The transfer window: player due diligence and why Gareth Bale is not worth UK£80 million

12 August 2013 | Posted in SportsPro Blog | By Michael Long | Contact the author

The transfer window: player due diligence and why Gareth Bale is not worth UK£80 million

It’s that time of year again. The soccer transfer window is fully upon us and with the majority of clubs having completed their pre-season friendly fixtures, attention has now turned to last minute wheeling and dealing as Deadline Day looms.

But as managers look to strengthen their squads for the new campaign, as club scouts scour the international transfer market for a bargain, how can anyone be sure they are getting a good deal? In many cases precious little is really known about players arriving from abroad, so what can be done to minimise the chance of signing a flop?

David Paton is the managing director of Kinross Sports Advisory, a British firm that provides advisory services to sports clubs and sports governing bodies across the UK and the US. He believes his company, which he founded last year, has the answer.

“If you were to buy a house then you’d do a land registry search, a local authority search, you’d have a home buyers report, you’d understand the asset that you’re buying as much as possible,” he says. “That’s the same if you’re buying a company; there’d be financial due diligence undertaken so that you knew of any underlying problems with the business before you bought the asset. What was very clear was that clubs were not doing that in the transfer market.”

“If you’re buying a player from South America, from Africa, from Eastern Europe in particular, a lot of the time there is not a lot of information known about the player, as to their background or any issues off the pitch or just how effective that player has been on it.”

"There are not huge financial gains to be made, unless you make it into the Champions League – and that’s becoming more difficult year in, year out."

Kinross’ services include strategic planning and commercial partnership sourcing but the company’s primary business at this time of the year centers on conducting player due diligence on behalf of its clients. The service, as Paton explains, is split into three distinct areas.

“The first area: we’re partnered with Opta and Scout7 so we can actually provide an on-field, playing profile of the player. We can look at the stats, we can match it up with what the club have actually asked as a requirement and provide historical trends over two to three seasons previously.

“The second stage is working with contacts around the world to take character references on the player, so how does the player interact in the training with his teammates? Has the player caused any problems for that club off the field? Is there any suggestion of any extra-marital activity, drugs, drink, gambling, whatever it might be? Are there any family issues that surround the player?

“And the third area is internet deep mining to understand what’s available on the player from a social media standpoint, chat rooms, all of that.”

Paton explains that it takes about a week for Kinross to conduct all the necessary checks. Once completed, the company will then submit to its client an initial dossier of its findings. “We then discuss with the club any areas they want us to drill down to specifically based on the first week’s research,” he adds. “And then at the end of week two we compile a report and we provide it to the club. The club then proceed with the transaction or they step away, so it just increases that position of strength for the buying club.”

While the company does not disclose the identities of its clients for confidentiality reasons, Paton (right) explains that Kinross aims to work primarily with larger clubs; those that may have greater resources to invest in in-depth player tracking but also, more importantly, for whom commercial considerations have a greater bearing on player acquisitions.

“They expect to use the player’s image a lot more globally to increase revenues across the board, to offset the cost of the player in the first instance,” Paton explains. “They need to know everything about the player, especially in terms of reputation, to make sure nothing is going to come out of the woodwork that will then damage that reputation, that commercial value over the course of the contract.”

According to Fifa Transfer Matching System’s 2012 report, which tracks the movement of players within the international transfer market, English clubs collectively forked out some US$59 million on agent’s fees in 2012, more than any other country. Kinross’ player due diligence service, Paton adds, is designed to reduce those costs.

“Agent’s costs are one of the biggest flows, after transfer fees, of money out of football clubs and football in general,” he says. “Where we can help there is to make that more efficient straight away. The fee for one of our assignments is nothing compared to an agent’s fee for a UK£30 million player, or even a UK£10 million player. This is all about business efficiency and sports clubs learning and starting to behave as businesses.

“You can see it in the Premier League at the top end, where some of the biggest clubs have brought in quite a lot of American talent on the business side. You can quote guys like Tom Fox at Arsenal, Tom Glick going to Manchester City from Derby, obviously the Glazer family, John Henry. These guys understand how to create a brand and use that as a business to make it profitable. A lot of the clubs further down the chain still need to understand and do a lot more work.”

The Premier League expects to generate around UK£5 billion in broadcast revenue over the course of the coming three-year rights cycle up to 2016. The league’s domestic TV deals alone, signed in June 2012 with Sky and BT Sport, are worth a combined UK£3.018 billion, a massive uplift of some 70 per cent on the previous home market agreements. That increase could mean that some clubs will earn up to UK£60 million extra per year from TV rights, but Paton has a warning for those who are planning to use that money to fund big-money transfers.

“I don’t think any player, even commercially, is worth UK£80/90 million. I think it’s more of a crowd pleaser."

“They should be using that money to pay off legacy debts and to think about infrastructure, not spending it all on players now,” he advises. “They’ve got to get that right because there’s a longer term play. You’ve got long term sustainability of clubs [to think about]; if they invested even 20 to 30 per cent of that money into an academy structure, in the long term the club will be in such a stronger position that if they buy one player for UK£20 million now that gives them two or three seasons of success. Because the chances are, outside of the ‘big four’, there are not huge financial gains to be made, unless you make it into the Champions League – and that’s becoming more difficult year in, year out because it is that very small group of maybe six clubs in the Premier League at the moment that are feasibly competing for the Champions League.”

But even the top clubs in Europe are under pressure to rein in their spending, with Uefa’s new Financial Fair Play (FFP) measures stating that clubs wishing to compete in European competition will from now on have to break even over a three-year period. Still, there are those who appear to consider themselves exceptions to the rule.

Big-spending Manchester City have already totted up a transfer bill of over UK£85 million so far this summer as they prepare to wrest the Premier League title back from the hands of their city rivals United, while French champions PSG, also funded by Middle Eastern millions, continue to flex their financial muscle, recently adding the likes of €64 million Edinson Cavani and €31.4 million Marquinhos to an already star-studded squad.

“They’re already running at a significant loss, and with financial fair play coming in, they seem to think that they’re excluded from that and FFP will not be implemented,” Paton says of those spendthrift clubs. “But I believe that [Uefa president Michel] Platini has to implement it, otherwise he’s going to look particularly weak from his position at Uefa.

“There’s a very interesting balance because the TV companies have bought all these rights and they want to have the Real Madrids, the Inter Milans, the Chelseas, the Manchester Citys - the key brands in European football - playing Champions League. They’re almost gambling that Uefa won’t be strong and implement [FFP]."

As many have suggested, Real Madrid’s widely reported pursuit of Tottenham’s Gareth Bale in recent weeks appears to fly in the face of any attempts to instil a culture of financial sustainability in European soccer. The La Liga giants were said to have been lining up a world-record UK£80 million-plus deal to acquire the Welshman but Paton questions the commercial sense in signing Bale for such an eye-watering sum.

“I don’t see how, if you pay at UK£80/90 million on a player, you can even hope to come close to breaking even over the next couple of years. I think it’s a touch foolhardy," he says.

“I don’t think any player, even commercially, is worth UK£80/90 million. I think it’s more of a crowd pleaser, and obviously in Spain, where you have the elections to be president of Barcelona and Real Madrid, it’s all about popularity. Business sense possibly goes out the window to a certain extent.”

blog comments powered by Disqus
Share |

Sports Business Directory

SIS LIVE G4S Globo TV Sports Informa Sports Group FIFA U-17 Women`s World Cup Azerbaijan 2012
Populous Graham Budd Auctions Ivy Sports Symposium ICSS Paddy Power plc