KENWRIGHT OUT INVESTMENT IN? – Everton Suffering After Missed Opportunity?
By Unclassified • Aug 13th, 2008 • Category: Fan Articles |I was thinking about investment, a hot topic amongst Evertonian’s and football in general, and it got me thinking, from a business perspective, would I, if I had the money at my disposal, invest in Everton as a business opportunity?
I have shared, in my previous articles on the site, my views on the current state of our club, such as the marketing side in Liverpool One Everton Nil, and the development and limitations of our current board in Kenwright – To Be Or Not To Be? However I’ve never really moved into the subject of investment in depth.
So many clubs have seen foreign investment in recent years, but Everton remain one of the clubs yet to succumb to the foreign money currently swimming around the Premier League. Most of these clubs have certain major factors in common; they tend to be London clubs, thus seemingly making them a more fashionable acquisition, or they are in areas with large catchments areas with minimal local competition and they tend to have modern stadiums. Everton, along with several other clubs, seem to have been overlooked or just don’t seem to be attractive to investors.
So let’s go to basics, how much would it cost to purchase Everton, what areas of Everton need investing in, and what future potential for extra revenue does Everton have?
Buying The Club
After his acquisition of the club in 1999, Kenwright immediately announced he was seeking to find new investors to help move the club forward, but now 9 year later, we still find ourselves without any new investors. In 2004, True Blue Holdings, the consortium which bought out Peter Johnson, was dissolved, making it easier for any potential investors to buy into the club, but even this has not lead to any concrete interest. Between the summer of 2004, when Gregg became disillusioned with Everton and wanted out, and winter 2006, when Earle bought Gregg’s approximately 25% share in Everton, no one, bar the ill fated Fortress Funds, expressed any interest in Everton. That means that no one made any serious takeover bids for a club which had a chairman who openly expressed his desire to attract investment, and the club’s second biggest shareholder was actively seeking a get out.
The majority of Everton’s shares are owned by a small group of people, with approximately 75% of Everton belonging to just 5 people, however Everton have no majority shareholder, so it would be possible for any serious investor to buy the majority of Everton Football Club, regardless of the stance of any one major shareholder.
The current value of Everton Football Club, to some, may seem surprising low. At current share price, usually between £1250 and £1500, with 35000 individual shares, Everton is currently valued between £43 750 000 and £52 500 000.
Improving The Club
It is fair to point out that Everton is a club on the up, which, despite a frustrating summer on the transfer front, has been on an upward trend for the majority of the past decade. I have, in previous articles, stated that I believed, when Kenwright seized control in 1999, Everton were a club stuck very much in the 60s, with a 1960s stadium, 1960s training ground, 1960s levels of marketing and a squad full of players who were in their prime in the 1960s. It is fair to say that many things have really advanced considerably, our marketing, though not at the cutting edge, has caught up by about 30 years, and is probably only about 5 or so years behind the times. Our training ground is now very much world class, whilst our players are of the best quality at Everton for some considerable time.
However one very big obstacle remains to Everton’s return to grace, the 1960s stadium we are currently residing in. With Destination Kirkby now on the rocks, it looks likely that Everton are going to have to find alternative sites. LCC have already stated that they will not offer Everton the same deal as Knowsley Council, who offered Everton the land on a very cheap lease, instead Everton, if they chose to locate within the city boundary, will need to pay market value for the land. Everton will also have to go into any potential new stadium proposal without the discount from Barr Construction, which was reported to have been in the region of £50 million. This means that, for the vitally required new stadium, Everton will now almost certainly need to invest between £120 million and £150 million for a new stadium of similar quality to the proposed Kirkby stadium.
Everton also have a debt to consider. Everton’s debts are currently standing at approximately £66 million, which although currently manageable, with the ‘credit crunch’ and increasing interest rates, the sooner these debts are cleared, the sooner Everton’s revenue can be invested back in the club, with Everton’s debt repayments currently standing at just under £3 million per year.
Everton are also currently lagging slightly behind in the marketing department. Everton can not claim a tradition of buying replica shirts and merchandise to the same degree as fans of Newcastle do, nor can we boast of being a major attraction to football tourists, meaning that the opening of a shop in the city centre will likely be run at a loss or with very little positive contribution. However Everton’s marketing and merchandising does need a boost, the city of Liverpool is full of images of LFC, meaning it would be possible for non-totalling tourists to visit our city without even noticing that Everton FC ply their trade here. For the required boost, to bring us on par with the likes of Spurs and Newcastle, Everton, in my opinion, would need an increased budget of around 2 million for both Research and Development of new merchandising, an increased marketing team, and a larger budget for promoting Everton at home and abroad.
Potential Revenue Return
There is a misconception that football is big business, football is not big business, far from it, football is business, but by no means big business. My memory may be playing tricks on me, but I seem to recall that Marks & Spencer’s flagship store on Oxford Street records a larger annual revenue than Manchester United, football’s wealthiest club. That is one store generating more revenue than the richest football club, which considering M&S are small in comparison with TESCO on a national level, who themselves are nothing in comparison to Coca Cola on an international level, football can not be classed as being big business, in fact the total revenue from all the European premier leagues according to Deloitte and Touche was £10.7 billion, only £1.6 billion more than M&S recorded in 2007. Everton’s current revenue stands at just £51.4million.
Everton’s catchment area is currently approximately 1.5million, which they share with Liverpool, and to a lesser extent in areas cross over with Manchester City and Manchester United, so it can be assumed that the local market is saturated by four of the biggest clubs in Britain, in fact the same can be said for the British market as a whole. This thus means that any increased revenue will come from foreign markets and non-totalling ventures. Everton are currently marketing at a steady level overseas with Soccer Prince, Chang and other ventures, but this will need to be taken up a gear if Everton are to compete with the elite which are pouring far larger resources into marketing overseas.
Total Investment & Types Of Investment
From this, I believe, if an investor was to come along with serious ambitions of building solid foundations to put Everton in the European elite long term, the potential buyer would need to put up in excess £220 million, this is before even considering the playing side of Everton. With the majority of this going on a new stadium, the importance of the success of the faltering Destination Kirkby is very evident.
If a potential businessman sees past this huge sum of money, the question is, what type of investor do Everton need, as Kenwright has always stated he will not sell to anyone but ‘the right person’.
The goings on at Liverpool are there for all to see, with the club plunged into debt, meaning that the team must qualify for the Champions League year in year out in order to keep up with payments. Manchester United under the Glazers, from a glance, seem to be doing very well, however try telling those fans who have been priced out of watching their team with price hikes and unfair ticket schemes that the Glazers are a good thing for Manchester United. Roman Abramovic may be pouring money into Chelsea, but he is doing so whilst changing the club’s image and soul, with Chelsea’s aim not being to make Chelsea big, but to make Chelsea the new Manchester United, and then of course there is Manchester City. These are all examples of investment I believe we should avoid like the plague.
With so many club’s becoming faceless franchises, for Everton’s individuality to be maintained, the investor has to be right. I personally want someone to invest in Everton Football Club, not the name, but the club. The difference between the likes of Chelsea, United and Liverpool is minimal, with the formation of FC United and Reclaim the Kop highlighting this. Everton need a 21st century John Moores, the man who bank rolled Everton in the 60s. He invested in the club and the club’s heritage, his aim was to rejuvenate Everton, not to create a new club. We need someone to invest in the Everton brand, the People’s Club, the School Of Science, to show people that we are one of the original pioneers of football, that we boast a record of success with cultured attacking football, whilst not turning the back on the fans and merely replacing them with new ones. This is obviously a very difficult balancing act, as any new owner would obviously aim to increase revenue with ticket price rises and other ventures which could affect the fan’s pockets.
I understand that this may seem very negative to many people, but I assure you it is not, not all is lost, we don’t have to settle for out lot, however the belief by some that there is a big businessman or sugar daddy out there to save Everton and instantly transform us into a top four club is somewhat far fetched, as many businessmen will be put off after an initial look into what investment Everton needs, whilst a sugar daddy, in my opinion, would be damaging to the club’s heritage and culture. I do, however, have ultimate faith in Everton Football Club, I personally believe that, in time, we will find our way back to the top, as long as we continue laying down solid foundations.
I believe that there will be a company or wealthy individual out there who sees the potential in Everton Football Club, and all we stand for, and that they will be willing to buy a minority share holding in Everton Football Club. Everton need to find this person, as we need to release a substantial amount of new shares to give us a cash injection, and, with the imminent collapse of Destination Kirkby, if we are to be the owners of our new stadium, we are going to have to find a backer willing to act as a guarantor for a very large loan, which ironically creates a catch 22 situation, we need an investor to build a new stadium, but many won’t touch us without one. But I have confidence that Everton Football Club, the founders and longest established member of the top flight will find that someone who will give us that boost we need to help build the next layers of foundations on our slow return to grace.
So back to my questioning myself as to whether I would invest in Everton as a business proposal. I would not invest the sums required to make Everton a member of the elite, as quite simply it is one gamble too far, even clubs like Villa and West Ham, who required less initial investment, have owners reluctant to invest vast sums to take break into the elite, as there are currently around eleven teams in the Premierleague who have an eye on the top four, including the teams currently occupying it, and the maths is simple, eleven does not go into four. As much as it pains me to say it, I would also have invested in many of the teams who have gained investment ahead of Everton, mainly due to location and stadium issues. However I would be willing to buy a smaller shareholding in Everton, I would be willing to help provide smaller levels of funding, and enter into a smaller gamble. Essentially I’m saying there isn’t likely to be an investor out there who purely aims to break into the top four where we so desire to be, but there will be an investor out there willing to give us that little boost, help consolidate our status as a UEFA Cup team and hopefully, slowly with growth and strengthening both on and off the pitch, we might manage to gain Champions League qualification for several seasons running.
Everton’s return to the top, I believe, won’t come in the form of a business man’s blank cheque, but will come by steady but ambitious management off the field, and, of course, Moyes’ great management on it. Unfortunately the road to the top, in my opinion, will be long, and whilst other clubs maybe taking gambles with risky short cuts, if we continue with the course we are currently on, preferably with the boost of a minority investor, we will find ourselves closer to the top for al onger period of time than the list of pretenders currently riding the short term wave of foreign money.
Please enter the investment debate, or many other debates, on the FollowEverton forum, or leave your comments about this article below.
Very good article Liam, keep up the good work for this site. I’m sure the owner will be pleased with that standard.
At the moment from an investment side of things It would be very off-putting but I surpose thats what the invesment is there for – to help the club get better.
Good stuff, I was very pleased with the attitude of your wrtiing for Follow Everton.
I’m afraid if I was to post my thoughts here, I would still be sitting here next week, 😐
Such a well written artical Liam, well done.
I really appreciate this article. I have also had to admit that I would not put all my money into Everton for the sort of reasons you stated. As we look back over the past decade we can see how Everon has steadily improved. The foundation is much stronger now than it was in 2000. The youth academy is attracting excellent players who are much more likely to stick with us. The hope has got to be for Everton to build slowly and steadily so that it can be one of the top clubs not just for one or two seasons but permenantly. If we saw the same amount of progress over the next ten years then we would certainly be a top four side in ten years time… with a solid foundation and structure.
Ok.if there are 35.000 fans at most games would the club consider making another 35,000 shares which i guess would price the new shares around £700 each. This would raise £24 million for the club and keep it a real people’s club. It would pay off nearly 40% of the debt at a stroke. Obviously there would need to be some market research and some supporters would not be able to buy shares but others would buy a few. Lets make the players buy a stake while they are at the club too so the more successful they are the more every stake is worth. Part of the contract is they have to sell the shares when they leave. I think Moyes could get some free shares for is continued ability to get a quart from a pint pot!
Very well written Liam,
But both the PR spin & deadly silence from BK and DM speaks volumes about how desperate our situation is.
Why hasn’y DM signed a new contract?
Why has Wyness gone?
Why did we pursue a course for the new stadium that was destined to failure?
Where has the Sky Money, Rooney Money Drip Feed, Gate Revenue, Merchandising, Hospiatality, Sponsorship and Johnson money gone?
Why is it that with 3 days to go to the start of the new season, we have a not added numbers to the squad?
Just look around the premiership the likes of Villa, Spurs, Portsmouth all building on last seasons performance, yet we stagnate, why?
To many questions not enough answers 👿
Why is that with
👿
i like many of you other evertonians are just as cheesed off about the lack of investment and transfer activity this summer but to lay the shoulder of blame solely on bill would be a travesty. I should take most of the blame for not pulling my finger out and signing anybody, and yes you evertonians think the sun shines out of my backside, yet season after season i do the same thing to you all,dilly dally and then by the time i’ve made up my mind who i want all the best players are gone. But yes you do have to blame bill for some of it, after all he has only allowed me to break the clubs transfer record on no fewer than 3 occasions in 3 seasons so why you all blame bill and the board for their failings i can sit quietly in the shadows allowing them to shoulder the blame for my misgivings
I noticed the spelling mistake when it got published. Apologies about that.
In regards to the deadly silence and potential share issue, I completely agree. I believe there should be a share issue to the fans, and give the fans the right to elect a representative onto the board, this would quash any mistrust amongst fans, whilst ensuring the fans still have a say in the club. However not all fans would be willing or able to pay for new shares, whilst the issue of new shares would decrease the price of shares, so not only would the major shareholders stand to lose many thousands of pounds, but the smaller shareholders, the fans, could also lose a few hundred off the price of their shares, so it might be a controversial move.
Sorry But I don’t think you address the real issues here, from where I stand it looks very much to me like the supposed lack of investment is being used by BK to push through the move to Kirkby. The club spin has suggested we will be more of an attractive proposition.
Having now lived outside of Liverpool for what is now more than half my life, time wise 26 years, the vast majority in the SE of England. During this time whenever I go to a new company without fail there are always Everton supporters, however remote the location. I am sick to death of reading that the likes of Villa and God help if it’s true West Ham, are better propositions than the mighty blues. It’s very simple “I don’t believe it……………. “. During this time down south I have never worked with any Villa supporters, a couple of Barcodes, strangely the second most supported team down south seems to be City.
Our fan base is bigger than any team outside the Big Four (I hate that phrase Big Four), as the kids outside the major cities support whoever is winning, surely it is simple – improve on the pitch and we will improve financially, both home and abroad.
I don’t know if there is an investor out there suitable for Everton Football Club, but please don’t treat me like an idiot and try to convince me that West Ham, Portsmouth etc are a better proposition for investment.
Just for the record this is my view on all things blue:-
I like BK, but it is becoming increasingly obvious he lies to the fans in order to bull dozer what he wants.
I like DM, I think has done wonders but am also aware of his weaknesses and he is still a young manager learning his trade.
My preference would be to stay at GP, and make ours the only football ground in the EPL as everyone else moves to new stadiums with no atmosphere.
I believe that Pompey and West Ham were better aquisitions, not because they are going to be bigger clubs than Everton, but because the initial investment required in Everton is far greater, making it a far greater gamble. For example Pompey have the potential for large local growth with far less investment required, whilst for Everton to grow significantly and up the revenue significantly, we need far greater funding.
I think you should revise your numbers for a ‘takeover’ Liam and also come to realise that Tesco are not the only possible developers/enablers. Maybe they are the only developers willing to use Everton for their own ends by relocating them to a small town in Knowsley but once the club commit to either a. redevelopment of Goodison (which would not need an initial cash injection of ‘between £120 million and £150 million,’ or a site closer to the city centre (which would attract other developers/enablers plus various European grants tied to regeneration) then the costs you mention can be significantly reduced;
* Aquiring 51% of shares would be enough to obtain a controlling interest in the club = +/- £25m
* The debt would not have to be initially cleared. The debt is already secured and serviceable (a large chunk of the £66m debt you mention is secured against future season ticket sales). Instead, a potential buyer could guarentee say £50m for squad development to be supplemented by TV rights and placing merit money (plus eventual Champions League money) to be spread over a number of seasons (as we all know transfers these days are paid incrementally.)
* Stadium Development – Given the current regime were apparently able to raise £78m (despite being potless) through the sale of Bellefield/Goodison/naming rights and some additional debt for Kirkby, then your figure of ‘between £120 million and £150 million’ is somewhat disingenious. If there are serious people interested in a ‘takeover’ then a matching of the £78m ringfenced Kirkby money (it does exist right?) would give a total of £156m. More than enough (even without the interest of other developers/enablers) to be getting on with.
There you have it then;
* controlling interest in the club = £25m
* squad development = (initial) £50m + (eventual) TV/placings/CL monies
* Stadium Development = £80m (plus monies ringfenced for Kirkby)
Total = £155m
(and of course, as has been mentioned, a further rights issue would not be out of the question)
Everton are ripe for a takeover, all that we need now is a willing seller and a willing buyer!
Very interesting and well delivered article….Are we surviving on our incoming revenue alone then ?
Your figure of 51.4 million, was that our total for last year because finishing 5th, last 16 in EUFA, good cup run in league cup,TV money and gate receipts plus merchandising must bring in more revenue than that….Once we remove wages etc etc , how was B K able to pay himself 10.8 million last year ???
EUFA only made us £400,00…they make more on sausage rolls on a saturday
Sorry Liam but I can’t agree with you about that one bit. To turn Portsmouth and West Ham into a big four would need the same investment as Abomovich has pumped into turning Chelski from a medium sized club to regular EPL contender.
Football is small fry in business terms, it is a misnomer that it is big business; someone was saying last week that the M&S store in Oxford Street has the same turnover as the whole EP, and M&S’s overall turnover is comparable to all the top flight leagues in Europe.
Investors in football clubs are not doing it to make big profit, it’s too risky a business, I’m sorry but your argument doesn’t run through. If I had £100m pounds (I wish) to turn one football club around, I would look at Villa, Spurs and Everton as my best options as they have history fans etc in place, then Newcastle, City and Leeds as maybe’s, wouldn’t entertain anyone else.