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Liverpool and Manchester United are up for sale. Which is the more appealing club to buy?

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Many years ago, friends wishing to wind me up would point out that I looked and sounded like my dad. One friend would simply say “peas in a pod” whenever he met us, knowing it would grate.

Now that I am 50 and have indisputably become my dad, I am ashamed that I used to get annoyed by the comparison. My dad is a great bloke.

Liverpool and Manchester United are 130 and 144 years old, respectively, and fans of both clubs have bridled when neutrals have suggested they are not too dissimilar: lots of fans, packed trophy cabinets, famous grounds, play in red, only 30 miles apart, think the world revolves around them and, since 2007, they have both been owned by Americans.

But now those owners, who have been aligned on many of football’s issues of the day, have decided to sell at the same time. And the appearance of both of these clubs in the estate agent’s window should help clear up one of English football’s oldest debates: which of these maidens is the fairest?

Liverpool have won more European crowns but United have the edge in English titles. Liverpool are third in UEFA’s coefficient rankings; United eighth. Liverpool are sixth in this season’s Premier League; United one place better. Both have won FIFA’s Club World Cup/Championship once. You pays your money, you takes your choice.

Liverpool and Manchester United’s rivalry still runs deep today (Photo: Ash Donelon/Manchester United via Getty Images)

But even when it comes to the money, there does not appear to be much between them. If we look at the 2020-21 season, Liverpool earned £487.4million ($590m), while United brought in £494.1m, 1.4 per cent more.

So why do many experts have United worth at least 50 per cent more than their rivals at the end of the Manchester Ship Canal?

“This will only be about the fans, fans, fans,” says Laurie Pinto, senior partner at Pinto Capital and a football finance veteran who describes himself as “an advisor to presidents and paupers”.

“If Liverpool and Manchester United are at the same price tag, it’s a total no-brainer. Manchester United are just a much bigger club, bigger stadium, bigger fanbase. It would be closer if Liverpool were still much better than them on the pitch but they’re not.

“This will feel like a once-in-a-universe moment to someone and that is what will make United look like a bargain.”

Sam Mabon, head of corporate at Brabners, an independent law firm with offices in both cities, broadly agrees.

“Football clubs can be unusual assets to value as a return on investment isn’t always the primary motivation for an acquisition,” he explains.

“However, the true value opportunity for both revolves around their ability to extract revenue from their global appeal, and it’s in this area United sets itself apart.

“The success of the Sir Alex Ferguson era, combined with the advent of Premier League broadcasting, allowed United to redefine what football clubs can achieve commercially. The club remains an outlier in terms of global following — with a fanbase of more than 1.1billion and 50 per cent more social media followers than Liverpool — and the ability to leverage this fanbase is where the real value lies.

“On-field accomplishment is a key driver in financial performance, and Liverpool’s success under Jurgen Klopp means it is forecast to overtake United in revenue soon. However, due to the brand heritage and global reach, United represents the better platform to achieve a greater return on investment if they can get back to winning ways.”

Bad news, Liverpool fans (and Fenway Sports Group) — there’s more.

“Liverpool and Manchester United are tremendous opportunities to acquire top-tier assets in European football,” says Jordan Gardner, a US-based football investor who has previously held stakes in Denmark’s Helsingor, Irish side Dundalk and the Championship’s Swansea City.

“It’s debatable which club is a better investment opportunity, but my opinion is Manchester United have more long-term upside, and a better opportunity to create value.

“Manchester United are arguably a bigger global brand than Liverpool. Any American investor, in particular, is going to be looking for long-term asset appreciation and opportunities to see significant commercial growth in the coming years, which points towards Manchester United as a better opportunity.”

Three votes for United, then.

Gordon Saint-Denis, head of sports finance at Chicago-based asset management firm Monroe Capital, thinks it is a little closer than that, though.

“To say one is a better investment than the other is like arguing your favourite ice cream flavour,” Saint-Denis tells The Athletic.

“For an investor, it often comes down to affiliation. If you are a fan, or follow one of the clubs more closely, you need to realise this is a once-in-a-lifetime opportunity to make the purchase.

“Although spreadsheets and return calculations will be done ad nauseam, it usually comes down to a bit of an emotional decision in the end, even at these huge valuations.”

Just to take a step back, Mabon’s 1.1billion fans statistic has been the subject of debate ever since Manchester United started using it in their financial reports a few years ago. Suffice it to say that it is based on a very generous interpretation of fandom. Perhaps the best way to illustrate this is to relay a conversation The Athletic has had dozens of times in Qatar this week.

“Hi, I see you are cheering for Argentina/Brazil/England/France/Portugal (delete according to the game currently on the big screen) — what’s your club side?”

“I have supported Manchester United since I was a young boy. And I also support Manchester City/Liverpool and Chelsea/Arsenal/Spurs. And I love Messi because I have always been a big Barcelona fan/and I love Ronaldo because I have always been a big Real Madrid fan.”

But the important point about the number is United’s commercial partners believe it — they must do, as they have continued to pay a premium to be associated with the club despite the years of relative mediocrity that are following Sir Alex Ferguson’s retirement in 2013.

For what it is worth, United’s lead on social media is probably greater than 50 per cent. As of March, United’s combined following on Facebook, Instagram, TikTok, Twitter and YouTube came to 177million followers; Liverpool’s was 106million.

But is it really just about counting fans?

If it is, it would suggest all fans are worth the same, in financial terms, and that all clubs are as adept at monetising them as each other. If those statements are true, football is wasting a lot of money on account managers, branding experts and social media gurus (narrator: it is not true).

So, what are investors looking for when they flick through the brochures?

To answer this, we first need to establish what type of investors we are talking about.

To keep this article on track, we are not going to spend much time discussing why the most likely buyers for Liverpool and Manchester United are other Americans. We have already written about this in relation to the Chelsea takeover which saw several non-American bidders mooted only to evaporate when the bidding got real.

The Glazer family have been unpopular owners at Manchester United (Photo: Simon Stacpoole/Offside/Offside via Getty Images)

“There is a tsunami of American money that wants to invest in football,” explains Pinto, who should know, as he has advised on significant investments by Americans in clubs in Belgium, Brazil, England and Germany in the last 12 months.

But not all American investors are the same. Those in the current wave are mainly from the private equity world but even they can be split into guys who believe they can turn European football clubs into businesses that make regular profits, like North American sports franchises, or those purely focused on asset appreciation.

Manchester United’s owners, the Glazer family, have done a bit of both, paying themselves significant dividends and selling small stakes in the business, while Liverpool’s owners, FSG, sold a minority stake to US private-equity firm RedBird last year, and now appear to be thinking of a big payday as they completely exit.

The FSG method has been by far the most common. In fact, the Glazers are the only owners in the Premier League who have regularly taken money out of their club. But waiting for someone richer than you to come along might not be a strategy that can work much longer: clubs are just getting too expensive.

That means we are at the point in European football’s business cycle when owners really, really start to care about the profit/loss statement. If that sounds a bit European Super Leaguey to you, erm, yes, that is exactly why the Glazers and FSG were on board, just as they were also the co-authors of Project Big Picture, the 2020 plan to overhaul how English football’s broadcast revenues are shared.

There is, however, a possibility that a new type of American owner will emerge: the corporation. Owning a football club, even a really popular one, is unlikely to be worth the aggravation to a brand like Apple but it might appeal to a betting company, as they occupy the same space and are interested in the same customers.

But — as the experts observed — the number of customers/fans is still going to be the most important factor to whichever type of investor is looking at these clubs, although it is likely to be a more subtle analysis than just the headline figure.

So, for example, younger fans will have more weight than older ones, and where those fans are will also matter — there is more upside with fans in developing nations. The banks the clubs have appointed to run their sales processes are selling potential growth stories.

The clubs’ respective social media followings will provide some clues but they are crude measures for sophisticated investors. They will want to know how many of those followers the two clubs are converting into customers, via sales of tickets or merchandise. They will also be asking how much the clubs really know about their fanbases, because data is dollars in today’s hyper-focused, geo-targeted marketing business.

There is a feeling in the industry that Liverpool may have the edge here but nobody really knows without access to the clubs’ data rooms, and this is just one of the reasons that it is so interesting the two biggest clubs in England are on the market at the same time.

“It is a totally unique and historic footballing reality to have two of the biggest brands in this sport on sale at the same time,” explains Christian Nourry, managing partner at Retexo Intelligence, a US-based analytics firm that advises clubs and investors on how best to spend their money.

“The groups that are professional and serious about ensuring they focus on the ‘better’ opportunity of these two clubs will take advantage of the fact both are running formal sale processes. They will want to spend time in each data room to get a sense of the underlying, monetisable fan data.”

Data rooms are just secure places where a business keeps its secrets. The questions potential buyers will want answers to are: 1) how can these two clubs add fans? And 2) how much will that cost?

According to Nourry, there are four ways to grow your fanbase:

Geography — how many people live locally and what competition you have for their custom Support as an inheritance, passed from generation to generation Winning — sounds old-fashioned, we know, but it is working for Manchester City And finally, by signing players, particularly popular ones, something United have perhaps focused a little too much on in recent years

“The interplay between the fanbase issue and sporting success is critical,” says Nourry.

“We’ve seen that 16-to-25-year-olds in international markets become fans of teams because these clubs are successful on the pitch during their early teens, or because star players they have had exposure to from video games and social media play for those clubs.

“This is epitomised by the phenomenon of controversial streamer iShowSpeed. He became a Manchester United fan because he started as a Cristiano Ronaldo fan and now has stated he will support whichever team Ronaldo winds up at next. I expect many of his 13 million YouTube subscribers will follow him.

“To capture the fans of tomorrow and turn Liverpool or Manchester United into successful businesses 10 years from now, you either need to be winning trophies now or regularly bringing in young, world-class talent that crucially stays for the long-term.

“To a 15-year-old, Manchester United are not a successful team but they still have Marcus Rashford, Jadon Sancho and Antony, who have brought in supporters. To a 15-year-old, Liverpool are one of the most successful teams in European football but both clubs are currently perceived to be in varying degrees of sporting disarray.

“So, the real point of comparison is to ask how much is it going to cost to tweak the sporting element of these organisations. Only then can you come up with an overall purchase cost.”

There is a lot to unpick there.

“In terms of valuation, I have a hard time seeing anything above £4billion for Manchester United and maybe £3-3.5billion for Liverpool using any sophisticated valuation methodology and revenue multiples,” says Gardner.

“Most people don’t realise that the pool of buyers at these price points is incredibly small, and while it is possible a bidding war could raise the ultimate sale price for both clubs, I don’t anticipate that happening here. There’s a real possibility one or both owners do not get the asking price they want and end up deciding not to sell.”

Pinto, on the other hand, is much more bullish on Manchester United. In fact, he thinks United being on the market at the same time as Liverpool has scuppered FSG’s hopes of getting a big number.

Owner John W Henry has enjoyed a successful time at Liverpool with FSG (Photo: Michael Regan/Getty Images)

Speaking of bidding wars, Chelsea’s takeover this summer is clearly the one that got the Glazers and FSG wondering if now was the right time to exit, as it set a new benchmark.

It is a rough-and-ready measure but many analysts start their valuations of sports teams by simply multiplying their annual revenue. The multiple you apply varies from market to market. At one end of the spectrum you have gold-plated, relegation-proof NFL teams, and they command multiples of 10 times their turnover. Talent, revenues and risks are shared; costs are capped.

At the other end, you have European football’s loss-making, relegation-threatened teams, all fighting for the scraps that trickle down the pipe. They are barely going for one or one and a half times their annual revenue.

Chelsea, however, are part of Europe’s relegation-proof elite, with regular access to UEFA’s Champions League income, a big stadium, global partners and the ability to sell players for large sums of money, too. That is why their bankers, Raine, the same guys retained by United, were able to persuade four different US syndicates, and British billionaire (and United fan) Sir Jim Ratcliffe, that Chelsea were worth a multiple of about six times their revenue.

Pinto believes United are more like a top NFL team, which is why he is valuing them at close to £5.5bn.

“The shift in US/UK interest rates will affect this a little bit — we’re now 10 per cent off (the pound’s) bottom — but United are just a much, much bigger club than Chelsea and Liverpool,” he explains. “Their fanbase is twice the size of Liverpool’s and about four times the size of Chelsea’s.”

His opinion, by the way, not The Athletic’s!

Roger Bell is the co-founder of UK-based financial analysis firm Vysyble. It uses a formula called economic profit to assess businesses that take into account the opportunity cost of not doing something else with your money, like investing it in the stock market, bonds or gold. If Pinto is the bull, Bell is the bear.

“Newcastle United were sold for circa £300m and, given the economics of the club, you can just about understand how that number has come about,” says Bell.

“I am not as sure the same could be said of the Chelsea valuation (£2.5bn), despite Todd Boehly’s formidable business track record. I suspect that given that transaction, on a relative valuation basis, the owners of Liverpool and Manchester United see a way out.

“Last season, Manchester United made an economic loss of £146m, with invested capital brought forward of just over £900m. In the short term, the profit and loss account doesn’t change much and the cash flows don’t change either.

“But someone, on an apparently relative basis, is going to purchase the club for £5bn? Assuming they want to be value neutral, the growth assumptions have to be very ambitious. Either that or you have to believe that marketing benefit is worth the rather large economic losses.”

Nourry is also a little sceptical about some of the numbers that have been floated for United’s valuation.

“The revenue-multiplier purists will be quick to point out that Manchester United’s 2021 revenues were superior to Chelsea’s only by circa £59m,” he notes.

“But using Chelsea as a yardstick is complicated by the fact that the generally quoted figure of £4.25bn includes £1.75bn in future investment commitments, mainly for a new stadium. It will arguably be easier for United-focused investors to attempt to structure a similar deal for them than Liverpool because there is a clearer need for investment at Old Trafford than there is at Anfield.

“There is also the reality that there is a poorer public, fan and media perception of the Glazers than of FSG. That may work against the Glazers should an interested party make a public declaration that their offer includes several billion pounds to invest in infrastructure.”

Saint-Denis is another who thinks the relative prospects of Anfield and Old Trafford will be key considerations in this debate.

“US investors will look at the venues and see what type of capital investment is needed over the next five to 10 years,” he says. “This was part of the Chelsea valuation and it will no doubt be factored into a decision to purchase either of these unique assets.

“But I expect the number of bidders to be quite high and the bidding to be robust — if you miss this window you likely won’t get another bite at these apples.”

Emotion and ego will undoubtedly play a part in the process but how high that bidding goes will most likely hinge on what the bidders find in the data rooms. As Nourry points out, the key questions will be how many fans do the clubs really have — as in, have genuine business relationships with — and how many more fans could they be transacting with if they were run by people who know what they are doing?

In truth, we are all stumbling around in the dark here. Nobody really knows how much these clubs are worth until someone ponies up the cash.

But it does seem somehow in keeping with the times that the great Liverpool versus Manchester United debate will be settled by the amount of money that entrepreneurs, most likely from the US, are willing to invest on this new-fangled football thing.

(Top image: Sam Richardson)

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