franchises are basically a licence to print money due to salary caps, no relegation and no foreign competition for players.  They can pay really high wages for the top stars, but this only takes a fraction on the money they make so they still have huge profits for the owners.

 

So with US owners coming to the Prem, I always think they have those assumptions in the back of their minds and just see the astronomical amounts coming into the club, and don't understand that it's almost impossible to have a team in the Prem long term while the owner makes a sustained profit because most of the money flows straight through to players/agents.  Normally the only way to make money from a Prem club is sell it on to some other sucker...

[Yellow and Green 334]

It's a method that lots of prospective owners use to limit their own personal risk. 

Man Utd and Liverpool, as mentioned above, have done a similar thing but they have enough commercial revenue to pay their debt off. Whether they are or not is another matter. I read on the Athletic that Burnley's interest is actually quite high, and they won't have much left over to spend in the transfer market.

As long as Sean Dyche is there, they'll be OK. They'll finish 15th most seasons and, if they do get relegated, they'd probably have enough to get back up. It's when he leaves that they'll face real problems, and probably sink like a stone.

[Nuff Said 5,089]

11 minutes ago, It's Character Forming said:

In the US it looks to me their mainstream pro sports franchises are basically a licence to print money due to salary caps, no relegation and no foreign competition for players.  They can pay really high wages for the top stars, but this only takes a fraction on the money they make so they still have huge profits for the owners.

 

So with US owners coming to the Prem, I always think they have those assumptions in the back of their minds and just see the astronomical amounts coming into the club, and don't understand that it's almost impossible to have a team in the Prem long term while the owner makes a sustained profit because most of the money flows straight through to players/agents.  Normally the only way to make money from a Prem club is sell it on to some other sucker...

This is exactly what I was thinking, reinforced by the recent nonsense that was proposed about restructuring the PL and EFL in conjunction with “solidarity” payments. That looked liked an attempt at getting the PL to more closely resemble the US model. 
 

Hopefully English football can fight off the attempts at an American takeover and the Yanks will lose interest and move on elsewhere, just like the Russians and Chinese owners have when they realise owning any club other than the big six is a great way of losing money.

[king canary 7,579]

15 minutes ago, It's Character Forming said:

In the US it looks to me their mainstream pro sports franchises are basically a licence to print money due to salary caps, no relegation and no foreign competition for players.  They can pay really high wages for the top stars, but this only takes a fraction on the money they make so they still have huge profits for the owners.

 

So with US owners coming to the Prem, I always think they have those assumptions in the back of their minds and just see the astronomical amounts coming into the club, and don't understand that it's almost impossible to have a team in the Prem long term while the owner makes a sustained profit because most of the money flows straight through to players/agents.  Normally the only way to make money from a Prem club is sell it on to some other sucker...

Yeah this is what I've felt in the past- I think it took owners like Randy Lerner or Ellis Short by surprise that football clubs aren't guaranteed to make money.

[Mr Angry 1,545]

A number of people have said that it is unlikely that anyone would invest in us because we’re not a basket case financially. Burnley were also a well run club financially-is this the only way to take financial control of clubs like this?

[keelansgrandad 6,679]

This topic could equally be on non football. Sport and football in this country is a business that should be profitable. A club like Manure sells millions of shirts worldwide. I don't know whether people buy programmes nowadays with everything available online but at one time Manure's programme sales were higher than near neighbours Stockport's gate receipts.

But greed and the impression that the game is an endless money tree has turned it into a money pit.

[king canary 7,579]

10 minutes ago, Mr Angry said:

A number of people have said that it is unlikely that anyone would invest in us because we’re not a basket case financially. Burnley were also a well run club financially-is this the only way to take financial control of clubs like this?

Swansea were the same.

The whole 'people only buy clubs in the financial ****s' idea doesn't really stack up with reality.

[Graham Paddons Beard 2,424]

2 hours ago, PurpleCanary said:

It is a salutary read. One aspect David Conn doesn't go into that much (not surprisngly, since there is so much financial detail to explain) is that the takeover is based on the notion that Burnley has great potential to grow commercially. Really? Perhaps the new owner genuinely believes that, but it looks like another example of the triumph of wishful thinking over business reality.

So the same mechanism as was used to fund the purchase of Man Utd. Buy the club using it’s own cash (an impressive £42m) , and borrow the rest secured against the future income of the club. 
So the existing owners walk away with a pocket full of money .

As has been mentioned , a relegation blows this apart doesn’t it? 
 

It does beg the question of due diligence. Do the current owners have any obligation to check the robustness of this ? Do they have a duty to check a “what if” on relegation. Does the EPL have a similar obligation - does this stand up to a fit and proper test? 

 

Edited February 2, 2021 by Graham Paddons Beard

[dylanisabaddog 4,868]

2 hours ago, wcorkcanary said:

Just look at Man u , 500 odd million borrowed, already 1-billion paid back......and they dont say whether or not its paid off the loan. Mental absolutely mental.

Man Utd is slightly different I think but both Utd and Burnley, along with Ipswich and others should be a lesson to us all. Think I'd rather stay as we are than let people like this anywhere near our club. 

PS having spent a lifetime in finance I should understand the following article on Man Utd but I don't. I have a nasty feeling that Michael Edwards didn't either 

https://www.investopedia.com/ask/answers/052715/why-manchester-united-manu-carrying-so-much-debt.asp

Edited February 2, 2021 by dylanisabaddog

[PurpleCanary 5,554]

1 minute ago, Graham Paddons Beard said:

So the same mechanism as was used to fund the purchase of Man Utd. Buy the club using it’s own cash (an impressive £42m) , and borrow the rest secured against the future income of the club. 
So the existing owners walk away with a pocket full of money .

As has been mentioned , a relegation blows this apart doesn’t it? 
 

It does beg the question of due diligence. Do the current owners have any obligation to check the robustness of this ? Do they have a duty to check a “what if” on relegation. Does the EPL have a similar obligation - does this stand up to a fit and proper test? 
 

A moral obligation, certainly! Sadly...

[wcorkcanary 4,329]

8 minutes ago, dylanisabaddog said:

Man Utd is slightly different I think but both Utd and Burnley, along with Ipswich and others should be a lesson to us all. Think I'd rather stay as we are than let people like this anywhere near our club. 

PS having spent a lifetime in finance I should understand the following article on Man Utd but I don't. I have a nasty feeling that Michael Edwards didn't either 

https://www.investopedia.com/ask/answers/052715/why-manchester-united-manu-carrying-so-much-debt.asp

The only real difference it seems is that the numbers are bigger at Man U. Sure there may be subtle differences to the way deals have been structured but the principle remains the same. M E N T A L !!! 

[sgncfc 1,221]

The description of a "leveraged buyout" is a little disingenuous. A company buying back its own shares at an agreed price is a pretty standard transaction - it's the way many achieve the transition from say, a retiring owner to a successor. The crucial thing is that the company is performing well enough to firstly borrow the money (if it doesn't have it) and secondly comfortably pay the interest. The ultimate objective is to repay the loan in most circumstances but (particularly at the moment) that may not be the best thing.

"loading with debt" is also a very emotive phrase. We claim to have "no external debt" but as we know, that doesn't suit many supporters who claim we are unambitious. Having no debt is not necessarily a good business plan for a club which targets the top 26 - and that will get harder to justify. Of course, if Burnley are relegated that might become a problem.

Most businesses function on debt, as do most households. It has a bad reputation, but it's not necessarily justified.

[PurpleCanary 5,554]

49 minutes ago, sgncfc said:

The description of a "leveraged buyout" is a little disingenuous. A company buying back its own shares at an agreed price is a pretty standard transaction - it's the way many achieve the transition from say, a retiring owner to a successor. The crucial thing is that the company is performing well enough to firstly borrow the money (if it doesn't have it) and secondly comfortably pay the interest. The ultimate objective is to repay the loan in most circumstances but (particularly at the moment) that may not be the best thing.

"loading with debt" is also a very emotive phrase. We claim to have "no external debt" but as we know, that doesn't suit many supporters who claim we are unambitious. Having no debt is not necessarily a good business plan for a club which targets the top 26 - and that will get harder to justify. Of course, if Burnley are relegated that might become a problem.

Most businesses function on debt, as do most households. It has a bad reputation, but it's not necessarily justified.

A lot of sense in that but on the face of it, just going on Conn's analysis, there are two potential problems with this takeover. One indeed is that Burnley are hardly likely in the foreseeable to feel safe from relegation in any season. Secondly, that if the new owner is to be believed his model includes the expectation of significant income from new off-field sources.

[hogesar 9,618]

Meh, people cry out for new ownership and this is the best Burnley could get whilst a Prem club. More than happy with what we've got.

[king canary 7,579]

1 hour ago, PurpleCanary said:

A lot of sense in that but on the face of it, just going on Conn's analysis, there are two potential problems with this takeover. One indeed is that Burnley are hardly likely in the foreseeable to feel safe from relegation in any season. Secondly, that if the new owner is to be believed his model includes the expectation of significant income from new off-field sources.

It will certainly be interesting to watch how it works.

Is it though to suggest that Burnley possibly show us the 'upper limits' of the self funded model? They were probably the club run most similarly to us in the top flight and they've decided they need to give in to outside investment. 

[Trevor Hockey's Beard 526]

Indeed, it will be very interesting to watch how this works out. For the previous owners it is probably a good thing - they've got their money back, but if I was a Burnley fan I'd be worried. They are a side which has overperformed for some seasons and they are only a bad run from relegation in any season.

I don't want to see this happen to our club, even if it did potentially mean some short-term gain.

[wcorkcanary 4,329]

4 hours ago, Mr Angry said:

A number of people have said that it is unlikely that anyone would invest in us because we’re not a basket case financially. Burnley were also a well run club financially-is this the only way to take financial control of clubs like this?

Quite possibly the only way without spending your own money, I know sweet fa about big money deals, I just know what smells and what doesn't.  To me this kind of stuff stinks, but time will tell, after all Stinking Bishop tastes good.

Edited February 2, 2021 by wcorkcanary

[Graham Paddons Beard 2,424]

Simply put , as football is a results based industry  let’s review the scenarios. 
1. the new Burnley owners use the extra money raised to strengthen the squad. Burnley rise up the Premier League over the next few seasons , consistently qualifying for Europe and increase their income on and off the pitch. Hurrah ! All good and the debt has worked well. 
I wish we were Burnley 

2. the new Burnley owners spend the extra money poorly , get relegated and find servicing the debt a risk to the business . A few seasons in the chumps mean reduced income both on and off the pitch Boo hiss I’m glad we are not Burnley 

 

 

[hogesar 9,618]

37 minutes ago, king canary said:

It will certainly be interesting to watch how it works.

Is it though to suggest that Burnley possibly show us the 'upper limits' of the self funded model? They were probably the club run most similarly to us in the top flight and they've decided they need to give in to outside investment. 

Let's hope they become a European giant, win a cup or something otherwise those who disagree with the self-funded model are going to struggle..

[keelansgrandad 6,679]

6 minutes ago, wcorkcanary said:

Quite possibly the only way without spending your own money, I know sweet fa about big money deals, I just know what smells and what doesn't.  To me this kind of stuff stinks, but time will tell, after all Stinking Bishop tastes good.

Exactly. Where is the scope for investment?

This year, the top clubs with 60000 gates will lose more than Burnley and its 20000. But several of them have single owners rather than corporate ones.

But as we all know, the TV money doesn't go far when average EPL players are on £40K a week and £10M only buys you a 15 goals a season Championship striker.

Burnley know that they have gems in Mee and Tarkowski. Something that all the bottom half clubs envy. Most clubs would love one of them let alone two. Trouble will be replacing them in a couple of seasons. And seven of their starters are 30 or over.

In the end, the only ones who might suffer are the fans and creditors or we could be wrong and they return to be a CL team as they were the equivalent of in the early 60s

[Badger 2,405]

47 minutes ago, king canary said:

Is it though to suggest that Burnley possibly show us the 'upper limits' of the self funded model? They were probably the club run most similarly to us in the top flight and they've decided they need to give in to outside investment. 

Sorry but that's nonsense, the "outside investment" has mainly been used to buy the club!

1. The old owner has sold the club and made a lorry load of cash.

2. The new owners have put very little of their own money into the deal and have a "no lose bet" on making some money.

3. MSD, who financed most of the deal, lend the money at 9.5% with the debt secured against all the assets including the trademarks/ grounds/ players etc

Everyone wins - except of course, the fans!

Rather than showing the limitations of the self-funded model, it shows the dangers of external investment!