One way to make money from a football club, I presume.

[BlyBlyBabes 0]

The following is an extract from Evanomics on the BBC website.

Private equity

First an explanation. Private equity is quite simple. Investors borrow money (from banks); they usually add a little of their own and use the cash to buy companies. Often the companies they buy were publicly-owned - in the sense that a large number of relatively anonymous shareholders buy and sell shares in them on the stock market - and once bought, they become privately-owned, in that their shares are no longer traded.

Three features tend to follow:

• First, private equity investors usually put the debts they have incurred buying a company, into the company they have bought. Thus they are increasing the debt portion of finance in the economy

• Second, they have a very big incentive to run the company well, because they stand to gain all the profits from so-doing. So they tend to be ruthless in the pursuit of efficiency and value.

• And third, after a few years, they tend to sell the companies they buy.

Am I to understand - as an amateur in the finance business that

1]   I could buy control of a football club (plc) for 10m by borrowing (say) 9m from the bank and putting in 1m of my own.

2]   I put the 9m I borrowed into the company and  put in my own (executive) management. I then implement a short/medium term strategy of ruthless financial efficiency, maximising revenues (bums on seats, restaurants etc), clever PR, realising assets (selling on valuable players, real estate etc), minimal investment  (enough to keep the company revenues stable - bums on seats, modest incoming player transfers, maintenance of current league status, small squads etc) -- all whilst paying down the bank loan and salting away excess revenue, thereby greatly improving shareholder value.

3]  Because I have another (primary) business that would certainly suffer significantly from heavy adverse publicity if I sell to a foreigner, I need to find a local enough buyer.

4]  I find a rich enough, local enough chap. But he is determined to run the company at a profit, and I have squeezed up the shareholder value about as far as it can go. Conundrum. I invite said local rich man to dip his toes in by investing (say) 2m and scarper off to look about my primary business for a while because time is running

5]  I leave local rich man in charge. Fish hooked by the adrenalin rush. He offers me 25m for my shareholding. I accept happily - you know.....nice profit, tax advantages on capital gains (lightly taxed if realised after more than 2 years) etc etc etc

Everybody''s happy, and I can retire to Surrey and watch Chelsea with all the other guineagogs.

Am I to presume this is a way it can be done ??? Making money out of a fooball club, that is.

But you financial types on here ought to have a clearer grasp than this questioning amatuer. What do you say?

Just asking. I''ll finish my Scotch now.[:)]

OTBC

 

 

 

[YankeeCanary 0]

If he were alive, Lenin would be proud of you BlyBly.....but I could not possibly comment.

[7rew 0]

If I was going to tdo this I wouldn''t bother about paying down the bank loan.You could just put the loan on to the clubs books and leave it there. See Glazier, Gulliet and Hicks.

[Old Boy 0]

I''m not renowned for financial acumen, but it seems to me that you''d need to cash in your chips quickly, because debt would increase rapidly, reducing the value of your shareholding. Ruthless efficiency at the margins wouldn''t help, because the big income necessary to avoid increasing debt only comes with success on the pitch.

[BigFish 1,986]

[quote user="BlyBlyBabes"]

1]   I could buy control of a football club (plc) for 10m by borrowing (say) 9m from the bank and putting in 1m of my own.

2]   I put the 9m I borrowed into the company and  put in my own (executive) management. I then implement a short/medium term strategy of ruthless financial efficiency, maximising revenues (bums on seats, restaurants etc), clever PR, realising assets (selling on valuable players, real estate etc), minimal investment  (enough to keep the company revenues stable - bums on seats, modest incoming player transfers, maintenance of current league status, small squads etc) -- all whilst paying down the bank loan and salting away excess revenue, thereby greatly improving shareholder value.

3]  Because I have another (primary) business that would certainly suffer significantly from heavy adverse publicity if I sell to a foreigner, I need to find a local enough buyer.

4]  I find a rich enough, local enough chap. But he is determined to run the company at a profit, and I have squeezed up the shareholder value about as far as it can go. Conundrum. I invite said local rich man to dip his toes in by investing (say) 2m and scarper off to look about my primary business for a while because time is running

5]  I leave local rich man in charge. Fish hooked by the adrenalin rush. He offers me 25m for my shareholding. I accept happily - you know.....nice profit, tax advantages on capital gains (lightly taxed if realised after more than 2 years) etc etc etc

.[:)]

[/quote]

Interesting hypothesis but I don''t think your insinuation works for the following reason:

1) The private equity model only works if 100% of the club is purchased and the PLC is taken private. It does not work if a company remains a PLC. NCFC would probably cost around £25m + security for the £20million debt.

2) Unless the company is private loading it with debt to buy shares would be defrauding the remaining 49% shareholding.

3) This, and the additional debt, requires servicing out of revenue. At say 2% above base rate this would mean that the club would need to find around £3.5m a season in addition to any operating loses.

4) The current majority shareholders have said they would sell their stake to anyone whom could be trusted to take the club forward.

So basically you have made a bit of a slur that doesn''t seem to be backed up with facts. Unless I''ve cocked up somewhere.......

[BlyBlyBabes 0]

Unconvinced by the critiques so far. Some thoughts:

1]  I paid 1m out of my own pocket for my shares and a few years later sold up for 25m. Seems to me I made a profit  of 24m before minimal capital gains tax and assorted minor expenses, my original debt having been paid down by the club (Attn: 7rew) , and replaced by them with other debt - securitisation?) 

2]  BigFish. I have a few shares in NCFC plc (not traded on any stock exchange). Are you seriously suggesting that I would have a case of any kind against said majority shareholder if his/her holding were sold?

3]  BigFish. Insinuation, slur?? Anything wrong with making money legally - even big money??

4] Lenin proud of me? Lawyer, expert propagandist, a leading revolutionary thinker of the 20th century, author of the October Bolshevik Revolution. I''m flattered, Yankee. But why so coy?

5] Old Boy. ''the big income necessary to avoid increasing debt only comes with success on the pitch.'' No, it also comes from consistently profitable training on the player transfer market, maxed out season ticket sales and virtually full stadia.

[D]

OTBC

 

 

 

[ron obvious 0]

Why don''t you just come out & say it, instead of just continually  making sly, smug, snide insinuations?

She''s only in it for the money/kudos. Doesn''t give a flying fart about the club really. Is a closet binner. Etc. etc.

You''re quite welcome to believe all this, I don''t..

I believe this is where the "little Norwich"  mentality  really resides. People with huge chips on their shoulders who think that the only reason NCFC isn''t in its rightful place, at the top of the premiership, is because of some hideous conspiracy against it.

Get over it.

[BlyBlyBabes 0]

[quote user="ron obvious"]

Why don''t you just come out & say it, instead of just continually  making sly, smug, snide insinuations?

She''s only in it for the money/kudos. Doesn''t give a flying fart about the club really. Is a closet binner. Etc. etc.

You''re quite welcome to believe all this, I don''t..

I believe this is where the "little Norwich"  mentality  really resides. People with huge chips on their shoulders who think that the only reason NCFC isn''t in its rightful place, at the top of the premiership, is because of some hideous conspiracy against it.

Get over it.

[/quote]

Grow up.

All your words, not mine.

It''s not a crime to make money. Even lots of it.

I''d just prefer a successful football club playing good football.

If you can''t stay on subject, why bother to come on the thread?

OTBC

 

 

[we8wba 0]

Making money like that seems way to easy than how it is, if it was that easy to make a killing we would all be doing it