Why FSG?

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The last 5 days have seen a bouquet of emotions, mostly negative. As if the Deadline Day (in)activity wasn’t sufficient, we didn’t do too well in the game against Arsenal and specifically laid bare our lack of options upfront. The question that’s asked and will be asked again and again in the next few months is simple – What if one of our strikers is injured or not at the peak of his form?

Let us take a look at the strikers/forwards/attackers who have been traded at this club since Jan 2011 –

Out – Fernando Torres, Ryan Babel, David N’gog, Dirk Kuyt, Maxi Rodriguez, Milan Jovanovic

In – Luis Suarez, Fabio Borini, Stewart Downing

(Craig Bellamy & Andy Carroll have been added and subtracted)

The numbers (headcount) doesn’t quite add up. However, when someone speaks about ‘prudence’ instead of calling it poetry what we will do well to understand how much money have we made by reducing the headcount from 6 to 3. The answer is none. Actually, we’ve spent £25m in the process! Agreed that Andy will have a sell-on value and it is not fair to not include his name in the list nor consider the money his sale would raise. So if Andy Carroll could be sold on for the reported £17m, the net spend on actually reducing our strike force has been £8m. This still does not take into account the monies paid for settling Jovanovic’s contract, agent fees for buying players etc. Similarly, wage savings aren’t included here for simplicity reasons. The point is simple – we’ve spent a lot of money for having fewer players!

Some might point out that we’ve added more midfielders but that isn’t the case either. Kenny added Henderson and Adam and sold Poulsen and Meireles while Rodgers added Allen and Sahin and sold Aquilani and Adam. Net change is zero but still have spent a lot of money in the process. A net of £19m spent without adding the numbers and the figure goes up to £30m if Sahin would have to be retained to keep the net headcount at zero. But £30m for having Sahin and Allen in the midfield instead of Meireles and Adam and Henderson on the bench instead of Poulsen? Agreed it is an upgrade but the value that should have been spent on the upgrade is an intangible for now. Let’s just say it neither fortifies nor dilutes the point made above.

JWH says: “We are still in the process of reversing the errors of previous regimes. It will not happen overnight. It has been compounded by our own mistakes in a difficult first two years of ownership. It has been a harsh education, but make no mistake, the club is healthier today than when we took over.” It is easy to dismiss it as passing the blame. But he does state clearly that their regime has made mistakes too. The above is a primary example of what kind of mistakes they’ve made.

Dwelling into FSG/LFC’s mistakes, first and foremost is the question of understanding the person(s) to blame for this farce, the one where we’ve spent to have fewer players. While that would be a futile exercise, it would explain some part of JWH’s letter. KD, while following football from the outside, was too far away from the business end of things for too long to have any sort of mastery in negotiations when he spent those megabucks. FSG were too new to ‘soccer’ by their own admission, DC was just a middle man, a go-through if you like, and IA was more of a Commercial Director than an MD. Moreover, no one person takes a multi-million pound buying decision by himself. So it is more of a collective failure from everyone involved than just person. As is said, the system failed. Digging deeper, of course the management, i.e. the owners, have to and do take more responsibility in putting that (non) system in place.

What’s frustrating here is the ‘what could have been aspect’ of the last 4 windows. In Jan 2011 we had a clean slate with only the deadwood to clear, about £50m-£70m in transfer budget for future windows and another £50m in incoming money from impending sale. In Aug 2012, we were still clearing deadwood, albeit both from the past as well as newly acquired.

I am going to reproduce the Aug’10-Jul’11 LFC accounts from a Swiss Ramble article to elaborate the ‘mistakes of previous regimes’ part:

















The article (if you click on the image, it will take you to the original article) should help in understanding various aspects of the P/L but there’s a remarkable symmetry in the ‘2011’ column. If we take out the written off stadium expenses from it, it leaves us with £300k in net profits. That is also despite we sold Fernando Torres and his profit is accounted lump-sum while the purchases are amortized over the contract period. While there have been extraordinary reasons to the delicate balance of the table above like lack of Champions League football (and thus a straight miss of £30m+ in revenues) there are also the other subtle reasons like lack of commercial growth and increase in wages. Additions of players like Maxi Rodriguez, Joe Cole and Milan Jovanovic was down to the ‘previous regime’ as JWH pointed out. They bought players with low upfront costs and higher wages (mostly related to the player being available on free) so that while they would not have to increase their debt burden, the incoming regime would bear the salary burden. It was like having an upfront fee of a few million pounds amortized as incremental salary for the player. Letting Gylfi Sigurddsson go only because his acquisition would have been counter-productive to wage control was one such case. That said, Gylfi and Dempsey (non) deals also established something else in the market which I’ll cover later. The prominent number that came out from this summer’s transfer activity is the wage saving of £27 million or so.

Lack of commercial activity for whatever reasons has hurt too bad. What is apparent and well documented is how FSG have been working on those two aspects. But also noteworthy is that the commercial tie-ups are only just happening. The additional annual revenue from the Standard Chartered deal would be in 2011 accounts above. 2012 accounts would only show a marginal increase. In 2013 we would see some difference in those numbers with extra £13m from Warrior and a few more millions from the likes of Garuda, Chevrolet, Ramsey, Paddy Power, Stanley etc. However, even an optimistic estimation of those numbers would let us assume that the increase in commercial revenues would be around £25m.

In cash flow terms, spending £28m net at the beginning of the year and committing £7m in wages out of the £52m to be accumulated over the period of the year is not too bad a business considering some sum also have to be set aside for the January activity – £18m including the 6 months’ salaries for new signings. What can we expect within that kind of money? Say a £15m player with £100k/week wages. Any extra commercial activity and sales from squad would/should add to that budget. Also noteworthy is that, for the Dempsey deal, FSG were also prepared to spend £7-£9m in fees and wages.

What we did badly in 2011 was overpay for players. At times, we compensated for lack of Champions League not by offering less money but by more and thus weighing the seller’s decision in our favor despite the player not being entirely inclined. We lost Ashley Young and Phil Jones to the lack of CL football. We didn’t want to lose our second choice winger and matched whatever Villa quoted just so we could push the sale. While establishing a malfunctioning system was FSG’s fault, DC could have hedged those spendings by scouting for talented players who would have been cheaper as well as younger and more importantly, hungrier. That in turn established our image in the market as ‘big spenders’. Clubs quoted whatever they fancied and surprisingly Liverpool matched everyone’s asking price. From Newcastle to Sunderland to Villa to Blackpool, everyone benefited from FSG’s naivete as well as their eagerness to ‘buy wins’. A lesson was learnt. But while being rich is not a bad thing, what it does is make us unnecessarily pay over the top amounts for players who would otherwise be sold to others for much lesser. I presume it was a calculated gamble when FSG refused to pay Gylfi his desired wages only to send out the message: We don’t have as much money as you thing we do. In the same breath, Clint Dempsey was viewed as a value buy. As someone who was 29  and thus no sell-on value and into the last year of his contract, we thought he made sense specially in our transition year. If your car breaks down and you need to call a cab to go home, it may not make sense to call a limo. What would make even less sense would be to call a cab but pay limo’s price. What FSG did was establish boundaries with the valuations they perceived and remained true to those. It might have hurt us in the short term of 16 weeks but definitely would help us in the longer. Can’t have enough of those £22m Suarezes and Torreses or free agent Bellamies. The acceptable mistake of the Dempsey fiasco was not having a plan-B. The thing about deadline day dealings is that either you end up getting someone like VdV at great value, or end up paying way over the top like AC or end up getting no one at all. The last 4 windows have taught FSG all 3 of those.

Unless a Football Club is a billionaire’s boytoy, it can only be run as a business – a profitable business not built on debt and leverage but on strong top lines and tight expenses. For people with lesser means but higher aspirations, the reality comes to bite sooner or later. Be it Rangers or Everton or Portsmouth or LFC, a club simply cannot spend more than it earns. Debt, insolvency, administration are terms we weren’t very far off a few months ago. Let us not get into that again. UEFA FFP is an ideal case system that, if implemented, would probably see us rising to the top of financial stability and thus competitiveness on the field. I’ve said before and I’ll say it again – instead of a Sheikh or an Oligarch or a Venky’s or a Glazer or an Ashely, I’ll take an FSG to be the owners of the club I support.




  1. When FSG had to choose in summer for the new manager, LFC was in the course of the most critical days/weeks of its modern history. The decision FSG would have made by appointing a new manager would stigmatize in-depth time the future of one of the most historical clubs/brand name in the overall history of world-wide football! It was the time for a serious decision and FSG did not have the luxury to call it wrong. At the specific moment John W. Henry, Thomas Werner, and Ian Ayre had to make that decision and they did not have the luxury for further experimentations as it has been going through for the last 20 years. LFC fans got fed up with psycho-destruction choices that could only irritate and annoy them. The fans were hungry to listen for the appointment of a well-established world class manager name with a proven title winner record not the name of an unrated/unpopular manager no matter if he has the potentials or not. Thus, this season LFC’s failure did not begin from yesterday’s defeat against West Brom but from the very 1st moment that FSG considered to appoint as manager either Roberto Martinez or either Brendan Rodgers. The strategy FSG is applying is very dangerous for the future of one of the most historic clubs in the world and it may be the time for them to consider selling the team to an owner who has the financial capability to invest heavily and turn the fortunes of this club by bringing back the glory days. There are no more excuses for them, for Ian Ayre, for any manager, for the players. The responsibility belongs to them and to nobody else! So, I think the time has come for all pure LFC fans in the world to protest and ask from FSG to sell!

  2. We all know we wasted millions on Carroll, Downing etc.. but that’s football. We still need to invest to get the type of players who will get us into the Champions League and from there we can spend what we earn.

    FSG need to make the jump from 8th to 4th and we can’t do that with Downing, Henderson etc.. yet the owners wouldn’t even give a few million extra for Dempsey. That isn’t wise, that’s just being tight and short sighted.

  3. Excellent article – I will forever be grateful to FSG for rescuing my beloved club. The one thing that FSG and indeed the Americans in general fail to understand is that we LFC supporters are very patient and forgiving if the facts are laid bare in front of us honestly without the “spin “. For instance I would have said somethinf along these lines 2 years ago ” we have spent £320 million to buy LFC and we intend to make it great again a s a p .but we have to be honest and admit that it will take time – indeed in the short tern things like the ground etc will simply not happen – we will concentrate on youth and slowly but steadily we will turn things around” BE HONEST – CUT THE SPIN – TRUST THE FANS – WE WANT TO LOVE YOU – WORK WITH US AND WE WILL – Get my drift

  4. I’ve seen many people blasting FSG for their latest transfer failure. Though I refuse to believe FSG statement that their work in Liverpool is not business but that of a fan, I thought it was overly harsh blaming them too much.

    Now, Liverpool’s offer for Clint Dempsey was reported to be rejected and they were asking for a higher price compared to the amount that he was eventually sold for. On one hand, we hated buying overpriced players last season. But here, we are blaming FSG for standing their ground by refusing to bow to other clubs’ attempt to exploit us.

    Ultimately, selling Carroll before getting a striker was a tad bit impulsive, but would we rather have another case of Torres-leaving-and-a-$35m-last-resort?

    Often fans’ regard soccer as a game of transfers. Thus, we tend to put numbers into who comes in and out. Fact is, we have a decent team, and a pretty good team for the future. Shelvey, Allen, Sterling, Sahin (if we keep him) are looking pretty good. And a couple of less famous buys that hopefully will perform. Henderson has the skill, but I’m not liking his performance so far.

    Our strikeforce is a problem. But your post and many others highlighted the lack of depth. Problem is, even with a full force, we were unable to beat Arsenal, and failed to kill the game against City.

    From here on, I either hope for some rich sheikh to take over the club and buy instant success, or FSG to keep their word in planning our club for the future. I always thought managers should have the upper hand in the club and not fear for their lives all the time.

    Managers should be given time to cement their authority. I firmly believe that is Rafa or Kenny had stayed, they will be successful. Roy was a different case, he had no Liverpool spirit in him.

  5. Great great article. While mistakes have been made you can see their vision for the club. Fans calling for them to sell are simply uneducated or naive or extremely impatient.

  6. http://swissramble.blogspot.in/2012/05/liverpool-keep-car-running.html this article is fantastic! Also you interpretation of the article within your blog post is equally positive and balanced. Keep up the good work. FSG are running us in the right direction. It’s encouraging that they will and have already proven that they will learn from their mistakes. Kenny was not and is not a businessman, if we’d have had Wenger in the seat 18 months ago, perhaps things might be different on player gambles vs. eventual ROI – unfortunately, running football clubs like a business is the shrewd and ‘guaranteed’ way of survival, but doesn’t alway bring success. Chelsea and Man City are not sustainable however, their spending has already bite them in the arse (Torres and Tevez are good examples…). What FSG are doing, is learning English football second, but putting finances first which, I don’t know about anyone of you other fans, but after our last lot of Americans, I think is a pretty decent result. At very least they are transparent in their operations and honest with the fans, managing fan expectations prudently, whilst putting a message out to other clubs that we are not to be taken for a ride. They’r doing a good job.


  7. I am a gooner and firstly can I say that I would rather have Liverpool as a top of the table rival than the sugar daddy clubs. I would prefer a club built on tradition and doing things the right way. At least JWH has admitted their mistakes which is refreshing because I think Rogers is currently hamstrung by the sheer amount laid out on Carroll, Henderson and Downing. It was likely near 2 years budget and they were probably led to believe by Commoli and Dalglish that these 3 would push you back to the top, such that not many more players would be needed in the future so that all the budget could be used here. I know you all love King Kenny but it was an amazingly bad period of business for a club that is likely in a very similar situation to Arsenal, that being a big club with a big revenue stream but one not able to pay £35m over the odds for 3 players and then just wear it and buy again like Citeh do. We were good on Sunday and worth the 3 points but Liverpool actually played well IMO. You are obviously short in firepower up front but look good otherwise and lets not forget you outplayed Citeh the week before. I would hope all Liverpool fans will remain patient with Rogers as I believe he will come good for you and take you back up to the top. The style of play he likes could see you eventually rediscover the old great days. I feel you do need a short term bit of help up front and would definitely consider Owen for a season and a loan striker maybe like Sturridge. Despite blowing so much on those 3 there must still surely be enough left to get 2 like them in.

  8. Mistakes never exist, they all are learnings. Andy Carroll’s entry and exit proved that, and so did the excess money wasted last summer. FSG are at a perfect stage where I think everyone at the club knows what has to be done in the future. Few probable masterstrokes by FSG:

    1) Contract extensions of star players.
    2) increased tie-ups resulting in commercial revenues.
    3) Coup in Joe Allen, a star of the future.
    4) The gamble on Brendan Rodgers. A 39-year old with big dreams and a sincere student of the game, if manages to fall in love with Liverpool and can stay for a long span as an SAF, we know what is coming.
    5) Admiting the mistake should make them stronger and should fall well for deals in the future.

    We should be honest with ourselves and admit it takes time. Buying success through an Arab or an Russian would kill the joy of being at LFC. (People routing for them epitomise plastic)

    We are walking, and importantly, in the right direction. Direction matters more than speed.


  9. good article…for years fans being crying out for letting the likes of suso and pacheco have a good run in the 1st team now is there chance…we dont need to add a new striker we need to give the young lads confidence to shine and they will do…i fully back FSG, we all want the glory days back at LFC but we cannot compare to chelsea , arsenal , man city …its pointless , we dont want to buy the EPL like chelsea and man city , we want to WIN it with players who plays for the love of the game and not for the money they are going to make from it….so come on guys get behind our team YNWA

  10. so IF untill january LFC still in red zone, they will not sack rogers, just like they did to woy, and IF by the end of the season we get relegate they’ll not find potential buyer for LFC. *ps : i hope none of this happen, and we finish 6th (cause it’s all i can hope right now) by the end of the season

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