The Sale of Barnsley FC - More or Less Likely?

The recent announcement by the Cryne family and the subsequent decision by Patrick Cryne to step away from the day to day running of the club is a huge blow. Of course, we all wish Mr Cryne well in his battle with cancer and hope that he is soon fit and well and able to resume control at the head of the organisation. The news should once again focused minds on the family’s on-going efforts to pass the club on to a new owner, who will look after the club in the image and with the care that the Cryne family has shown. I have noted that Mr Cryne’s son has not chosen to stand in for his father as a temporary member of the board, and this must surely point to the eventual sale of the club, and the intensification of the search for a new owner. But does our recent success, both on the field and in terms of successful transfer activities make a sale more or less likely?

The number of potential new owners for a small town football club that has always sought to punch above its weight, and with the right motives for wanting to become the new owner are few. The ownership of the football club has cost the Cryne family £millions and whilst there has been a general out-pouring of sympathy from fans because of their current problems, it is not long since Mr Cryne was being urged to move on by a small section of impatient fans, keen to see greater investment in the team. Being the owner of a football club has more downs than ups, and deep pockets are a key requirement for any owner who wants to come through the downs. Football club ownership is a rich man’s game.

It has taken Mr Cryne a long time to establish a viable formula for running the football club. It has been a long learning curve during which time many managers have been tried. Each manager represented a new change in direction and policy, a new formula for success, a new recipe that had to be tried and tested before moving on. We have all written thousands of words on here that documented that search for a magic formula, and finally that formula seems to have been found. It is tragic that Mr Cryne’s moment of success has been overtaken by sadness because of his new health problems.

Most fans would assume that a club that is very much on an upwards swing is much more of a saleable asset. It has an attractive Balance Sheet with cash in the bank. It is establishing itself in a new division. It has a good management team and it has developed a reputation for finding and developing new young talent. What could possibly go wrong? Well, the something that could go wrong is the sale of the club to the wrong owner. You see, as I have pointed out, Mr Cryne has made lots of mistakes over the years. Those mistakes were costly, but he took it on the chin, funded the mistakes personally and he has learned from those mistakes. Our current success is the product of that expensive school, but a new owner will probably want to do things his way. A new owner might see the pile of cash in our Balance Sheet and think that it would look a lot better in his. For all his promises, a new owner may not have the right motives for ownership.

This is what the Cryne family must try to assess, and I would suggest that our recent successes make that process harder, rather than easier. They must look beyond the words in order to assess the motives of any prospective new owner. Of course, a new owner will need money and lots of it. In Mr Cryne’s case, that money allowed him to ride out the shock of relegation, gave him the time to find a new and viable strategy, and eventually, allowed him to put the club back on its feet. But equally, that money could have been wasted in chasing the impossible dream. It could now be residing in the pockets of any number of feckless footballers who came, gave very little to the cause, and disappeared again with pockets bulging with cash. The fact that a rich man has made money does not mean that he cannot lose it all again very quickly by chasing the impossible football dream. Mr Cryne cares too much about the club, and what he has achieved during his time with us to cast it all away by choosing the next incumbent to the hot seat carelessly.

But there will be pressure to move on, to make a decision. There will be pressure from the Cryne family and there will be the pressure of time. Personally, I hope that he will be able to resist those pressures long enough to make a good decision. In my opinion, giving the club back to the fans is not a good decision. Whilst the fans have the good of the club at heart, they neither have the cash resources to resist the shock of relegation, nor do they have the wisdom to pursue the correct policies to give the club the best opportunity for long term success, or even a good definition of what long term success is for a small provincial football club.

We live in interesting times.

 

Iv got a feeling this time next year the ownership of Barnsley football club will look a lot different to what it does now.
Just as long as we don't sell to Cellinos mate we should be fine.


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There's a lot of sense in there, but I think there are two main issues here:

This, just isn't true. It can't be; we don't have any tangible assets other than whatever cash is sitting in the bank from the one-off sale of players, and as far as I'm aware we still haven't fixed the issue of making a year-on-year operating loss before player trading, so whatever cash there is sitting in there will just drain away from funding this shortfall. Similarly, whilst the Cryne family have undoubtedly underwritten losses in the past at great personal cost, a significant portion of debt to them still sits on the balance sheet. So it's far from "attractive". This is an unfortunate consequence of splitting the football club from the stadium - we all understand the intention but in my opinion it has made the football club unsaleable, which has been borne out by the lack of serious investors coming forward.

Secondly - the successful formula as you put it has coincided with Patrick Cryne becoming more involved with the running of the business personally, which clearly now is (rightly) going to take a back seat with him. In the past Mr Cryne has been scathing in his criticism of those he appointed to run the football club on his behalf. I wonder if the family will now be more active in seeking alternative ownership - in the past it's always felt like they've had the house for sale without having a board outside or putting it on rightmove...

 

This speculation is way too premature, if understandable.
I'm sure Patrick is only concerned with overcoming this temporary setback and getting back to running the club. He's not the sort to give up easily.
I'd prefer to leave him to get on with doing just that, with all our support of course.

 

We've had a press release, from the club, saying Patrick won't be involved directly in the running for the "foreseeable future". So there's going to be change on one level or another. I'm not sure how speculating what this might or might not look like hampers Patrick from fighting his illness, particularly given the outpouring of goodwill that's come from this board.

 

Situation summed up succinctly - it does seem to pass a lot of people by that the Football Club owns nothing.

What would someone be buying ? Other than potential cashflow.

 

We don't want to become another Coventry City; foreign owner, no ground, no supporters, no future.

At the moment only one of those applies to us; no ground.

 

imho our 'business model' with regard to assets means only a Barnsley supporter who doesn't care about a return on their money would purchase - unless Oakwell Community assets would consider selling the land and stadium too.

 

Hope you're right mate.

 

I know what you mean - a lot of sharks out there - the issue is (as with Mr Cryne's health at the mo) - if we 'need' to sell, then there's a limited market of buyers.

 

Yes, the dregs at the bottom of the barrel.....

 

If Patrick Cryne decides to sell because of ill health then Baz Taylor wants to be as far away from the club as possible, remember he brought Peter Ridsdale in.

 

AFAIK, there's nothing to stop a new owner building a stadium elsewhere in the longer term.

 

Absolutely not - unless some restrictive covenant was placed in the deal - length of tenancy etc


Sent from the darkest recesses of a poisoned mind.

 

I am the same age as Patrick Cryne. I am retired. My mortality is not constantly in my mind, but I cannot say that I have not thought about the day when a doctor gives me news that I dread. That is not to say that Patrick Cryne has been given that news. I have no knowledge about the seriousness of his condition and I have only raised the issue because I feel some affinity with his current dilemma. I cannot help but place myself in his shoes, and consider what difficult choices I would have under the same circumstances.

As for your points about the Balance Sheet, I have to say that I do not agree.

You have correctly identified that the land and buildings that formerly belonged to the football club are now held in a separate company. That company is owned 50/50 by Patrick Cryne and Barnsley MBC, who paid £3m each for their shares. In my opinion, the ownership structure of the football club and the property company was a masterstroke. It reflects the main reason that the original BFC failed. The original BFC failed because it pledged the property to the bank as security for a loan. When BFC could no longer afford that loan, the bank pull the rug from under its feet and called in the Administrator. If the football club no longer has any assets, it cannot pledge them against a loan, therefore it can never put itself in that danger again. I am sure you are right that the football club would be a far more attractive proposition if it had land and buildings on its Balance Sheet. But would it be more attractive as a football club or because the new owner could potentially cash in by selling the property. This is exactly the point that I was making about the cash resulting from the recent transfer business, and the difficulty involved in assessing the motives of potential buyers. Mr Cryne just does not know for certain whether potential new owners are interested in the club in order to make a fast buck, or because they want to take their turn as custodian of a community asset.

You also make the point that most of the money invested by the Cryne family is in the form of loans, and indeed it is. However, the amount of cash that the club has pocketed is sufficient to repay those loans with plenty left over. However, Mr Cryne has never shown any desire to manage the club in a way that would see his loans repaid. Indeed, he has always seemed ready to put his hand in his pocket to fund additional expenditure. Were he to sell the club though, it would not seem unreasonable that the new owner repay those loans with the cash that he injects into the club as part of the takeover deal.

For the record, the Balance Sheets of football clubs considerably undervalue them all. Firstly, the Balance Sheet does not include the Football League share. Every football league club owns such a share and must have one before it is allowed to play in one of the divisions of the football league. One never hears about such things until a club is being sold, and the Football League deliberates upon whether the new owner is a fit and proper person, and whether the share will be transferred. It would be an interesting exercise to try to place a value on such a share and in order to do so you have to consider how much the cost would be, and how long the waiting time in order to obtain the share without taking over an established league club. And yet, the share is listed nowhere on a football club Balance Sheet.

When a club signs a player, the cost of obtaining the player's signature on his contract (transfer fee, signing fee, agents fees etc) are capitalised and shown on the Balance Sheet. This sum is written off to Profit and Loss Account over the term of the players contract unless the player leaves prematurely, when the balance of the cost remaining is written off immediately. The market value of players under contract to the club is liable to fluctuate with the form of the players and the length of time left on their contract, but in the case of Barnsley FC, the current market value of players will be far higher than their Balance Sheet value, meaning the Balance Sheet value is lower than the true value of the club.

Most football clubs lose money. The fact that the most likely outcome for any investor in a football club is that he will lose money does not seem to put potential investors off. Investors have an innate confidence in their own ability and are prepared to back themselves to come out on top. I have no doubt that the Cryne family could have sold out long ago if they had no concern about the future of the football club, but the right owner is particularly hard to find. And that was the original point to my opening post. It will be very hard to find a suitable new owner. I hope the troubles that the Cryne family are currently enduring do not cause them to rush the process.

 

If I may :

1. Land - any new owner would be a tenant. There are no assets on which to secure any finance - possibly a good thing given the whole Administration saga, but again - no tangible assets in that respect. Other than players contracts and theoretical transfer fees.

2. Loans - Mr Cryne underwrites about £2m of debt each season if I recall correctly. The new owner would have to take on that mantle or show that they had funds to clear said debt -and provide working capital going forward. You mention cash pocketed - I'm not sure how you calculate that there would be a healthy surplus, given undisclosed fees, on going costs and overheads both this season and future seasons - we have zero guarantee of more lucrative player sales in the future.

3. The football league share - what value can it possibly have outside the world of league football ? I'd suggest zero. It is a necessary process in purchasing and establishing yourself as a suitable owner. It's only purpose is to dissuade the more suspect characters from buying football clubs - hardly a success granted - which leads to :

4. Your take on balance sheets being undervalued - take that theory to a bank and ask them to lend you money to buy a football club. The very best of British with that.

5. Current market value of players - diminishes over their contract period, and is not a solid footing on which to draw up a business plan. Unless you plan to sell as soon as you purchase to fund other acquisitions - but again, depends on a suitable purchaser etc etc, and is at best a theoretical figure.

You are right in stating it is hard to find a new buyer, even more so as the reality of BFC's financial position isn't as rosy as you attempt to make out. We are dependant on the Cryne family. Happily Mr Cryne has been working to mitigate that and hopefully stop that situation.

 

Hope we don't sell the club, otherwise we will have to get a new flag.

 

If I buy it and drop badly you can just send a card or something.

 

I do not think that I have attempted to make out that the financial position of Barnsley FC is rosy. My last posting was made in the interest of balance. I was merely countering some assertions made by Tyketical Masterstroke about the interpretation that he placed upon certain figures in the BFC Balance Sheet. No potential purchaser will look only at the Balance Sheet, because a Balance Sheet is merely a historical record of past transactions. Potential purchasers will be more interested in the potential future rather than the historical past.

Mr Cryne does not underwrite £2million pounds of debt every year. I have copies of the accounts for the past 5 years and write a report of their contents each year. What Mr Cryne does is provide a safety net to tide us over the bad years. The safety net tends to be required when we are relegated and a structural adjustment is required in order for the club to become used to the lower revenues in the league below. The last time that we were relegated, I seem to remember that he had to find £2.7m, but there have been long periods when he contributed nothing.

In order to become the owner of a Football League club, you need the Football League share. Without it you cannot be an owner of a club. These things are not traded so they have no intrinsic value, but you have to buy a league club and then pass certain tests in order to get one. The fact is that football clubs are sold for far more money than would be suggested by their Balance Sheet valuations. Accountants usually refer to the difference between a Balance Sheet valuation of a company and the figure for which it is sold as being Goodwill. Goodwill being the theoretical difference between one valuation and the other. However, this is merely a convenient cover-all that saves the time and effort of establishing the real reason that the two valuations differ. All that I am saying is that Barnsley Football Club has a valuation that is higher than its Balance Sheet valuation and if you were to try and attribute the individual assets that comprise Goodwill, then two of those assets might be the Football League Share and the difference between the Balance Sheet value of the players' contracts and their current market value. The reason that I think that the Football League share has a valuation is that if you were to start by buying a non-league team and through successive promotions, get it to the level that Barnsley is playing at now, there would undoubtedly would be a cost measured by the funding requirement necessary to improve the playing performance of a team in order to get it to our level. That cost is not reflected in the Assets of Barnsley FC because it is a cost that has been funded by the owner through Share Capital and Loans. The cost is all the losses that the owner has had to fund. If you like, the debit balance on the Profit and Loss Account reflecting all those past losses.

No reputable bank is going to lend you money to buy a football club, which is why our intermediate owner had to go to the disreputable end of the banking system for money.

 

Some interesting points, Red Rain. But after the roller coaster of the last 12 months I've come to feel we understand the soul of our club even less. It's progress has been a magical, almost mystical thing. And I think we have little prospect of fully understanding it, let alone trying to bottle the formula. All we can do is rejoice in the relative success we've enjoyed and have faith in it's continuance. Some form of trust would seem one way forward. But I look at things like the Wentworth Fitzwilliam Trust, and find I don't understand that - who it benefits and what it really stands for - and I find that I can't be sure that such an arrangement would guarantee the spirit of what we've had for the last 12 months and what we continue to have. I think that all we can do is to enjoy living in the sun - for now.