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Chelsea have spent £1bn – but how much of that have they seen on the pitch?

https://theathletic.com/5404135/2024/04/11/Chelsea-billion-boehly-clearlake-players/

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The money colours everything.

Whenever and wherever Chelsea fail on the pitch these days, a reference (usually gleeful or taunting in nature) to the £1billion ($1.27bn) that owners Todd Boehly and Clearlake Capital committed to transfer fees for player signings in their first three transfer windows after acquiring the club in June 2022 is never far behind.

That gargantuan number sets the parameters for both the expectations and the schadenfreude, most memorably encapsulated by Sky Sports pundit Gary Neville branding Chelsea “blue billion-pound bottle jobs” in the closing minutes of their Carabao Cup final defeat against Liverpool.

For many people, no further analysis of the £1billion is necessary.

It offers an incomplete picture of Chelsea’s overall transfer dealings (more than £300million has also been recouped through player sales in the same period) but, as numeric shorthand, it is accurate enough. The Athletic estimates that Boehly and Clearlake committed £977.5million to transfer and loan fees in their first three windows, with add-ons likely to take the eventual spend into 10 figures.

There is no debate that the short-term returns on that vast investment have been shockingly bad, with Chelsea forced to confront the very real prospect of a second consecutive Premier League season spent almost entirely in mid-table, followed by a second consecutive campaign without European football of any kind at Stamford Bridge in 2024-25.

But beyond the team’s deeply inconsistent performances and often underwhelming results there is a question that yields some equally startling answers: how much of the £1billion Boehly-Clearlake transfer spend have Chelsea even seen on the pitch in the last two years?

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With the notable exception of Kendry Paez — who will complete his £17.3million move to Stamford Bridge from Independiente Del Valle when he turns 18 in May 2025 — The Athletic has looked at all of Boehly-Clearlake’s 29 other signings to examine what percentage of the available Chelsea first-team minutes each has played since they joined the club.

Based on the results, the players were then divided into four brackets: those who have played fewer than 25 per cent of the available Chelsea minutes since signing; those who have played between 25 and 50 per cent; those who have played between 50 and 75 per cent; and those who have played 75 per cent or more of the available first-team minutes as Chelsea players.

The breakdown of these brackets — and the cumulative transfer fees commanded by the players within them — is illustrated by the pie chart below.

As you can see, a whopping £303.9million (or 31 per cent of the total Boehly-Clearlake transfer spend in the first three windows of their ownership) has barely been seen on the pitch for Chelsea at all:

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This lowest bracket includes developmental signings like Gabriel Slonina, Cesare Casadei, David Datro Fofana, Andrey Santos, Angelo Gabriel and Deivid Washington, several of whom have spent all or the majority of their young Chelsea careers out on loan. Boehly and Clearlake priced in their lack of short-term contribution in the belief that they can one day blossom into stars, or at least grow into assets who can be sold for profit.

It also includes Wesley Fofana (20.3%), Christopher Nkunku (11.4%) and Romeo Lavia (0.9%), £176million in purchases who were expected to play big first-team roles but have instead been derailed by injuries.

Fofana has not featured at all this season, Lavia will finish the campaign with 33 minutes to his name and Nkunku has played almost 300 fewer minutes in 2023-24 than Armando Broja, who joined Fulham on loan at the start of February.

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The two middle brackets indicate signings who have at least been supporting contributors in Chelsea’s squad. At the lower end are Marc Cucurella (38.6%), Benoit Badiashile (32.9%), Mykhailo Mudryk (39.3%) and Noni Madueke (27.3%).

At the higher end, you find Raheem Sterling (62.6%), Nicolas Jackson (72.3%) and Malo Gusto (58.6% this season, after spending 2022-23 back on loan at Lyon) as well as goalkeepers Robert Sanchez (50.2%) and Djordje Petrovic (56.2%), who have both been given sustained runs in the No 1 spot this season.

Only four players have been on the pitch for more than 75 per cent of Chelsea’s available first-team minutes since arriving: Enzo Fernandez (83.9%), Moises Caicedo (85.8%), Axel Disasi (95.4%) and Cole Palmer (86.3%), who have all been pillars of head coach Mauricio Pochettino’s team selection.

This is not a direct indicator of a successful signing. Fernandez and Caicedo in particular appear to have struggled with such a high load. But it does underline that they are regarded as key cogs in the team being constructed at Stamford Bridge.

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Fernandez and Caicedo’s status as two of the four most expensive Premier League signings ever has been a gift and a curse. On the one hand, it has saddled them with arguably impossible expectations at a time when both are still developing their skills. On the other, it virtually guarantees them opportunities to play through their mistakes and stretches of bad form, since Chelsea have so much invested in their success.

Below them, the other expensive acquisitions of the Boehly-Clearlake era have had wildly diverging fortunes.

Mudryk and Cucurella are not as prominent in this Chelsea team as their price tags suggest they should be while Sterling, the marquee signing of the summer of 2022, has not played enough minutes to be viewed as integral despite missing no significant time through injury over the past two seasons:

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The fact that Fernandez and Palmer, two of the most important players to the Boehly-Clearlake project, were deadline-day signings only provides further ammunition to those who believe their unprecedented recruitment drive was haphazard and lacking in coherent strategy.

Chelsea were also only in position to announce the arrival of Caicedo on August 14, a day after the opening game of the 2023-24 season, despite pursuing him as their top midfield target for much of the summer and ultimately going well above their own valuation in order to get their man.

But the bigger picture offers tentative signs of improvement.

The summer window of 2023 was the first to be formally led by co-sporting directors Laurence Stewart and Paul Winstanley, and the players who arrived at Stamford Bridge in that period have been significantly more prominent than those signed when Boehly first assumed the role on an interim basis:

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Breaking down the Boehly-Clearlake transfer spend clarifies details and entrenches viewpoints.

Those who believe Chelsea’s owners have contrived to spend £1billion wildly badly will point to almost a third of that figure barely being seen on the pitch for the first team, and fewer than a handful of the signings establishing themselves as stalwarts under Pochettino.

Others will look at the same figures and argue it shows a heavily future-focused transfer strategy, undermined in the short term by bad injury luck, but retaining huge long-term upside.

It may be years before the argument is definitively settled, and Chelsea’s fortunes on the pitch in the coming seasons will be decisive. But from now until then, expect the word “billion” to remain the central word in the discourse around this Boehly-Clearlake investment project, because the money colours everything.

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Posted the highest operating loss of any club in the PL with £249m, but apparently managed to not fall foul of the PL profit & sustainability rules by selling two hotels to BlueCo (themselves?)

https://www.dailymail.co.uk/sport/football/article-13304941/Chelsea-hotels-Premier-League-Profit-Sustainability-Rules.html

 

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21 hours ago, Vesper said:

when a sense of control in midfield is so often elusive.

There has been talk of both Arsenal and Liverpool having “dodged a bullet” when Chelsea blew them out of the water in the pursuit of Mudryk and Caicedo respectively. But that is nonsense. It is easy to imagine a scenario in which Mudryk would have made the same kind of impact at Arsenal as Leandro Trossard has. Likewise, it is easy to imagine Caicedo would have thrived in Liverpool’s midfield, resuming his Brighton partnership with Alexis Mac Allister.

At the same time, it is notable how many recent players who have left Chelsea over the past few years are thriving elsewhere: Jorginho and Kai Havertz at Arsenal, Marc Guehi at Crystal Palace, Antonio Rudiger at Real Madrid, Fikayo Tomori, Ruben Loftus-Cheek and Christian Pulisic at AC Milan. Mateo Kovacic hasn’t quite had the same impact at Manchester City and Mason Mount has experienced a wretched time with injuries at Manchester United, but the overall picture invites further questions about Chelsea’s strategy both before and particularly since the Boehly-Clearlake takeover.

A bit all over the place, but still a nice read. I Agree about Caicedo potentially doing better at Liverpool (still unsure about his passing ability). I disagree about Mudryk for the earlier point made in the article, which was conveniently forgotten when making the point above: Trossard is competitive, while Mudryk isn't.
Sometimes it's just the mentality of the players, and not about tactics or nice speeches in the locker room.

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On 13/04/2024 at 04:22, Vesper said:

Chelsea have spent £1bn – but how much of that have they seen on the pitch?

 

Short answer: quality wise only seen £50m (Cole Palmer). Rest have been embarrassing, be it injuries, performance level, genuine ability, whatever. Shocking.

Edited by OneMoSalah
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monster data dump!

 

Chelsea Finances 2022/23

We Live So Fast

 

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Chelsea’s 2022/23 accounts covered a disappointing season, as they slipped from third place to 12th in the Premier League, thus failing to qualify for Europe for the first time since 2015/16.

The Blues also crashed out of both the FA Cup and EFL Cup in the third round, though they did reach the Champions League quarter-finals before being eliminated by Real Madrid.

The poor results on the pitch led to the dismissal of head coach Thomas Tuchel in September 2022, when he was replaced by Graham Potter. However, the Englishman was shown the door after only seven months, succeeded by his former assistant Bruno Saltor for one game, before the caretaker made way for the return of the prodigal son in the shape of Frank Lampard.

Ownership

In May 2022 a consortium led by American businessman Todd Boehly and Clearlake Capital acquired Chelsea for £2.5 bln (plus £1.75 bln infrastructure commitment), following Roman Abramovich’s decision to sell the club as a result of Russia’s invasion of Ukraine.

Accordingly, 2022/23 was the first full season completed under the new ownership.

Profit/(Loss) 2022/23

Chelsea’s pre-tax loss reduced from £121m to £90m, mainly thanks to £107m once-off accounting entries, including the sale of hotel buildings to another group company for £77m and £31m other operating income.

Revenue rose by £31m (6%) from £481m to a club record £512m, breaking through the half billion pound barrier for the first time, though this was wiped out by a £37m (5%) increase in operating expenses to £761m.

The loss would have been even higher without the benefit of £63m profit from player sales, though this was only around half of the previous season’s £123m. However, net interest payable was up from £2m to £12m.

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The higher revenue was largely driven by commercial increasing £33m (19%) from £177m to £210m, while match day was also up £7m (11%) from £69m to £76m. Both of these established new club records. This was partly due to Chelsea being able to operate without the government restrictions placed on the club in the prior year.

However, broadcasting fell £9m (4%) from £235m to £226m, mainly because of the worse performance in the Premier League.

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Investment in the squad led to significant increases in both wages, up £64m (19%) from £340m to £404m, and player amortisation, up £43m (27%) from £160m to £203m. In addition, other expenses increased £25m (22%) to £139m.

However, there was no repeat of a couple of substantial once-off costs in the previous season: £77m player impairment and £18m legal fees. In other words, the underlying year-on-year increase was even higher than reported at £132m (21%).

Chelsea’s £90m pre-tax loss is not great, but two clubs in the Premier League did even worse last season, namely Aston Villa £120m and Tottenham £95m. Many other clubs also posted large losses, including Leicester City £90m, Everton £89m and Southampton £87m.

On the other hand, a few clubs did manage to generate a profit, most notably Brighton £133m and Manchester City £80m. Bournemouth also reported a £44m profit, though this would have been a £27m loss without the benefit of a £71m owner loan write-off.

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Player Sales 2022/23

 

Chelsea made £63m profit from player sales, which by most standards is pretty good, but is only around half of the previous season’s £123m. In the summer of 2022 they sold Timo Werner to RB Leipzig, Emerson to West Ham and Billy Gilmour to Brighton, followed by Jorginho to Arsenal in the January transfer window.

A number of big deals were also agreed just before the end of June 2023, namely Kai Havertz to Arsenal, Mateo Kovacic to Manchester City, Kalidou Koulibaly to Al-Hilal and Ruben Loftus-Cheek to Milan.

Given that all of these sales were included in the 2022/23 accounts, the £63m profit is perhaps lower than might have been anticipated by some.

Nevertheless, this was still one of the largest gains in the Premier League last season, though only around half of Manchester City £122m and Brighton £121m.

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Profit/(Loss) Trend

Chelsea have now lost money in four of the last five years, adding up to a hefty £434m, including three losses over £100m in this period. The good news is that losses have reduced two years in a row, albeit from a chunky £156m in 2020/21.

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In fairness, like all clubs Chelsea were adversely impacted by COVID. I estimate their revenue loss as £128m, split between £32m in 2019/20 and £96m in 2020/21. Most of this was match day £76m plus £36m commercial and £16m broadcasting.

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In addition, Chelsea’s results were impacted by the sanctions placed on Abramovich from 10th March to 30th May 2022 (when the club’s sale was completed). During this period, the club was restricted in “its ability to sell match day and season tickets, sell merchandise, accept event bookings, as well as sign contracts with players and commercial sponsorship partners.”

That said, Chelsea are no strangers to posting large losses, being responsible for two of the four highest losses ever reported in the Premier League (and five of the top 20). Last season’s £90m deficit just sneaks into this list.

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In fact, over the last five years, Chelsea’s £434m loss is the second worst in the top flight, only “beaten” by Everton’s £506m in this period.

To be fair, only four clubs managed to make money, namely Brentford, Brighton, Manchester City and Wolves, but Chelsea’s loss was much higher than every other club – with the unfortunate exception of Everton.

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Exceptional Items

In recent years Chelsea have often been adversely impacted by exceptional charges, including management changes, legal matters and early termination of the shirt sponsorship.

However, it was very different this year, as the bottom line benefited from £107m of exceptional credits, especially a £77m gain from selling hotels on the Stamford Bridge site to another group company, Blueco 22 Properties Ltd.

In addition, other operating income included £31m, made up of £17m litigation costs recharged to the parent company, £12.5m for an unexplained “settlement fee” and £1m research and development credit.

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Interestingly, the club opted not to classify an estimated £46m for last season’s management changes as exceptional items, but instead include these in wages. These covered:

  • Tuchel pay-off £10m

  • Compensation paid to Brighton for Potter and his support team £23m

  • Potter pay-off £13m

The only other Premier League club that reported anything like Chelsea’s £77m exceptional items last season was Bournemouth, who booked a £71m credit for the write-off of a loan from a former owner.

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Chelsea’s £31m was also the highest other operating income in the top flight with the only other club in double digits being Brighton with £25m. That was also very largely driven by Chelsea, as it was almost entirely made up of the compensation for poaching Potter.

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Player Sales Trend

Chelsea’s business model has been far more reliant on player sales than any other major English club, so they generated more than half a billion pounds in the last six years, including good money from Academy graduates, who represent pure profit in the books. This included no fewer than three years when they generated more than £100m.

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To place this into perspective, Chelsea’s £530m profit from player sales in this period was around £150m more than the next highest club in the Premier League, namely Manchester City £376m.

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However, the accounts state that Chelsea have only made £48m to date this season from the disposal of the registrations of 10 players. This has presumably come from Mason Mount to Manchester United, Christian Pulisic to Milan, Edouard Mendy to Al-Hilal, Ethan Ampadu to Leeds United and Callum Hudson-Odoi to Nottingham Forest. The figure probably excludes Lewis Hall’s loan to Newcastle United with an option to buy.

This is again probably less profit than fans might expect, once again highlighting that transfer fees in the media should be treated with a degree of caution. A few players left on free transfers, such as Aubameyang, Kanté, Azpilicueta and Bakayako, thus producing no profit from the sales, but helping to reduce the wage bill.

Of course, there is still time for Chelsea to boost their player sales, but these would have to be registered by 30th June for them to be included in the 2023/24 accounts.

Whether the Blues can realise decent fees is debatable, as other clubs will be well aware of the club’s PSR issues, so will use this to their advantage and look to pick up players for low fees. It might also be difficult to match the wages paid by a leading club, so players might be unwilling to leave.

 

Operating Profit/(Loss)

If we exclude the significant exceptional items, player sales and interest payable, Chelsea’s operating loss further widened from £224m to £249m, which means that this has worsened three years in succession.

The club’s business model has essentially been to offset large operating losses with profits from player sales, so this is not overly surprising, but there’s not much good to say about an operating loss of a quarter of a billion pounds.

This means that they have lost nearly £900m from day-to-day business in the last five years, which takes some doing.

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In fairness, very few clubs make an operating profit, but Chelsea’s £249m loss was comfortably the worst in the Premier League last season, nearly £100m more than the next highest, Leicester City £151m.

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In fact, Chelsea’s £249m operating loss last season is the highest ever recorded in England’s top flight, though they have actually produced three of the top four. The only club close to this level of performance has been Manchester City.

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Revenue

Chelsea’s £512m revenue is the club’s highest ever, £66m (15%) more than the £447m pre-pandemic peak in 2019. The growth since then has been led by commercial £30m and broadcasting £26m, though match day is also up £10m.

Both commercial and match day set new club records last season, but broadcasting remains Chelsea’s most important revenue stream, accounting for 44% of total revenue. Commercial is just behind with 41%, while match day is only 15%.

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Chelsea’s £66m revenue growth in the past four years compares favourably with most of the Big Six, only significantly outpaced by Manchester City’s £178m.

One point worth noting is the difference in fortunes between Chelsea and Tottenham in the course of the last decade: the Blues were £139m ahead of their North London rivals in 2014, but were £37m behind last season, i.e. a massive swing of £176m.

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As a result, Chelsea’s £512m revenue is now the fifth highest in the Premier League, having been overtaken by Spurs. Furthermore there is a sizeable gap to the top three clubs: Manchester City lead the way with £713m, followed by Manchester United £648m and Liverpool £594m.

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Chelsea dropped one place to 9th place in the Deloitte Money League, which ranks clubs globally by revenue. That’s not too shabby, though they were as high as 5th in 2011/12.

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Broadcasting Revenue

Chelsea’s broadcasting revenue fell £9m (4%) from £235m to £226m, mainly because of the worse performance in the Premier League, though the previous season also benefited from winning both the UEFA Super Cup and the FIFA Club World Cup.

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Despite the reduction, Chelsea’s £226m broadcasting income remained the third highest in England, only behind treble winners Manchester City £299m and Liverpool £242m. The impact of European qualification is evident.

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Chelsea received £138m from Premier League central TV distribution, which was £8m lower than prior year, as they finished nine places lower (12th vs. 3rd), which meant a reduced merit payment. The decrease was partially offset by the favourable impact of the new 3-year cycle.

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Europe TV

Chelsea earned €96m for reaching the Champions League quarter-finals, which was €4m higher than the €92m they received the previous season for getting to the same stage.

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Success on the pitch is most visible financially with TV money, so Manchester City earned €135m for winning the Champions League, i.e. €39m more than Chelsea.

The difference in earnings between Europe’s leading tournament and the other competitions is stark. As an example, England’s Champions League representatives averaged €95m, which was over three times as much as €29m in the Europa League, and four times the €22m in the Europa Conference.

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Chelsea’s record in Europe was very impressive in the Abramovich era, as they won both the Champions League and Europa League twice. Their victory against Manchester City in the 2020/21 Champions League final was worth €120m on its own.

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In fact, Chelsea have earned half a billion Euros from Europe in the last six years, though this was still a fair way behind Manchester City €615m and Liverpool €564m. On the other hand, this was a lot higher than Manchester United €355m, Tottenham €322m and especially Arsenal €150m.

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Chelsea’s failure to qualify for Europe this season will obviously hurt them, leading to an immediate decrease of €96m TV money plus lower gate receipts and contractual reductions in sponsorships.

 

Commercial Revenue

Chelsea’s commercial revenue rose £33m (19%) from £177m to £210m, which was a new high for the club, driven by strong sales of non-match day activities including stadium tours, as governments restrictions were lifted, plus a net increase in sponsorships.

It’s possible that this category also includes player loans income, e.g. Lukaku to Inter, Batshuayi to Fenerbahce and Sarr to Monaco.

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However, Chelsea’s £31m commercial revenue growth in the last four years is one of the smallest in the Big Six, only (slightly) ahead of Manchester United. Others had much higher increases, e.g. Manchester City £114m, Tottenham £93m, Liverpool £84m and Arsenal £58m.

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As a result, Chelsea’s £210m commercial revenue has been overtaken by Tottenham £228m, while they are miles behind the top three clubs: Manchester City £341m, Manchester United £303m and Liverpool £273m.

This will surely be an area of focus for Chelsea’s new owners, who will hope to bring US expertise to the commercial operations.

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Chelsea have a long-term kit deal with Nike £60m (£900m over 15 years), but the Three UK £40m shirt sponsorship expired in June 2023, belatedly replaced by Infinite Athlete. In addition, Whale Fin did not renew their £20m sleeve sponsorship at the end of last season, succeeded by BingX, but only from January 2024.

Chelsea will be seeking more lucrative deals, e.g. there was talk of a £60m shirt sponsorship with Riyadh Air, but that might prove difficult without more success on the pitch.

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Match Day Revenue

Chelsea’s match day income rose £7m (11%) from £69m to a club record £76m, just above the previous £74m peak in 2017/18. This was helped by the removal of government restrictions and an increase in attendances.

In 2020/21 all games were played behind closed doors (except three with severely restricted capacity).

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Chelsea’s match day income has only increased by £6m over the last decade, while other clubs have invested in stadium development, leading to significant growth, especially Tottenham (up £77m), Liverpool (up £35m) and Manchester City (up £32m).

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This is Chelsea’s Achilles heel in terms of revenue, as their £76m is far below some of their rivals, especially Manchester United, Tottenham and Arsenal, who all generate well over £100m.

However, the club does benefit from steep London prices, as their cheapest season tickets are the third highest in the Premier League, only less than Arsenal and Tottenham.

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Chelsea’s average attendance increased from 37,698 to 40,002, but this was only the ninth highest in England (and fourth best in London). Seven clubs regularly attract crowds above 50,000, while Manchester United’s 73,671 is over 30,000 more than the Blues.

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Chelsea have frozen ticket prices since 2011/12 – with the exception of the more exclusive areas of the upgraded West Stand. The club said that this meant that prices had fallen in real terms by around a third.

However, there has been talk of a price increase for 2024/25, which the Supporters Trust said “could lead to irreversible toxicity”.

 

Stadium

The relatively low match day income helps explain why the club is considering a new stadium. Plans had been well advanced under Abramovich before the development was put on hold after his political difficulties started.

There is no doubt that stadium development at Stamford Bridge is extremely challenging, because of its location, close to a railway line, the Tube, a cemetery and an underground river.

The cost has been estimated as between £1.5 bln and £2 bln, though this should be covered by the infrastructure expenditure that the new owners committed when they acquired the club.

Chelsea fans should probably not hold their breath, however, as the club is unlikely to “break ground” in any development for a while.

 

Wages

Chelsea’s wage bill shot up £64m (19%) from £340m to £404m, easily a new high for the club, after the net increase arising from the numerous player purchases and sales (plus contract extensions).

That said, it was inflated by the inclusion of last season’s management changes, which the club has previously classified as exceptional items. I estimate this cost them £46m, covering pay-offs to Tuchel and Potter plus compensation paid to Brighton for Potter and his support team.

If this were excluded, wages would still have increased year-on-year by £18m (5%) from £340m to £358m.

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Based on the reported figure, Chelsea’s wages have increased by £118m (41%) in the last four years, which is the highest growth of the Big Six, even more than Manchester City’s £108m.

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Last season Chelsea’s £404m wage bill was only below Manchester City’s £423m, but their rivals’ figure included hefty bonuses for winning the treble. This was higher than Liverpool £373m, Manchester United £331m and especially Tottenham £251m and Arsenal £235m.

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In fact, Chelsea’s £404m wages are the second highest ever in the Premier League, while they have had three of the top ten – all with wage bills in the last three seasons. They are only the second English club to break through the £400m barrier.

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Chelsea’s wages to turnover ratio increased from 71% to 79%, the club’s highest since 2010. However, if the once-off management changes are excluded, this would fall to 70%, which is more in line with the usual level.

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Either way, this is by far the worst of the Big Six, with Liverpool being the next highest at 63%. Others have much better ratios, such as Arsenal 51%, Manchester United 51% and especially Tottenham 46%.

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Clearlake’s co-founder José Feliciano told a private equity conference last year that the club needed to cut costs, “I think what we are trying to do is reduce the salary and the operational expenses of the business by over $100m per year.”

Clearly, that has yet to come to pass, though wages should have come down this season, as there would have been lower bonus payments due to no European football, while a few expensive players have been offloaded.

 

Directors’ Remuneration

Chelsea’s highest paid director only received £286k, which was one of the lowest in the Premier League, miles below the likes of Daniel Levy at Tottenham £6.6m, Denise Barrett-Baxendale at Everton £3.3m, Paul Barber at Brighton £2.9m and Richard Arnold £2.6m at Manchester United.

However, it’s possible that payments were made by other group companies, as was the case the previous season when Blueco 22 Limited paid £50m to former directors for services relating to the sale of the club (£35m to Marina Granovskaia, who acted as Abramovich’s lieutenant for many years, and £15m to others, including former chairman Bruce Buck).

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Player Amortisation

Following the significant investment in the squad, Chelsea’s player amortisation, the annual charge to expense transfer fees over the length of a player’s contract, inevitably shot up £43m (27%) from £160m to £203m, which easily broke the previous club record of £168m four years ago.

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As a result, Chelsea’s £203m player amortisation is by far the highest in the Premier League, a long way above Manchester United £170m and Manchester City £145m, reflecting the club’s enormous transfer expenditure.

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In fact, Chelsea’s £203m player amortisation last season is the highest ever reported in the Premier League. They actually have four of the five highest, which is pretty clear evidence of their spendthrift transfer policy.

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Of course, player amortisation will further increase in 2023/24, following another huge outlay this season, exacerbated by the full year impact of purchases in the January 2023 transfer window.

Incredibly, Chelsea’s player amortisation would have been even higher if they had not signed many players on incredibly long contracts. For example, Mykhailo Mudryk is on an 8½-year deal, while central defenders Benoit Badiashile and Wesley Fofana signed for 7½ years and 7 years respectively.

This has the benefit of spreading the cost of the transfer over more years, thereby reducing the annual expense booked to the profit and loss account and considered for the PSR calculation.

If the player works out, then this will prove to be an astute piece of business. However, it also carries significant risk, as Chelsea could be saddled with an under-performing player on high wages, who might prove difficult to move on.

Since then, the Premier League has agreed a new rule to limit the amortisation period to five years for the purpose of the PSR calculation, in line with UEFA. However, this change was not backdated to include transfers that had already been signed, so Chelsea will still benefit from their fancy financial footwork.

 

Player Impairment

In addition, Chelsea booked £77m player impairment in the prior year, which had the benefit of reducing amortisation going forward (as well as being a pretty good indicator of poor recruitment).

To highlight just how large this charge really was, it is by far the highest player impairment ever booked in England, way ahead of Stoke City’s £43m in 2019/20.

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Wages & Player Amortisation

Many clubs look at wages and player amortisation combined to give the annual cost of squad investment. Indeed, this is likely to be the basis of the Premier League’s new squad cost control ratio. Per this metric, Chelsea’s annual squad cost increased by over £100m (21%) last season from £501m to £607m.

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This is the highest in the Premier League, even ahead of Manchester City’s £568m, but without anything like the same level of success.

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Other Expenses

Chelsea’s other expenses rose £24m (22%) from £115m to £139m, yet another club high for a cost category, though still a fair bit lower than the two Manchester clubs and Tottenham.

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Transfers

Chelsea splashed out an incredible £745m on player purchases in 2022/23, which was the highest by some distance in the Premier League, more than the next three clubs combined (Arsenal £251m, Manchester United £247m and Manchester City £221m).

In the summer of 2022, they brought in Wesley Fofana from Leicester City, Marc Cucurella from Brighton, Raheem Sterling from Manchester City, Kalidou Koulibaly from Napoli, Carney Chukwuemeka from Aston Villa and Pierre-Emerick Aubameyang from Barcelona.

The spending did not stop there with more arrivals in the January 2023 window, including Enzo Fernandez from Benfica, Mykhaylo Mudryk from Shakhtar Donetsk, Benoit Badiashile from Monaco, Noni Madueke from PSV Eindhoven, Malo Gusto from Lyon, Andrey Santos from Vasco da Gama, Cesare Casadei from Inter and David Fofana from Molde.

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Chelsea’s £745m gross spend last season is easily an all-time high for the Premier League, over twice as much as Manchester City’s £328m in 2017/18. Of course, the Blues are no strangers to splashing the cash, being responsible for three of the top four annual transfer outlays.

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To a certain extent, it could be argued that Chelsea were playing catch-up, as their expenditure in the transfer market was “relatively” restrained in the three preceding seasons, averaging £144m, only around half the £285m in the previous 2-year period.

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That said, their £1.2 bln outlay over the last four years has easily outpaced their domestic rivals, being at least £400m higher with Manchester City spending £744m, Arsenal £736m and Manchester United £698m. For more context, it was more than three times as much as Liverpool’s £368m.

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Of course, Chelsea have continued to invest in their squad this season with the accounts stating that they have spent another £454m, bringing the total outlay since Boehly’s consortium arrived to a staggering £1.2 bln in less than two seasons.

The new signings include (deep breath) Moisés Caicedo and Robert Sanchez from Brighton, Roméo Lavia from Southampton, Christopher Nkunku from RB Leipzig, Cole Palmer from Manchester City, Axel Disasi from Monaco, Nicolas Jackson from Villarreal, Lesley Ugochukwo from Rennes, Deivid Washington and Angelo from Santos and Djordje Petrovic from New England Revolution.

That’s a full football team on its own, but most supporters would agree that only Palmer has been an unqualified success to date.

 

Agent Fees

Chelsea also sit at the top of the table in terms of agent fees, spending £75m in the 12 months between 1st February 2023 and 1st February 2024, ahead of Manchester City £61m and Manchester United £34m. In fact, this was a new record for the Premier League.

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Squad Cost

Chelsea’s squad cost, based on amounts paid per the club’s balance sheet (as opposed to market value), increased from £918m to £1.1 bln.

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They are the second English club to break through the billion pound barrier, though they were still slightly below Manchester City. That is likely to change this season after the £454m player purchases.

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Debt

Chelsea’s gross financial debt increased from zero to £146m, all owed to the parent undertaking. This is slightly strange, as the cash flow statement references £428.5m proceeds from borrowings, while nothing is mentioned in the Related Parties note.

There were many media reports last September about Chelsea reaching an agreement with US investment firm Ares Management for a similar amount to the figure in the cash flow statement, so that seems to make sense.

Some described this as similar to the infamous Payment In Kind (PIK) loan notes used by the Glazers when they acquired Manchester United. These are high interest, but payments are usually deferred until the loan matures.

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Abramovich had regularly provided cash injections to Chelsea during his tenure, putting in over £1.5 bln, resulting in the highest debt in the Premier League. However, this was written-off as part of the club sale.

Based on the £146m in the balance sheet, Chelsea’s debt is far below the likes of Tottenham £851m (to fund their new stadium), Everton £792m (stadium and transfer spend) and Manchester United £636m (the lingering impact of the Glazers’ leveraged buy-out).

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As a result, Chelsea did not pay any interest last season, but received £0.6m interest. This as in contrast to some other clubs that had to make substantial annual payments, e.g. Manchester United £31m, Tottenham £25m and Everton £23m.

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Transfer Debt

Chelsea don’t separately report transfer debt, but assuming that this represents 90% of Trade Creditors, it massively increased from £137m to £479m. This is obviously a modeled number, but the club did attribute the significant increase in creditors to “the amounts owed in relation to player trading”.

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On this basis, Chelsea’s transfer debt is the highest the Premier League, though many clubs have significantly increased purchases on credit in the past few years. so huge amounts were also owed by Tottenham £307m, Manchester United £277m, Arsenal £240m and Manchester City £204m.

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Cash Flow

Chelsea’s £218m operating loss (including exceptional items) swung to £173m positive operating cash flow, after adding back £218m non-cash items (player amortisation and depreciation) plus £174m working capital movements.

This was boosted by £203m from player sales before spending a huge £748m on player purchases and investing £21m in infrastructure.

The resulting cash outflow was £392m, which was fully funded by net £426m from loans, though the source was not specified.

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As a result, Chelsea’s cash balance rose £34m from £54m to £88m, one of the highest in the top flight, though still a fair way below Tottenham’s £198m.
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Profitability and Sustainability Regulations (PSR)

Chelsea stated that the club has complied with Premier League and UEFA financial regulations “since their inception in 2012 and expects to do so for the foreseeable future.”

They added, “The football club continues to balance success on the field together with the financial imperatives of complying with UEFA and Premier League regulations.”

My model suggests that they were well over the maximum £105m loss for the 3-year monitoring period up to 2022/23, even after considering allowable deductions for “healthy” expenditure, such as infrastructure, academy, community and women’s football, plus losses caused by COVID.

However, they were saved by the sale of the hotels on the Stamford Bridge site to another group company for a £76.5m profit, leading to them (just) complying with PSR.

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Such property sales have been used in the past by a number of Championship clubs to help meet PSR targets, including Derby County, Sheffield Wednesday and Aston Villa. The EFL subsequently closed this loophole, but this is apparently not the case in the Premier League. Indeed, Chelsea have claimed that their approach was discussed in advance with the PL.

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The big question now is whether Chelsea will comply with PSR this season.

Based on my estimate for Chelsea’s cumulative PSR loss for the two years up to 2022/23 of £141m (even after the hotel sale), they would have to somehow generate a PSR profit of £36m this season to meet the target.

Assuming that allowable deductions remain at £35m, this means that they would basically have to break-even in the accounts.

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That seems a tall order, given that revenue will be much lower due to not playing in Europe, while profit from player sales is currently also less than 2022/23 The wage bill should fall, but player amortisation (and possibly impairment) will increase.

The expectation is that Chelsea will address this with player sales before the end of June, especially Academy products such as Conor Gallagher, Reece James, Armando Broja, Ian Maatsen and Trevor Chalobah.

There are two other possibilities:

  • Chelsea pull another rabbit out of the hat with more property sales, though a stadium disposal might be prevented by the Chelsea Pitch Owners, as they own the Stamford bridge freehold.

  • The club might argue that further adjustments to the PSR calculation should be made to take into consideration:

    • Revenue lost when sanctions were applied by the government

    • Exceptional player impairment (as claimed by Everton)

    • Lost player sales, due to the transfer market being deflated by COVID and the economic sanctions preventing deals being made.

 

UEFA Financial Sustainability Rules

If Chelsea do manage to qualify for Europe, they would also have to comply with UEFA’s regulations, but the good news is that these are less strict than the former regime, as the maximum allowable loss has doubled from €30m to €60m (potentially as much as €90m if a club is deemed to be in good financial health).

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UEFA have also introduced squad cost control via a new ratio of player wages, transfers and agent fees that will be limited to 70% of revenue & profit on player sales, though there is a gradual implementation over 3 seasons (90% in 2023, 80% in 2024 and 70% from 2025), giving clubs time to get their house in order.

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Based on my calculations, Chelsea’s ratio was 86% in 2022/23, which suggests that this will also be something of a challenge. This will also be the basis of the Premier League’s new PSR, so will have to be an area of focus for the club’s owners, especially as property sales are excluded from this calculation.

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Legal Matters

Chelsea self-reported some issues related to historical transfer payments that they discovered during the takeover. The resultant Premier League investigation could lead to “future liabilities that cannot be quantified”.

Conclusion

Not only did Chelsea report another significant loss of £90m, but it would have been even worse without around £100m of once-off adjustments, including £77m from the hotel sale.

It’s one thing applying a series of accounting “tricks” to satisfy Profitability and Sustainability Regulations, but the reality is that this is a pretty awful set of financial results, notwithstanding the record revenue.

Chelsea fans will probably not care too much about the balance sheet, so long as the owners continue to provide financial support, but they will be concerned that the massive investment in new players has so far produced little success on the pitch.

Edited by Vesper
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A little trouble in paradise for Eghbali.

 

|The Big Take

The End of the Cheap Money Era Catches Up to Chelsea FC’s Owner

The Californian private equity firm has at least $10 billion in distressed debt among its portfolio companies, a snapshot of the difficulties the buyout industry is facing right now. 
A Chelsea flag at Stamford Bridge.
A Chelsea flag at Stamford Bridge.
Photographer: Andrew Kearns/CameraSport/Getty Images
July 9, 2024 at 11:00 PM UTC
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Clearlake Capital Group is best known beyond financial circles for owning Chelsea Football Club, an English Premier League team that’s been criticized at times for buying unproven players at sky-high prices.
As the California-based private equity firm raises money for its latest fund, some investors and creditors are asking similar questions about the value of acquisitions it made at the height of the buyout boom.
Back in 2020, Clearlake was turning away people clamoring to get into its sixth flagship fund. The firm had delivered in the past, dishing out best-in-class returns to its limited partners — the pensions, insurers and others who back its wagers. Companies bought from its previous cash hoards such as healthcare software company Provation and self-storage supplier Janus International were well on their way to generating stellar profits for Clearlake and its LPs.
But only a few years on from raising more than $7 billion for fund six, the world is very different. The firm used that fresh influx of investor dollars to carry on spending at the start of the decade, snapping up businesses when valuation multiples were high and piling them up with debt. Today stubbornly elevated interest rates are weighing heavily on many such assets.
 
Clearlake isn’t alone in having to navigate the end of the cheap money era; many of its buyout industry peers are facing the same difficulties. Investors are still signing on in droves to its latest $15 billion fundraising, pointing to its money-spinning track record in previous funds.
And yet the firm does offer a snapshot of the challenges confronting private equity right now, especially anyone who spent big between 2020 and 2022. It’s the PE firm with the most distressed debt among its portfolio companies, at least $10 billion, according to data compiled by Bloomberg at the end of June. The data captures loans trading below 80 cents on the dollar and bonds with both prices below 80 and spreads wider than 10 percentage points.
“A peak like 2021 is going to make for a poor vintage when you want to realize value,” says Christina Padgett, associate managing director at Moody’s Ratings, speaking about private equity acquisitions in general.

Clearlake's Stressed Credits

Clearlake has a number of firms with debt near stressed and distressed levels

Bloomberg

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Source: Prices rounded to the nearest cent based on estimates from debt traders and Bloomberg data during the week of July 1. 
Note: Some companies have co-investors alongside Clearlake. Some companies have undergone liability management exchanges that include new loans ranked above legacy loans quoted here.
Conversations with more than a dozen people familiar with Clearlake — including investors, bankers and rivals — highlight concerns about assets bought at the M&A boom’s zenith, particularly by the sixth fund. 
A slew of businesses Clearlake acquired between 2020 and 2022 such as investment software maker Confluence Technologies and Quest Software Inc., an enterprise IT specialist, are under strain, and some LPs are asking whether the private equity firm’s breakneck growth left it overstretched.
Clearlake is also among the industry’s leading users of continuation vehicles — a controversial practice of selling assets to a new fund the firm manages as well — setting up five deals in the past. It’s now exploring a sixth, for digital-marketing company Constant Contact, people with knowledge of the matter say.
A spokesperson for the firm declined to comment for this story, although others with knowledge of the situation point to the progress in its latest record fundraising as evidence of investor support. Even those who are critical in private about fund six are handing Clearlake more money, expressing the hope that its financial smarts will help it navigate a tough period for buyout groups.
 
Like rivals, Clearlake often plays hardball with lenders to its companies during distressed situations, shielding its own LPs from much of the pain.

Glory Days

Clearlake was founded in 2006 by José E. Feliciano and Behdad Eghbali to target technology, consumer and industrial companies through traditional buyouts and distressed investments, but it really hit its stride at the end of the last decade. These were the industry’s glory days when debt was cheap, inflation low and pension funds were awash with dollars to plow into private markets. A long-running M&A boom made asset prices go up everywhere, and firms rushed back to investors as fast as they could to nab more money.
As Jay Powell’s Federal Reserve holds fire on rate cuts, the buyout gold rush is history. And LPs are short on cash to allocate, making them more demanding.
2021 Robert F. Kennedy Human Rights Ripple of Hope Award Gala
José E. Feliciano.Photographer: Slaven Vlasic/Getty Images
Sheffield United v Chelsea - Premier League - Bramall Lane
Behdad Eghbali.Photographer: Mike Egerton/PA Images/Getty Images
Clearlake’s investors didn’t fret too much about its rapid growth when earlier funds were giving them handsome payouts and raking in impressive multiples of invested capital, a key performance yardstick in private equity. Its fourth and fifth funds have already given LPs back more than the capital they put in and have more assets still to sell. These successes have made its lofty fees and fondness for continuation funds tolerable to most backers.
 
The firm’s assets have swelled to more than $80 billion thanks to an aggressive push between 2015 and 2021, when it went back to the market every couple of years or so to raise a new buyout fund, with each one roughly doubling in size.
“Clearlake would be a poster child for the excessive popularity of that particular asset class,” says Jeff Hooke, who just retired from teaching at Johns Hopkins Carey Business School. “When you have multiple funds and start a new one every couple of years, you’ve invested the money pretty quickly.”

Clearlake's Cash Haul

The private equity firm has pursued an aggressive fundraising strategy

Bloomberg

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Source: State of Connecticut
A recent due-diligence report for the State of Connecticut, whose pension plans invest in multiple Clearlake funds, found its soaring assets under management “may cause concerns of strategy drift through the lack of discipline and focus,” while acknowledging the firm’s investment team has grown in line with assets.
Connecticut’s pension consultant wrote, too, that Clearlake “historically utilized higher leverage levels in its portfolio companies, raising concerns in current market conditions.” In common with many peers, the firm didn’t hedge enough against interest-rate shifts, although it does now. It has about $15 billion in hedges on its portfolio, a person with knowledge of the matter says.
Regardless of any investor misgivings, Feliciano and Eghbali’s latest efforts to tap LPs appear to be on track. Clearlake waded into an unforgiving fundraising environment for buyout firms last year when it started gathering cash for its eighth buyout fund, telling backers that it aimed to surpass the $14 billion raised for its seventh fund, which closed in 2022.
A year on, it has nearly $10 billion of commitments toward a $15 billion goal, a person with knowledge of the situation says, and it hasn’t had to offer investors extra incentives.

Trouble Spots

As backers weigh how much they want to commit to the latest fund, some have been paying closer attention than usual to its investments of recent years, especially from the heady days of 2020 to 2022.
 
Plenty are having a torrid time. Confluence, bought in 2021, has been downgraded by Moody’s, who noted that its “highly levered capital structure and weak liquidity” indicates “aggressive financial strategies.”
Clearlake is also looking at combining parts of Quest and cybersecurity outfit RSA Security — two other heavily indebted software companies in fund six — into a new business and selling a stake. It previously sold a division of RSA to repay debt and used proceeds to return money to investors, irking some lenders.
FinThrive, a healthcare e-billing company acquired in 2021, is in creditor talks about an overhaul that could include a below-par debt exchange.
And trouble isn’t confined to fund six. Wheel Pros, a custom-wheels outfit acquired in 2018, did a distressed-debt swaplast year to buy time. S&P Global Ratings says it’s still vulnerable to default, and investors have dumped a new loan placed as part of the swap, driving its price down to near 60 cents on the dollar. Wheel Pros was rolled into a continuation vehicle in 2021 and, according to Connecticut’s report, its internal rate of return was -20% as of Dec. 31.
Elsewhere, Pretium Packaging, a plastic-bottle maker bought in early 2020, did a debt restructuring last year that S&P viewed as a selective default.
 
The deal for which Clearlake is famous, Chelsea, wasn’t loved by some investors but it’s too early to judge financially. The firm had the investment marked at Dec. 31 slightly above what it paid, despite the team reporting a £90.1 million ($115 million) pretax loss last year. Football Benchmark, which provides financial data on clubs, estimates Chelsea is worth £2.8 billion, about £500 million more than what Clearlake splashed out in 2022.
Its owners hope their vast outlay on young talent will pay off ultimately and let it compete with elite rivals such as Abu Dhabi-owned Manchester City.
Aston Villa v Chelsea - Emirates FA Cup Fourth Round Replay
Clearlake Capital has spent enormous sums on Chelsea’s young players.Source: Visionhaus/Getty Images

Patient Capital

Such calls for patience apply equally to the broader business. The nature of PE investing means sponsors like Clearlake have long time horizons to let wagers play out. They don’t have to price assets more than once a quarter, and one slam-dunk bet can offset a lot of duds. The firm remains chipper about some recently minted investments such as BetaNxt, a wealth-management fintech.
 
Another feature of the buyout world is how fiercely firms work to safeguard returns for themselves and their backers when refinancing distressed debt, often at lenders’ expense. Take the restructuring of Clearlake-owned Valcour Packaging, a maker of bottle caps, which recently offered more than 90 cents on the dollar to a bunch of creditors who promised to fork up new capital.
Anyone outside that group who doesn’t play ball will be pushed toward the back of the line and can trade in their debt at 60 cents. Such bruising tactics can make enemies among lenders just as you’re having to do a lot of renegotiating.
Clearlake’s muscular approach also helps it protect returns even in dire situations. A December report from Pennsylvania State Employees’ Retirement System showed that the multiple on invested capital was more than five times on Wheel Pros, the company sold on to a now struggling continuation fund. Pretium’s was more than double.
Fund six had a net IRR of 24% as of Dec. 31, according to Connecticut’s documents, and the state’s pension plan has committed $200 million to Clearlake’s eighth fund even after its due-diligence report. Other backers took a closer look at Clearlake’s recent dealmaking and reinvested too.
People familiar with Clearlake’s strategy point out that it’s also an investor in distressed assets as well as growth opportunities, which may let it take advantage of depressed prices in today’s private markets. “We’ve had relatively decent US economic growth since the pandemic,” says Padgett at Moody’s. “So there may be decent businesses with bad balance sheets.”
Still, there’s no cause for investor complacency quite yet. PE uses a metric known as the “distributed to paid-in-capital ratio” to show how much it’s returning to investors. A ratio of one means investors got their money back. Fund six was 0.1 at the year end, according to the Connecticut documents, showing how much work remains to be done to realize value from the portfolio.
When Clearlake hosted its annual meeting for LPs a few weeks back, it made a surprising choice as star speaker: former British Prime Minister Boris Johnson. Like him, the buyout industry hit a peak of popularity at the turn of the decade before falling from favor. Getting back to those heights won’t be easy.
 
For Padgett, this is true for PE firms on the whole — and for the funds that lend to their companies. “Both private equity and credit are going to have more meager returns than they’d originally anticipated,” she concludes.
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9 hours ago, ZAPHOD2319 said:

 

Anything overseen by Stewart & Winstanley is certainly going to be a disaster. Hopefully they get removed from their positions if we have another mixed bag/poor season. 

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The football world looks on in astonishment as a club with a rich, colourful history is used as an investment vehicle, a trading platform, by venture capitalist owners.

Accountancy wheezes such as selling the two hotels on the forecourt to a different part of the business, and doing similar with the women’s team, resemble acts of desperation rather than visionary commercial nous. A couple of missteps with fans, including increased ticket prices, unpopular corporate schemes such as the Dugout Club and withdrawing subsidies for travelling away fans have met the ire of militant – and well-organised – supporters’ organisations. Success under Roman Abramovich brought comparative serenity, but now long-serving Blues find themselves harking back to their club’s 1970s financial collapse for a spell as fractious.

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16 hours ago, Blue Armour said:

That quote keeps coming back to bite them in the arse.

Should never have made such a ludicrous statement.

 

Eghbali: Chelsea were ‘not terribly well managed on the football side, sporting side or promotional side’

We’ve got the brawn, they’ve got the brains, let’s make lots of money!

https://weaintgotnohistory.sbnation.com/2022/12/24/23525031/eghbali-Chelsea-were-not-terribly-well-managed-on-the-football-side-sporting-side-promotional-side

We’ve heard a fair amount from Chelsea co-owner Todd Boehly over the past few months, but more recently, it was fellow co-owner Behdad Eghbali’s turn to speak at a business conference, appearing at SporticoLive’s “Invest in Sports” Summit back in mid-October, as part of the “Expanding International Portfolios” panel.

So hot!

Video of the full conversation was published about a month later, and now, thankfully, Football.London have transcribed all of Eghbali’s words, so we don’t have to sit through the public-speaking of a person not very good at public speaking. Clearly that’s not what he gets paid for.

Most of what he says we’ve heard before, at least in broad terms. Basically, they (i.e. Boehly and Clearlake) saw an unexpected opportunity — boy, those sanctions sure worked good! — with an underdeveloped asset in an underutilized market, and are looking to take advantage of a massive untapped market by taking lessons from what’s worked in other leagues (NFL, MLB) and combining that with the current hotness in football (i.e. the multi-club model).

“For us, it was about looking at the macro. You look at the NFL, the NBA, NFL, $20 or so billion revenue, 150-200 million fanbase, media rights, all rights, all IP is shared within the league whereas [in the] English Premier League [you have a] massive global audience, you share broadcast revenue but big disparity otherwise in terms of your IP, your assets.

“We thought Chelsea [was] frankly an asset, a business that was not terribly well managed on the football side, sporting side or promotional side, so meaningful opportunity at the club and we’ll get to it for us, who needed the beachhead to then look at multi clubs. [We] looked at it and we think European sports is probably 20 years behind US sports in terms of sophistication on the commercial side, and sophistication on the data side. [...] These are global assets, global audiences which we think we can certainly help grow.”

“[The] value of NFL teams probably $150-155 billion, the Premier League, La Liga, France, Italy I think you’re probably $30 billion, fanbases of maybe 3-4 billion globally compared to 200 million and that’s being generous to the NFL. A league and a sport that is optimised, clearly not everything is created equal, but a 4 billion fanbase on a cumulative market gap of $30 billion maybe and cumulative media revenue of $5 or $6 billion against $20 for the NFL on 20 times the fanbase globally.”

As Shania said, ka-ching!

But what is all this multi-club talk then? Eghbali mentions Portugal, France, Africa, and South America, but is it just an obvious loophole around work-permit regulations? Is it the sporting equivalent of vertical integration, if not a straight up monopoly? Is it just a profit generator? Is it all of the above?

The answer is always all of the above.

“We think there’s a path to controlling labour costs and still producing a winning product using data, using the multi club. We think the multi club is an interesting tool for player trading [and] if you have a cost structure that can sustain and you invigorate the fanbase we think you can have a business that makes money that are natural monopolies in their markets without the regulation, without the salary caps.

“[If] done well you can make money on each specific enterprise. [If] done right, if you use data, if you’re thoughtful about this global market for talent and access of talent that is not effectively done through a draft or an extensive college or baseball farm system [then] you can capture, acquire, retain, sign talent and monetise talent. There’s a talent arbitrage opportunity that exists.

“[And] it’s the perfect pathway of developing talent whereby you don’t have to spend crazy money on payroll. [We] hired a coach from Brighton and we think they’re one of the best-run teams in the Premier League. The owner is from a sport gaming, data background. Spends 10% of the payroll, wins almost as much and is a very stable mid-market, mid-table, very profitable club. I think if you apply some of that IP into developing talent but keeping your talent.”

And as before, Eghbali assures that all of these business interests are couched in and enabled by developing (or maintaining) a winning culture at the club (the asset). None of this works if the team’s not successful.

Same goes for investing in the club itself in terms of facilities, infrastructure, etc.

“Ultimately, if you’re investing capital into a training facility, an academy, a stadium, if you’re improving the team you’re going to have a lot of public support. [We] think winning and a good product on the pitch and commercial success go hand in hand. You have to have a good product to generate sponsors for the content to work. [...] You’ve got to win. Winning on the pitch, you can do it efficiently as opposed to not, but you have to do that to have commercial success.”

Additionally, while Clearlake may be a private equity firm focused on generating short-term gains for their clients, they’re looking at Chelsea as a long-term, perhaps even a “permanent” investment vehicle that their clients then can also choose to put some of their money into ... or some such. Sort of like picking mutual funds in your 401k, but with sports?

“[At] Clearlake, we’ve done five continuation vehicles, that we call icon vehicles. These are permanent vehicles where LPs (Limited Partner) can choose to sell or stay in. [...] Sports have multiple folks, institutions, and individuals who are interested. [We] think there’s a market for it and we think there’s a market to afford LPs the ability to exit and others to step in and to have a long-duration vehicle to keep these assets. We’ve done it with other assets. There are certainly businesses you want to own for a long time and private equity has to evolve from the formation ‘Hey, I raised a fund, I’ve got to sell’.”

-Behdad Eghbali; source: SporticoLive via Football.London

The only thing we have to keep in mind is that none of this will happen overnight. The plan will take time, will take patience, dedication, and, ideally, flawless execution.

In summary, we’ve got the brawn, they’ve got the brains, let’s make lots of money. (And win some things?)

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