Chelsea’s transfer fees have had a major impact on the European transfer market
Over the past 12 months, the arrival of Todd Boehly and Clearlake Capital as owners of Chelsea has caused major upheaval in the transfer market.
Between taking over the club in May 2022 following its foreclosure following UK sanctions against former owner Roman Abramovich and the end of the January transfer window, Chelsea have spent more than £500m acquiring some of the most sought-after talents in world football.
Enzo Fernandez, Benoit Badiashile, Mykhailo Mudryk, Wesley Fofana and Noni Madueke, among many others, all finished at Stamford Bridge last year, although a 12th place meant the project had a miserable performance for its first year for new owners.
Chelsea co-owner Behdad Eghbali had expressed his admiration for Liverpool owner Fenway Sports Group at the October 2022 Sportico Invest In Sports Conference speech in New York where ECHO was present.
“In our opinion, these [Premier League] teams are generally not well managed. Fenway Sports Group and Liverpool have done well, but for the most part these opportunities have not been used to their full potential,” the Clearlake Capital co-founder said.
A club owned by an investment fund needs success on the pitch to bolster its efforts and increase the value of the club, which received a £2.5billion bounty last year. In the sequel, a return must be realized for the investors.
However, the best chance of doing so is to try to add value to the club and make a profit on the sale.
However, the heavy spending was seen as a long-term investment, although not playing the 2023/24 Champions League was not part of the plan and will further complicate things from a financial perspective given the liabilities that exist on the club’s balance sheet., salaries and wages also amortization costs for the acquisition of players.
It is a philosophy at odds with the philosophy adopted by Liverpool under the FSG, where the club was run under a much more rigorous business model, spending according to its income and going against the trend in football where there is always has losses.
The failure to ease monetary policy has over time caused a great deal of anger among certain sections of the Reds’ fanbase.
Chelsea’s ability to reduce the financial impact of spending on the balance sheet stems from adopting the tactic of offering extended contracts, in some cases for seven, eight and nine years, thus spreading out the amortization costs attributable transfer fees over a longer period, giving the club more financial flexibility.
For example, a transfer fee of £100m on a five-year deal would be amortized to club accounts at the rate of £20m a year. However, if a player is offered a nine-year contract, the amortized cost is £11.1m on the balance sheet.
The use of such contracts has forced UEFA to act, blocking contracts for players over five years old from this summer, with a number of European clubs appearing to be unhappy with Chelsea’s use of longer contracts.
However, it is understood that some clubs remain concerned about a possible circumvention of the five-year rule that has been put in place.
Chelsea had tried to sign Uruguayan midfielder Manuel Ugarte from Portuguese club Sporting CP. Ugarte was a player strongly associated with Liverpool earlier this year.
It now looks as though Paris Saint-Germain will win the bid for the 22-year-old, with the Mirror reporting that Chelsea were ready to offer Ugarte an eight-year contract and were looking to circumvent the regulation.
including any additional years beyond the five-year limit as options in favor of the club that could activate them
Chelsea have made a big impact on the transfer market thanks to their approach over the past year, which has seen European football’s governing body rewrite the rules to try to avoid a potential problem down the road.
Now that new rules have arrived, other European clubs will keep an eye out as any attempt to find a solution will end up with UEFA.
And in the end, the owners must be satisfied with the investments. “If we like each other, we can work together even after the transfer market. Let’s see. Then we continue or not.”
