For many Liverpool fans the lack of transfer spend when compared to their rivals has been the major bone of contention with owners Fenway Sports Group and the cause of considerable ire.
The struggles that have existed this season have only served to see that ire grow and FSG, who are mulling their long-term options around whether to sell Liverpool or whether to welcome on board new investors, have been feeling the heat.
The FSG mantra has always been one of sustainable success, where the revenues and the moving on of players – as well as attention to detail on the recruitment side that led the field for some time – are key components in what 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.
When Boehly and Clearlake arrived on the scene in May having won the fierce bidding process following the forced sale of the club by the sanctioned Roman Abramovich, there was the suggestion that the free spending of the Russian’s era at Stamford Bridge, one that saw the club end up with some £1bn worth of 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 Play rules by UEFA.
Boehly, speaking at a conference last year, said: “Financial fair play is starting to get some teeth and that will limit the ability to acquire players at any price.
“UEFA takes it seriously and will continue to take it seriously. [More teeth] means financial penalties and disqualification from sporting competitions.”
The arrival of Mudryk, which came just two weeks on from a deal worth close to £100m for Benfica’s World Cup winner Enzo Fernandez collapsing, saw Chelsea continue to flex their muscles, something that raised eyebrows among the wider football community, especially given the impending arrival of Christopher Nkunku next summer and the continued pursuit of Brighton & Hove Albion midfielder Moises Caicedo, a long-rumoured target for Liverpool.
There has a notable pattern to the majority of the deals struck so far.
There is a window of opportunity for Chelsea to spend. The current level of investment in the playing squad is one that simply cannot be sustained under FFP regulations moving forward, nor is it something that Chelsea’s owners, who are spending a good chunk of other people’s money with this investment, are able to continue to do relentlessly.
It is a bold play, one that will impact Chelsea’s balance sheet for a large portion of the next decade. The emphasis has been placed on buying highly-rated young players and placing them on long contracts, keeping them tied to the club and protecting value while also reducing the amortisation figures on their yearly financials.
While the payment structure on some of the deals may be done in one, two or three instalments, likely inside three years, the way the fees are accounted for at the end of the financial year comes down to the transfer fee divided by the number of years on the contract. The amortised costs relate to guaranteed transfer fees only and do not account for add-ons.
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.
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.
The sales of the likes of Emerson, Billy Gilmour and Werner can all be accounted for in the accounts, with around £45m brought in through those sales that will show on the balance sheet for the 2022/23 accounts.
Boehly and Clearlake chiefs Behdad Eghbali and Jose E. Feliciano are playing the long game with Chelsea and backing their new hires behind the scenes, new man in the dugout and recruitment strategy to give them the edge when competing over the next five to 10 years. It is a bold move but one that comes with considerable risk if the signings that they have made are unable to deliver on their hefty price tags yet are tied to long contracts that will give them little need to look elsewhere if the money isn’t right.
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.
Chelsea (£162m) had the highest amortisation costs in the Premier League last season, ahead of Manchester City (£146m), Manchester United (£120m), Arsenal (£117m) and Liverpool (£108m), according to figures presented by football finance expert Swiss Ramble back in August. Liverpool’s figures have been added to since with the arrival of the likes of Darwin Nunez and Cody Gakpo. Some figures which had accounted towards amortisation will drop off, notably the final £10.6m that was costed for Naby Keita’s £53m deal back in 2018.
With record revenues expected when the 2021/22 accounts are published in a few weeks time they have the room to spend, the question will be to what degree they will be willing to do so.
