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With less than a week to go until the transfer window closes, Liverpool and their owners Fenway Sports Group find themselves in not entirely unfamiliar territory.
Having been quick out of the blocks in the market with the signings of Alexis Mac Allister and Domonik Szoboszlai, Liverpool’s summer rebuild seemed to be on track. But since then, despite links to a host of players and failed bids for others, the transfer business has left many fans with a familiar feeling of frustration at the club and the way that the owners choose to operate in their approach to the transfer market.
Liverpool’s major rebuild that was planned has so far seen three players join, with 30-year-old Japan captain Wataru Endo arriving recently in a £16.2m deal from German Bundesliga side VfB Stuttgart. Heading out of the door, however, are Jordan Henderson, Fabinho, Roberto Firmino, Alex Oxlade-Chamberlain, Naby Keita and James Miner, all first team players.
For some time the Liverpool approach to the transfer market was something that was lauded in football circles. The ability to find value in the market for players with a high ceiling who had been overlooked led to the inspired additions of the likes of Mohamed Salah, Andrew Robertson and Georginio Wijnaldum.
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But finding those kind of deals has become harder, and with more money than ever being shelled out thanks to the influx of private equity cash and the likes of Saudi Arabia and Qatar seeing football as a tool to diversify revenue streams and change the worldview of nations, prices have risen for players across the board, for both wages and transfer fees.
Liverpool have long had the starting point when entering into the market of being willing to pay what they believe is a fair price and being willing to walk away from a deal if it didn’t make financial sense. To look at the approach to trying to sign Romeo Lavia from Southampton, where a number of bids were rejected below the £50m that the Saints wanted but Liverpool didn’t think he was worth, and the willingness to go all out on a £111m bid for Moises Caicedo show the Reds approach.
Liverpool lost on both Lavia and Caicedo to Chelsea, with some suggestions that the latter was nothing more than a PR play designed to curry some favour for FSG. In truth, that’s largely a nonsense argument. Of course, showing a willingness to spend such sums showed the kind of ambition that fans had wanted to see, but it also saw them negotiate terms of the deal with Brighton & Hove Albion at a time when Chelsea, who had only gone as far as £80m in their bids for Caicedo, weren’t expected to come back in over and above what Brighton had been asking for all along. Indeed, Caicedo was open to the Reds move were it not for the fact that Chelsea found a way to keep their hand in and make the deal work financially.
There are easier ways to go about getting good PR than committing to a £111m transfer spend. In fact, in terms of PR, it was an entirely embarrassing episode for Liverpool and their owners, with the victory of Todd Boehly and Clearlake Capital in the market over FSG and John Henry, whose Boston Red Sox have been adversaries of the part Boehly-owned Los Angeles Dodgers for some years, something that would have left some egos bruised.
There is money to spend for Liverpool. This is a club that generated £594m in revenues last year, is a club in the black and with next to no concerns about breaches of UEFA’s Financial Fair Play regulations or the Premier League’s profit and sustainability rules. It is a club that has access to credit, has good cash flow and a business model that is robust. All these things are a testament to good stewardship of the club as a business.
However, the transfer market has evolved in recent years and the Reds’ rigid approach to how they do business has created a problem.
There were eyebrows raised when the Reds bid for Caicedo at such a high price, especially when they baulked at a potential deal for Jude Bellingham, who ended up joining Real Madrid. The reality was that the overall cost of the deal in terms of wages, agents fees and other contingents meant that it dwarfed the move for Caicedo, who Liverpool felt could solve their defensive midfield problem immediately as well as be its cornerstone for the next six, seven or eight years.
Liverpool have a long list of targets, as any club does. Clubs move through their list until they land what they need. But this summer, in the way that moves have panned out, the Reds have been left moving through their list but finding that the kind of targets that they want aren’t getting much cheaper. Figures of £70m-plus for Crystal Palace’s Cheick Doucoure have been touted, a player who cost Palace just £18m last summer. Liverpool are now having their feet held to the fire with little in terms of leverage, options running out in terms of their target list and, most crucially, time ticking away in the window, one again running the risk of leaving themselves short in key areas for a campaign where they really need to get back on the horse and make it into the top four and the Champions League to overcome the disappointment of missing out for this season, both competitively and financially.
There is a notion that the lack of desire to spend big is purely through the owners putting profit over success. In reality, FSG don’t own Liverpool, or indeed any of their sporting assets for their profitability year to year. Of course, they want a profitable business with strong revenues, and how successful they are at doing that relates directly to their ability to invest on the pitch sustainably. But in terms of the financial benefits for FSG, they are in the business of long-term value creation from the assets they own. The £300m paid for Liverpool in 2010 is now around £4bn, and that is a figure that will almost certainly continue to rise in the coming seasons as the Premier League keeps growing globally and new markets and demographics take a greater interest, driving up revenue through broadcast deals, sponsorships and merchandising.
The kicker for FSG is that to continue realising a growth in the value of Liverpool the club has to continue being part of the conversation year in, year out when it comes to success in the biggest competitions. With new generations of fans in new territories waking up to the sport and ready to follow the journey of Premier League teams, making sure the Reds are as successful as they can be is actually a cornerstone of their Liverpool business.
The problem is that it is becoming increasingly expensive to compete, and going toe to toe financially with the likes of Manchester City, who face over 100 Premier League charges relating to alleged breaches of Premier League profit and sustainability rules, Chelsea, whose owners are embarking on a high-risk strategy that could see them faced with big P&S issues in the future, the Saudi Arabian Public Investment Fund-owned Newcastle United and the rise of the PIF backed-Saudi Pro League, is becoming harder with the tried and tested Liverpool model.
It is a fallacy that FSG don’t want Liverpool to win trophies and be the very best team in world football, it is after all the thing that delivers huge financial incentives and helps to grow the value of the business further. But it isn’t incorrect to think that the stubborn approach to the market needs to be flexible on a needs basis.
Liverpool have left themselves little room for manoeuvre in the remaining days of the window, and they won’t be able to find any real value from clubs that know the Reds have cash and are desperate to add players in key areas. The approach to the second half of the window has created problems, and expensive ones at that. Liverpool have always moved on from targets they don’t feel are worth it, and that has often been to their credit and afford them negotiating leverage as clubs know that they aren’t bluffers. But now, with days remaining, the Reds are left knowing that they will have to overpay to get the next targets on their list, and in leaving it so long they have done little to inspire confidence.
But overpay they must, as if they don’t address their issues it could end up costing them a lot more than a few extra million if it is to be another season away from the Champions League, and that has the potential to create a domino effect.
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