Manchester United’s fanbase could hold the answer to solving the club’s huge debt burden and help Sir Jim Ratcliffe turn their financial woes around.
Ratcliffe has already predicted in a BBC interview this week that United will be “the most profitable club in the world” in three years’ time, claiming to have cut more than £100m of costs from its operation.
But United remain saddled with a sizeable debt burden, having paid over £1bn in interest in the last 20 years, while still owing more than £500m from the Glazers family’s leveraged buy-out of the club and nearly the same total again to other clubs in transfer fees.
Their current annual interest bill is £60m and has risen every year for the last five, more than doubling over that period. It now wipes out nearly half the club’s annual pre-tax profits.
There are solutions out there – they just might need some thinking outside the box.
“I think one of the things that’s been really frustrating for all Manchester United fans is to have witnessed and seen is just how obdurate and stubborn the Glazers are when it comes to the ongoing management of the football side of the business, that is a direct result of the management of the business side,” Joe Sillett told The i Paper.
Sillett is a lifelong Manchester United fan, but is perhaps best known for founding the cricket equipment company used by Andrew Flintoff and Kevin Pietersen in their heyday. He is a serial entrepreneur in the process of setting up his fifth business – and thinks there is an opportunity for his beloved football team to leverage their global support to put the club back on an even keel.
He added: “To some extent, I can understand the vehicle of using debt inside of a business, but where it comes to the Glazers’ ownership of Manchester United, it has just been a sieve leaking money or a ship leaking oil for the best part of 20 years. And that oil could have been saved and used elsewhere to fuel energy inside of the club and the community in a much, much better way.”
Sillett’s idea is to wipe out the debts by selling as much as 25 per cent of the club to its fans around the world, raising more than £1bn.
Even making a dent in that debt figure would be advantageous, given the interest charges, although returning to a “debt-free” model may not be necessary.
“There is a concept called ‘weighted average cost of capital’ which, to coin a phrase from the 1980s ‘debt is good’,” explains Stephen Brand, an accountant who specialises in financial turnaround and transformation.
“This will invariably determine that being ‘debt free’ as some fans want, is not necessarily optimal for the capital structure of the club.”
What is optimal is reducing United’s costs, which has been Ratcliffe’s primary focus.
“One approach in turnaround and transformation is to get the low-hanging fruit first, those savings and changes that are relatively simpler to make,” Brand added.
“Therefore, the assessment of around 400 redundancies in total seems reasonable and required to help place the club on a more sustainable financial footing. This could save the club around £15m per year, based on average UK gross annual earnings of £37,000.”
But the club’s debt, almost all of which was created during the Glazers’ ownership, has been a PR disaster, and the subject of years of protests by disgruntled United fans.
“Imagine if the Glazers came out tonight or tomorrow and said ‘Actually, we’ve had a meeting tonight what we’d like to do, and we’ve approved it with Sir Jim Ratcliffe, because he also thinks it’s a good idea’,” Sillett said.
“‘We effectively are going to wipe out the debt of the company by selling shares that match the exact value of the debt, that includes paying every pound of transfer fee off and wipes every pound of debt off the balance sheet.’
“The Glazers could, all of a sudden, really quite shock people and get them thinking ‘Wow. Okay, they’ve been bad guys for a long time. But actually, this is a really good move’.”
Using Ratcliffe’s own valuation of the club when he bought in last year (around £5bn), Sillett’s sell-off would need to raise around £1.25bn to buy 25 per cent of the club, a slice that would give the fans group certain legal rights within UK law on matters of the running of the business.
Sillett added: “Do I personally, as a Manchester United fan of 40 years, believe that there would be a global appetite among the 700 million Manchester United fans around the world, for everyone to put their hands in their pocket and basically stump up £1.25 billion to buy 25 per cent of Manchester United? Yes, I do.
“I believe that if that door opened up, I’m absolutely certain that you would get a combination of serious and professional investors, high net worth individuals that support Manchester United, people that had however much money they’ve got to invest, and the casual punter, if it was opened up for everyone to own a small piece.
“You’re not going to be short of people around the world that would buy £500 worth of Manchester United shares, to know that they’re forming part of this 25 per cent ownership group of Manchester United, which in itself is a very marketable brand and PR story.”
The fan-ownership model, even as minority stake-holders, is a rare one in the very highest echelons of football. In 2018, Stan Kroenke forcibly bought out the last remaining supporter-shareholders at Arsenal to take full control of the club. Luton Town, relegated last season, are the most recent Premier League club to have any sort of “fan ownership” model, part-owned by a supporters’ trust.
“Supporter-owned football clubs can have several advantages, but there are also a few notable disadvantages,” Dr Dan Plumley, an expert in football finance at Sheffield Hallam University, told The i Paper.
“These centre around decision-making challenges, the impact of ownership models on competitiveness and financial constraints.
“In terms of decision-making, if numerous supporters are involved in the decision-making process, there can be a lack of coherent, unified vision and potential for conflict of interest. Decision-making can also run slower as well, compared to fully private ownership models.”
The Glazers could opt to sell a significant number of Class B shares to fans around the world, raising capital without giving away control of the club: it is something they have already done once as part of Ratcliffe’s involvement with the club. The deal with the Ineos billionaire reduced the Glazers’ overall shareholding in United, but because of the classes of shares involved, they still have 97 per cent of the voting rights over club decisions.
Governance is not the only problem a new model could create. Ratcliffe recently claimed that United would have run out of cash by the end of 2025 had he not implemented a regime of swingeing cuts throughout the business. That is only true if you assume that United had no ability either to borrow money from lenders or raise capital from existing owners. In cases of fan ownership, it is rare to raise more money from existing supporter shareholders, just one of the ways in which a large group of supporters is less attractive than a single owner.
Lower down the leagues, it has been workable, but the resources required to compete in the Premier League make it harder.
“Supporters generally have fewer financial resources compared to wealthy private owners or large investors,” Plumley added.
“This can make it difficult to compete with clubs that have more substantial financial backing. Ditto attracting major sponsors and corporate partners.
“This also impacts the on-pitch investment re attracting top talent and paying high wages. In the case of Manchester United, we are talking multimillionaires and billionaires now being needed to run that club.
“Even if it is a relatively small supporter owned stake, it is likely to dilute the financial power of the club.”
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