Thursday, 23 January 2014

Leeds United - Darkest Before The Dawn?

Takeovers are not meant to be this complicated, yet almost 2 months have passed since the announcement that a share purchase agreement had been completed between Sport Capital (the consortium fronted by David Haigh and including Andrew Flowers) and GFH. The only stumbling block was Football League approval, something which is usually a formality, and Haigh expected completion prior to the transfer window.

Fast forward to late January and there remains no further progress. The Football League approval process has set new records and a crescendo of rumours detailing a shortage of funding for the Sport Capital consortium climaxed today with strong rumours that Haigh was talking to Massimo Cellino, chairman of Cagliari, about joining the consortium. Cellino's son was also later seen tweeting pictures of the Elland Road pitch. Cellino is a controversial character in Italy, someone not unafraid of confrontation, who told all his players that they could leave in December due to the lack of a stadium for the club (Cagliari play their games in Trieste which is over 1,000km away due to a dispute with the council). Cellini was also charged with embezzlement and false representation as part of the rebuilding of Cagliari's stadium early last year.  

The prospect of individuals such as this being involved in the running of our club in the future raises numerous questions, namely what is best for Leeds United in a financial context and more broadly, who is best for Leeds United?

A decade of Batesonomics has left the club on precarious ground. Much like an oil tanker heading towards an iceberg, GFH's work over the past year has started the work of turning the boat away from a collision but much remains still to do, namely considered investment in the playing squad and a requirement to support the ongoing cashflow of the club over the short term. It has become increasingly apparent over the past year that GFH lack the financial muscle to help Leeds get to that next level and therefore further investment is required. In addition, in the new world of Financial Fair Play (FFP), the club which maximises its revenue (ticket sales, merchandise, hospitality etc) will be the one which is able to prosper the most. Leeds United stands out as a sleeping giant in this context, and it will be the ability of a future management team to maximise this which will provide us with the sustainable revenue growth (and ultimately profitability) which will enable Leeds United to deliver the playing squad which will lead to the Premier League.

To my mind, the question is whether Sport Capital can deliver this. The events of the past few weeks, namely the increased publicity, the missing of deadlines and the last minute courting of individuals who quite frankly remind us of a previous owner do not suggest the stability and professionalism required to act as stewards of our club.

Football is unlike any other commercial business. Whilst an individual or company may have financial ownership of a football club, it is the fans who determine its success. In this respect, the owners are more like the board of directors of a publicly listed company, having to remain responsive to the whims and desires of their shareholders (the fans). The Bates approach ignored this, and the consequences were falling attendances, declines in other sources of commercial revenue and ultimately bequeathing an extremely difficult financial legacy to its new owners.

The successful clubs are those which are able to engage and embody the spirit of their fan base. Much of the work done by GFH over the past year has been focussed on this and the change in sentiment has been profound. Where this encounters difficulties are times like these where the goals of an investment bank (and its fiduciary duty to its client to secure the best possible financial return) conflicts with the requirements of a fan base seeking a competent and suitable future owner of the club. The tragedy of Leeds United is that the long term financial mismanagement limits the number of people who are willing to take on a significant degree of risk and invest.

The actions of Cellino throughout his ownership of Cagliari suggests that he is someone who doesn't understand this, and I have significant doubts over the financial backing and ultimately the commercial expertise for the Sport Capital consortium to take us beyond where GFH have got us to so far.

Leeds United require someone with the management expertise to re-awaken the sleeping giant, prepare the club for the FFP era, and perhaps more importantly, embrace and propagate the proud tradition of Leeds United. The rival consortium consisting of Mike Farnan, Gary Verity, Frank Devoy, ex-Leeds United captain Lucas Radebe and allegedly Adam Pearson (ex-commercial director of Leeds United) to my mind offers a compelling mix of individuals who understand the history and ethos of our club, yet also offer the expertise to take on Leeds to the next level. Much remains to be understood about this consortium, but it seemingly makes no sense to maintain exclusivity with a party who are desperately grappling to form a consortium 2 months after having agreed a purchase contract.

GFH need to consider what their legacy will be, persisting with a consortium who could well take us backwards or opening up the prospect of selling to a consortium who may offer a greater prospect of restoring this club.

Time will tell whether we will head back towards the Bates-esque dark ages, or whether in fact it is darkest before the dawn.

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