Foreign Investment in Premiership Football Clubs has seen staggering amounts of money poured into their coffers, hence generating much controversy because of the levels of debt that these clubs have incurred and some foreign owners have acquired these clubs through LBO known as a Leveraged Buyout, which means the acquisition of a company (club) financed with significant debt and later repaid with the company's (club's) profits. This method of financing was used in the U.S.A. by 'Corporate Raiders' for example Carl Icahn for taking over target companies, I personally call it 'JUNK BOND FINANCING'.
A potential candidate for targetting must meet the following criteria and have certain qualities:
. A clean balance sheet with little debt
. Steady and predictable cash flow
. A strong, defensible market position
. Divestible assets
. Limited working capital requirements
. Minimal future capital requirements
. Heavy asset base
Usually, the acquirer in a leveraged buyout takes the target company private through the transaction. That means it will buyout the entire stake held by the public and delist from the listed stock exchange, if the target is a public company. This can give the acquirer the freedom to execute major changes in the acquired business. Many good companies or clubs can and have been destroyed due to the over-leverage created by the LBO transactions. Another option used is the recapitalization of the acquired company in a manner that the buyers can extract money from it.
It is without a doubt that the Premier League in England has been and is a TARGET for CORPORATE RAIDERS and the like, due to it's popularity these INVESTORS wish to also share in it's success but that success could also leave a bitter taste of debt saddled against the assets of the club which went initially from a "clean balance sheet with little debt" to vast amounts of commercial debt which are placed into HOLDING COMPANIES acting principally as a burden rather than to support investment or spending.
I find it rather timely that UEFA will implement their 'Financial Fair Play' regulations and also the current select committee hearings taking place in the UK on FOOTBALL GOVERNANCE.
A potential candidate for targetting must meet the following criteria and have certain qualities:
. A clean balance sheet with little debt
. Steady and predictable cash flow
. A strong, defensible market position
. Divestible assets
. Limited working capital requirements
. Minimal future capital requirements
. Heavy asset base
Usually, the acquirer in a leveraged buyout takes the target company private through the transaction. That means it will buyout the entire stake held by the public and delist from the listed stock exchange, if the target is a public company. This can give the acquirer the freedom to execute major changes in the acquired business. Many good companies or clubs can and have been destroyed due to the over-leverage created by the LBO transactions. Another option used is the recapitalization of the acquired company in a manner that the buyers can extract money from it.
It is without a doubt that the Premier League in England has been and is a TARGET for CORPORATE RAIDERS and the like, due to it's popularity these INVESTORS wish to also share in it's success but that success could also leave a bitter taste of debt saddled against the assets of the club which went initially from a "clean balance sheet with little debt" to vast amounts of commercial debt which are placed into HOLDING COMPANIES acting principally as a burden rather than to support investment or spending.
I find it rather timely that UEFA will implement their 'Financial Fair Play' regulations and also the current select committee hearings taking place in the UK on FOOTBALL GOVERNANCE.
No comments:
Post a Comment