By Alec Johnson
Most debates surrounding Swansea City right now all hover around the subject of international investors - do we stick or twist?
I'm definitely in the twist camp. Let me sell you the benefits of not just accepting the opportunity, but also embracing it as an exciting development.
Firstly, this cannot be compared to Cardiff or Birmingham takeovers, where complete control is handed over to a foreign loony and the board had no choice but to save their club.
Also, comparisons have been made to previous American ownership in the shape of Liverpool and Man United where the club has been used to saddle the debt of purchase within the football club. This practise is illegal in mainland Europe, so by nature this attracts foreign investors to our shores. This is because leveraged debt is legal in the UK and, despite decades of profit at these clubs, they carry the debt of their owner's loans.
Our position is entirely different, and while we don’t require external investment to survive we certainly need it to grow.
|Big decisions for Huw.|
There are also many benefits to a wide group of shareholders with minority interest in any business, particularly when the investors span different backgrounds and geography.
Tapping into the new circles of corporate America or China elevates us to a new league and securing our financial future in the process. Also, we are not talking about bankers or miners here - the Americans can teach us a thing or two about sports marketing and monetising the asset of sport in the business community. Having run big American sports club for long periods, there is an established depth of sponsorship history that can be exploited together with the brand building exercises for deeper fan bases.
The best and most difficult thing in any company structure is to achieve external investment without relinquishing control. Selling a successful business isn’t as difficult as you would think. The board are not going to do that at Swansea City. There is almost an infinite number of private equity groups and family estates that would buy a growing and successful company. The number of groups interested in large investment without control is tiny by proportion. If our board have unlocked that door then they’ve found a golden key for our club.
The challenge will be to value the business.
Typically a multiple of the recent trading year's profit is considered, with ten being the typical multiple to determine value. Given the published profits are around £15m per season, the club is worth approximately £150m. However a premium is placed on the growth potential and balance sheet.
I would argue that Swansea has enough bling and potential to attract a multiple exceeding ten but most investors want control to pay more. They won’t get control at Swansea. What they have is a route into the glamorous showcase of the Premier League.
This is what Usmanov has at Arsenal - trophy ownership and an investment in a club that he can attach himself to. Other investors merely want a return in dividends or future share sale. I suspect this would be the motivation of any minority investor in Swansea and that’s fine by me.
On an emotional level, the chips are high for our club. Four years of Premier League, profit, stability and debt free. This results in an all-time high for their relatively modest investment of £50k each to save our beloved club just over a decade ago. Who can begrudge them of a pay day that can help secure their personal future?
Yes they have a duty to the fans and have a social responsibility that they take very seriously. Diluting their personal shareholding is totally acceptable. They will not leave us exposed in any way - while money changes things, it won’t change their love for the club.
Meanwhile the tension between investment into the squad and the stadium is a healthy one. Both need constant investment and history suggests a budget of around £15m per season into the playing staff. This is the approximate budget required for the club to accommodate the next batch of fans waiting to join the Premier League bandwagon through expansion.
Are they glory hunters? Quite possibly. But Swansea need to invest in a whole generation of future fans, converted to the club for life, like ourselves. It’s an investment into the next few decades. The seats will sell out given the relatively modest addition to the capacity. The best players also want to play in the best stadiums. Our Liberty needs that third tier.
So fast forward nine months - the cranes are up, finishing off our shiny new East Stand but the squad hasn’t changed. Cue the calls for player investment, but the £15m has gone into the stadium. A few injuries and we slide down the table. Monk is under pressure and the board start taking a few bullets.
This scenario scares me a lot more than having some American billionaire investing into our club, making us stronger in every way. Every way besides the romantic notion of complete fan ownership, which is pretty much where we are today.
It’s served us very well for the past decade but we’re in a different universe now. Stick or twist?
Visitors to Swansea are welcomed by the message ‘Ambition is critical’ and we need to remind ourselves of this message.
This is a time for us all to let the head rule the heart!
Christmas is coming - now is the time to buy your copy of Swansea City's Greatest Games - out now worldwide on Amazon, or in Waterstones, WHSmiths, Tesco and other good bookshops.