Football regulator vows to look ‘very closely’ at debt-funded takeovers
Watchdog is seeking financial information from clubs for its first ‘state of the game’ report, due next year
The head of English football’s new regulator has raised the prospect of making it harder for investors to use debt to fund club takeovers, a practice that has previously lumbered teams — including Manchester United — with years of costly interest payments.
The Independent Football Regulator last week outlined what financial information it intends to seek from clubs and leagues in order to produce its first “state of the game” report, due next year. The results of that report — billed as the “most in-depth assessment of the football industry ever conducted” — will then be used to inform policy at the new supervisory body.
Richard Monks, chief executive of the new body, said that there was no desire to stop owners from investing in their teams and that increasing financial sustainability did not mean aspiring to “the stability of a graveyard”. Clubs would not be expected to break even, he added.
However, one area of concern was the way debt has been used to fund takeovers, which can then stretch a club’s already fragile finances.
“We want clubs and owners to have ambitions and dreams. We’re not risk averse. That’s what makes English football so special and that’s what fans want”, said Monks, who previously worked at the UK’s Financial Conduct Authority.
“But at the same time, we don’t want the future of clubs to be gambled away. And I think because of that, we would look very, very closely at highly leveraged buyouts, for example.”
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The IFR will have the power to block takeovers if it deems the funding behind them to be insufficient. Monks said that the regulator would look at every club and every takeover on a case-by-case basis rather than introduce blanket rules on borrowing.
“Something we would strongly consider is whether highly leveraged buyouts have any place in football. I suspect they don’t,” said Monks.
Debt-fuelled takeovers have been a controversial topic in football since the Glazer family acquired United through a leveraged buyout in 2005. The club has since paid more than £1bn in interest and debt payments.
In 2023, the Premier League set a limit for how much debt could be used to fund a club takeover, while many US sport leagues have strict controls on how much any team can borrow.
A report by BDO last week highlighted some of the financial challenges facing the game. The accounting firm found that 90 per cent of English clubs expect to record pre-tax losses this year, and so need further injections of capital from their owners.
Monks said that clubs’ reliance on shareholder funding had left many “on the precipice” financially.
“Owner investment provides great benefits to English football,” he said. “But at the same time, if owner funding is suddenly withdrawn, clubs face immediate financial crisis. So we have to examine liquidity, we have to examine solvency, we have to examine business models.”
Several clubs have fallen into distress after their owners stopped providing the funds needed to cover losses. Sheffield Wednesday, one of the oldest teams in English football, fell into administration late last year after its Thai owner stopped putting money into the club.