The main point of contention and source of substantial resentment with owners Fenway Sports Group for many Liverpool supporters has been the club’s underinvestment in the transfer market compared to their rivals.
The difficulties this season have only served to fuel that anger, and FSG, which is considering its long-term options over whether to sell Liverpool or to bring in new investors, has been feeling the pressure.
The FSG credo has always been one of sustainable success, where the revenues and player turnover – as well as attention to detail on the recruitment side that once led the field – are crucial factors in how much the club actually spends in the transfer market.
In the wake of Mukhaylo Mudryk’s €70m (£62m) move to Chelsea from Ukrainian side Shakhtar Donetsk, a signing that saw the London club’s spending under the new Todd Boehly/Clearlake Capital regime push the £300m mark, many comparisons have been drawn around what is happening at Stamford Bridge and what is not happening at Anfield.
There was speculation that the free spending of the Russian era at Stamford Bridge, one that saw the club end up with about £1 billion in debt to their former owner’s company that was written off, would be replaced by spending that was more conservative due to the impending tightening of Financial Fair P in May after winning the competitive bidding process following the forced sale of the club by the sanctioned Roman Abramovich.
Last year, Boehly observed, “Financial fair play is starting to develop some teeth and it will limit the ability to buy players at any price.
“It is something that UEFA takes seriously and will keep taking seriously. [More teeth] results in monetary fines and exclusion from sporting events.”
Chelsea continued to show off their strength with the signing of Mudryk, which came just two weeks after a deal worth close to £100 million for Benfica’s World Cup champion Enzo Fernandez collapsed. This raised eyebrows in the wider football community, especially given the impending arrival of Christopher Nkunku next summer and the ongoing pursuit of Brighton & Hove Albion midfielder Moises Caicedo, who has long been rumored to be a target for Liverpool.
The vast majority of the deals that have been made so far follow a clear pattern.
Chelsea has a window of opportunity to make a purchase. The kind of investment in the player team that is currently being made is one that cannot be continued in the future under FFP standards, nor is it something that Chelsea’s owners, who are using a significant amount of other people’s money with this investment, are able to do relentlessly.
It’s a risky move that will have an effect on Chelsea’s balance sheet for the majority of the upcoming ten years. The focus has been on purchasing highly-rated young players and signing them to long-term contracts in order to keep them committed to the team, preserve value, and lower the amortization rates on their yearly financials.
The way the costs are calculated at the conclusion of the financial year comes down to the transfer charge divided by the number of years on the contract, even if the payment structure on some of the deals may be done in one, two, or three installments, probably within three years. Only guaranteed transfer fees are included in the amortised costs; add-ons are not taken into consideration.
Mudryk signed an eight-and-a-half year deal at Stamford Bridge (£62m), Benoit Badiashile (£33m) signed a seven-and-a-half year deal, Wesley Fofana (£70m) signed a seven-year deal, David Datro Fofana (£8m) signed a six-and-a-half year deal and Marc Cucurella (£55m) signed a six-year deal.
For a long time the length of deals seldom went past five years, but Chelsea’s approach now is something that will likely be replicated by some others when it comes to keeping the amortisation figures down on the balance sheet in order to skate underneath FFP’s radar in the future.
When it comes to keeping the amortization figures low on the balance sheet in order to avoid FFP’s radar in the future, Chelsea’s strategy is one that will likely be copied by some others. For a long time, deals rarely went beyond five years.
On the balance sheet, Mudryk’s annual amortised cost would be £7.3 million, while Badiashile’s would be £4.4 million. In the other deals, Fofana would cost £10 million, Datro Fofana would cost £1.2 million, and Cucurella would cost £9.2 million. Given that they have eliminated some amortization expenses that were on the balance sheet, Chelsea’s shareholders would be confident in their ability to absorb the additional £32.1m that the annual amortization costs on the balance sheet would reflect.
Mudryk’s annual amortised cost on the balance sheet would appear as £7.3m, while Badiashile’s would show as £4.4m. The other deals would see Fofana appear as £10m, Datro Fofana show as £1.2m, and Cucurella show as £9.2m. In total the annual amortisation costs on the balance sheet would show an additional £32.1m, something that Chelsea’s owners would be confident of absorbing given they had rid themselves of some amortisation costs that existed on the balance sheet through the sales of the likes of Timo Werner back to RB Leipzig (£9.6m per year amortised cost in Chelsea’s accounts), while the loan fee paid for Romelu Lukaku to Inter Milan would offset his amortisation cost, while Inter picking up his major wages would allow for flexibility to bring players in, with those arriving unlikely to command the kind of fees that more experienced players carry.
It is possible to account for the sales of artists like Werner, Billy Gilmour, and Emerson in the books, and about £45 million from those sales will appear on the balance sheet for the fiscal years 2022–2023.
Behdad Eghbali and Jose E. Feliciano, the chiefs of Boehly and Clearlake, are working with Chelsea over the long term and supporting their new hires in a covert manner as well as their recruitment plan to give them an advantage over their rivals in the next five to ten years. Although it is a risky decision, it carries some danger if the expensive additions they made can’t live up to their long-term contracts, which will provide them with little need.
Liverpool will need to revamp their own playing squad when the summer arrives, with doing it beforehand not looking like being something that will come to pass if reports are correct.
According to data presented by football financial specialist Swiss Ramble back in August, Chelsea (£162m) had the highest amortization expenses in the Premier League last season, followed by Manchester City (£146m), Manchester United (£120m), Arsenal (£117m), and Liverpool (£108m). Since then, Liverpool’s statistics have increased due to the addition of players like Darwin Nunez and Cody Gakpo. Some numbers that had been used to calculate amortization will be eliminated, including the last £10.6 million costed for Naby Keita’s $53 million deal in 2018.
The question will be how much they will be willing to spend given that record revenues are anticipated when the 2021/22 accounts are released in a few weeks.