A £10 million investment turned into a potential £100 million in just 10 months? Any venture capitalist would take those numbers PLATFORM Richard Gillis
It took Roy Keane eight months to move Sunderland from 22nd place in the old second division to the Premiership. In roughly the same period, football's financial landscape has shifted, some believe fundamentally.
The city has been energised by the success of the club. Last weekend at the Stadium of Light, a good few Wearsiders and their new legion of Irish fans were keen to spend Niall Quinn's money. Their shopping list included several of Keane's former team mates: "Giggsy and Scholes will both come next season, no doubt about it," said one fan in red and white.
Underlying the Niall and Roy Show are the Drumaville consortium - Quinn, Charlie Chawke, Paddy Kelly, Jack Tierney, John Hays and the rest are set for the ride of a lifetime, wined and dined by football's elite.
Promotion means they have turned their £10 million investment into a potential £100 million in 10 months. Any venture capitalist would take those numbers.
But the Sunderland story is set against a backdrop of fast-changing ownership of many Premier League clubs. JP Morgan, the bank that brokered the Glazer/Manchester United deal, says it expects half of the Premiership to be in US hands by the end of 2007.
So, what is the Drumaville consortium's end game? Is promotion the end of the story or the beginning? In July 2006 the Quinn-led group took on the club's £40 million debt, paying £10 million for complete control.
Deloitte's sport group have put the value of promotion to the Premiership at £60 million. This is a worst-case figure, assuming the club will be relegated after the first year. This is mainly made up of the club's cut of media rights income, along with enhanced sponsorship and match day receipts. If Sunderland go down after year one, they will receive parachute payments of £11 million for each of the following two years, money designed to lessen the impact of relegation and bridge the gap between the top league and the championship.
If they stay up beyond next season, they can add a further £35 million a year to the total.
To put a figure on how much Sunderland FC is now worth, look at the cost of recent acquisitions. Since Mohammed al-Fayed bought then lowly Fulham for €45 million in 1996, seven more Premiership clubs have been bought by foreign investors.
Roman Abramovich paid €195 million for Chelsea in 2003, Malcolm Glazer paid €1.05 billion for Manchester United, and Portsmouth (€100 million), Aston Villa (€110 million) and West Ham (€155 million) have all been snapped up. Most recently, Liverpool was bought by American duo George Gillett and Tom Hicks for £174 million. Manchester City is under offer, for £90 million.
How does Sunderland compare to these clubs? Conservative estimates put it at £100 million. It's often portrayed as that mythical figure of football lore, the sleeping giant. The Stadium of Light is a modern, purpose-built stadium holding 49,000 people every match day. The local catchment area is substantial and the club's brand carries considerable heritage.
There is a feeling in financial circles that the new investment coming in to the game, particularly from the US, will bring changes. One analyst told this column: "We are in completely new territory."
The last football investment boom was in the mid-1990s following the 1996 Sky TV deal, when a number of big clubs were publicly listed on the London stock market. This largely failed as initial enthusiasm waned along with the share prices. The experience left a legacy of mistrust between the banks and football clubs due to an inability of city bankers to influence how clubs managed themselves. Fund managers with a small equity stake found themselves ignored by club chairmen and directors. Weak leadership and a rampant Europe-wide talent market meant much of the television money went on player wages rather than to the bottom line.
This time around, the new owners have complete autonomy. For Hicks, Gillett, Glazer and Stan Kroenke who is pursuing Arsenal, football is not an emotional buy. They are a new breed of professional sports investors, who see the Premiership as an extension of their core US major league businesses. The progress of Sunderland next year will be fascinating to watch.
richard@gillisonline.co.uk
