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When Manchester United were defeated by Olympiakos in last season’s UEFA Champions League, there was one picture that did the rounds among the social media, in which the English club’s executive vice-chairman Ed Woodward was seen to be taking a selfie at the stadium. As expected, there was a maelstrom of abuse from fans all over the world, ridiculing him for not buying needed players for reinforcing the team.
As it turns out, Woodward was far from taking a selfie. Instead, he was taking a picture of the scoreboard to remind himself that such a situation should never occur again.
The Glazers don’t spend
Of course, it was not just Woodward that took the abuse. United fans have taken to picking on the Glazer family, owners of the Manchester club, for failing to invest in the team. A particular bone of contention has been the fact that the Glazers made a leveraged buyout of the club, meaning taking debt out on the assets of the club for purchasing the necessary shares. And since then the club has been saddled with a huge debt, with the interest payments itself being 60 million a season.
For those looking from the outside, this may sound pretty simplistic. After all, the club didn’t seem to have missed a beat, continuing to win the league, and even had a Champions League trophy to boot. But what the fans could see was the severe lack of investment in the team. And it has proof of numbers too.
Ever since the Glazers takeover, former manager Sir Alex Ferguson moved away from his transfer window splurges to being more prudent. Barring the 30 million spent on Dimitar Berbatov, there were no big money signings, at a time when Chelsea, Real Madrid, Barcelona and all the other top clubs were signing all the superstars. And this is a manager who broke the British transfer record 4 times since he started his tenure around 20 years before the Glazers came to this side of the pond.
The Debt
As already stated, the interest payments that the club had to pay were 60 million every season, a significant chunk of money. And this does not even take into consideration the principal amount, which stood at 660 million after the takeover was completed.
A swift look at the spending during the Glazer years shows a glaring fact – the amount spent on servicing the debt was far more than what was actually invested in the squad. The numbers show that since 2005, there has been more than 680 million have been spent on servicing the debt, which includes interest payments, principal payments, bank charges, etc. Compared to this, there has been around 380 million spent on player acquisitions.
You can see why the fans are really angry with the Glazers.
But things are now looking a lot better for the club, and especially after the disaster that was last season, this transfer window has already been good for them. The debt has been reduced to around 350 million, and the interest payments have come down to around 20 million a season.
The Deals
And that’s why the Adidas deal makes so much sense for the club, and should do so for the fans too. In itself, it’s 75 million every year, more than enough to service the debt without having to put any pressure on the manager to not spend significant amounts of money. Add that with the Chevrolet deal that brings in 53 million every season, and you can understand how money is no longer going to be a problem for the club. And we haven’t even taken into consideration the gazillion different sponsorships that the club has for every small thing that can be marketed. Over the course of these deals, the debt will come down to negligible levels.
For all the debt that they may have had all these years, Manchester United reported a profit of around 145 million in the last financial year, and this year is going to be significantly higher than that. True, they may have dropped down a notch in the Deloitte wealthiest club rankings, and according to the same company, are set to lose around 50 million in revenue this season due to lack of Champions League games, but that shouldn’t overly concern the fans. They are competing with clubs like Barcelona and Real Madrid, who hardly have tax constraints.
But the signings of Anders Herrera, Luke Shaw and previous season’s Juan Mata show very encouraging signs that the club is finally investing in the squad. And this is what Ed Woodward said about the club’s ambition this season:
“We have to strive to win. We're not here to be an also-ran”.
Words to live by.
*All figures are in pounds
**All figures have been gleaned from mainstream media sources like BBC and Telegraph.
