The Sale of Barnsley FC - More or Less Likely?

Fair enough. My reading of "for the foreseeable future" is "for a bit". If those last few words hadn't been in the press release then it could be interpreted very differently.
I'm sure Patrick won't let anything distract him from fighting his illness, and I know that you and everyone on this board is on his side, but that quote of Mark Twain might just cross his mind.

 

The safety net as you term it (ie the promise of cash) that Mr Cryne provides would have to be provided under new ownership. Therefore cutting through all the conjencture, as we stand with the club owning zero assets in reality - the only other potential owner would be a Barnsley fan with millions to spare. Not happening.

It's my contention that if Cryne went we would not see another full season out at Championship level, unless the new ownership had millions to fund future operations to gamble on progress.

We do not prosper on gate receipt and commercial activity alone. And with contracts for Hourihane et al running down, the potential for transfer income is minimal at best.

 

I didn't say that the Balance sheet is the only consideration when taking over a football club; it clearly isn't, there's always going to be an emotional element to an investment in any football club given that in general they are such poor investments if you measure them solely in financial terms. What I did was respond to your incorrect assertion that the balance sheet is "healthy". It absolutely isn't, for the reasons that Extremely Northern and I have already outlined.

You are correct that Patrick Cryne has not always had to provide prop-up funding in every year, but you have a look at the years where we haven't made a surplus from player trading and then tell me whether or not he has had to put gifts or loans in. What you'll see is that from underlying trading, we run at a loss. Despite claims on here to the contrary, this club is still not run in a way where it is self-sufficient save for the bonuses of big transfer fees, and at the moment we have very few saleable assets given the short duration of contract we have remaining on our best players. In a world where Patrick Cryne continues to underwrite the losses, it doesn't matter, indeed it helps to make us competitive and we are uniformly grateful for that, but it's just yet another reason why the club isn't on the face of it an attractive investment to a non-fan.

You point to the intangible value in the football league share; yes, but this applies to all football clubs. An investor looking for a football club to invest in isnt likely to be assessing us for value against Shaw Lane Aquaforce are they, they're likely to be looking at us versus say Leeds, or Rotherham, or Doncaster, or whoever. What you also fail to consider is the lower potential ceiling for crowd and income increases we have versus clubs with larger catchment areas and/or traditional fanbases. What all this means in my opinion is that for someone to want to invest in us, as EN says, they're likely to need to be a carbon copy of Patrick Cryne - a wealthy Barnsley fan with both the will and means to underwrite losses. I suspect the population of appropriate people fitting those criteria is somewhere between zero and two. This is not necessarily a bad thing - as has been pointed out it does as was intended in protecting us from the asset-strippers and the quick money-makers, but it makes finding an alternative tricky.

Finally, you are incorrect in your interpretation of a balance sheet; it is not a record of historical transactions at all, but a snapshot of the overall financial health of the organisation through it's assets, liabilities and capital at a specific point in time. This is an important distinction and without understanding that you are not properly interpreting it.

 

There's now about £75 left in the flag fund, so we may keep that for your card if the worst happens

 

Wow. When I typed out my original post, I had no expectations that it would be met by a prediction of Armageddon. I thought that was my job.

If Barnsley Football Club is to survive, it must have a workable business plan. I accept that it needs an additional income stream other than gate receipts, commercial activity and income generated by the Football League from TV deals. The magic formula that I referred to in my original posting was the development of that new income stream. The phrase, "magic formula" refers to the team that finds potential new talent before it has been spotted by anyone else. It refers to the team that coaches and develops that talent and improves it. It refers to the willingness to put that talent in the shop window of the first team, and it refers to the willingness to sell that talent on at the right time. You refer to Conor Hourihane as though he is the only talented player at the club, as though his value is plummeting because he is nearing the end of his contract. You may be right about Hourihane, but you are wrong about him being the only player at the club with any value. The process of finding, developing and cashing in on talent has to be regarded as an on-going and continuous process. It has to be regarded as a primary income stream, because without it, you are right. The club is doomed. But I see that the club sees things in the way that I have described and I see that our recent transfer activity underlines the view that this is the only way that small clubs can survive and prosper outside the Premier League.

Do not get me wrong. I think that football club ownership is a rich man's game. There are bound to be bad years, and when there are bad years, it is less risky, easier and cheaper to get that bridging finance from an owner rather than a bank, and that will be the case whether you have tangible assets or not. You may be correct that there is no alternative to the Cryne family when it comes to the prospect of the type of beneficial ownership that we have all enjoyed, but that question goes to the heart the question that I originally posed. I hope that the prospect of Armageddon is not the only thing that we have got to look forward to when the Cryne family eventually hands over control of the club. I hope that their tenure in charge has been marked by the legacy of a business plan that works, but only the future will tell.

In the short term, we made £6m from the John Stones sell on and another £5m from the Alfie Mawson deal so the club is not in imminent danger of collapse, even if the Cryne family has taken back its loans, which I doubt.

 

10 bob card, I'll have the rest in cash. nice one.

 

Na, the rest will have been "donated" to the Curry Mahal by that time

 

I don't think we will ever see him back at the top in the position he's gave up to concentrate on a bigger battle. He's wanted to sell the club for years and mentioned passing it to the fans. He doesn't like being known as the owner. I think things will run smoothly whilst he's away and when he's able to come back he will just decide to keep things as they are, trust others to continue to run the club properly and after another health scare try and enjoy the club more just as a fan with less input at board level.

I still think the Cryne family will own us though because nobody in the right mind is going to buy such an unattractive football club due to us not even owning our own land.

 

The mistake that you make is that you regard transfer income as a "bonus", rather than an integral part of the trading income of a football club. It is income that can form an exceptionally high part of total revenue and it is exceptional in that it is variable from year to year, but it is, nevertheless, part of the normal trading revenue of a football club. As I have said to Extremely Northern in a separate posting, Patrick Cryne has changed the way that the football club thinks about transfers, both inwards and outwards. It is now more closely to the core of the way the club generates its income and should not be regarded as exceptional.

You are right that a Balance Sheet is a snapshot in time, a summary of Assets and Liabilities, but those figures are made up as a summary of historical spending. If it was an accurate valuation of a company, then companies would always be sold for the Balance Sheet valuation. They are not because the Balance Sheet merely reflects the historical cost of many of its assets. Let me illustrate.

If a company was formed to buy a house at a cost of say £250,000 and the shareholders provided the funds for the purchase of that house then the Balance Sheet would show Land & Buildings at the historical valuation of £250,000 and Share Capital of £250,000. If the company did nothing for 10 years, then at the end of that time the Balance Sheet would still show Assets of £250,000 and Share Capital of £250,000. However, if you asked an Estate Agent to value that house, he might give a valuation of £300,000. Even though the principle and only asset of that company is now worth £300,000 according to a professional valuation, the value in the company's Balance Sheet would not change, because a Balance Sheet, for all that is a snapshot in time, it is also a historical record and not a record of the current value of a company.

Here endeth today's lesson in practical accounting for beginners.

 

Right let's tone down the hyperbole. Armageddon ? Because a football club struggles financially ? Dear me.

If Cryne left - as Dave Allen has just done at Chesterfield, then how would we move forward ?

I note in your reply to TM you equate transfer income with regular anticipated income. Almost like a debtor sheet. You take this from our recent-ish business model of buying younger/cast off from other teams players to develop and sell on. If you went to buy the club today, what are the transfer values of our squad ? The realistic answer is that you cannot say. As a buyer (non Barnsley fan) where is the value in the playing staff ? Not theoretical, but hard cash value - it just isn't there. So the only possible purchaser as we stand today - with the Club not owning any tangible assets - is a Barnsley fan with pots of cash - we are not an attractive proposition to any other buyer - unless what is for sale changes.

And I didn't say Hourihane was the only one with any value - but he's a good example of an asset reducing in cash value over time.

 

NY Yankies owners looking into buying Notts County. Why can't we drop on something like this. Financially secure,2 leagues above county, 1 season & we're a premier league team

 

When someone buys a football club, they are not buying the individual assets. They are buying the company that owns the football club. That company/football club comprises a number of assets, some of which are on the balance sheet and some of which are not. In previous contributions to this thread, I have tried to show that many of the company's assets are not on the balance sheet. This is true of any business. Some of these technology companies have huge valuations, but they own almost no tangible assets at all. Admittedly, their worth is tied up in future profitability rather than being one of the 72 clubs privileged to play in the football league. Nevertheless, for an individual with plenty of money, and a desire to be involved in football, that position in the top tier of the football league is worth something. Nevertheless, the Cryne family will need to ensure that there is more to the desire to be involved in football than ego. They will be looking for an owner with good intentions, someone prepared to stick with it when the going gets tough, someone who has been through the learning curve, someone who they think can take the club forward. As you say, there are not many of those around. The question is, does Mr Cryne's illness add new urgency to the search, and that is why I posed the question originally.

I am still not sure why you think that a football club should own its own ground. Sure, it is a tangible asset, but the ground would cost any prospective new owner £6m on top of the price he pays for the football playing side. What could he do with the ground that he cannot do without it? The training facilities lie in an area of green belt so he cannot sell it for housing and because of that it has only agricultural value. He could sell the ground and car park, but where would the club play then. He could pledge it against a loan, but he already paid £6m to buy it, so how would he be better off. I do not follow this tangible asset argument at all. Perhaps you would care to explain it to me.

 

"The mistake that you make is that you regard transfer income as a "bonus", rather than an integral part of the trading income of a football club. It is income that can form an exceptionally high part of total revenue and it is exceptional in that it is variable from year to year, but it is, nevertheless, part of the normal trading revenue of a football club"

Absolute bilge water; it is not part of the day to day trading and it is by definition an exceptional item, which is why it's shown below the line as such when compiling statutory accounts. You cannot draw an extrapolation from one year to the next because by it's nature it is so lumpy and dominated by extraordinary items. If you think that is a basis for a sound business then you are tapped.

Why are you rambling about accounting for assets on the balance sheet? I am perfectly aware of how that works thanks, but the whole point that you seem unable to grasp is THE FOOTBALL CLUB DOES NOT OWN ANY ASSETS OF ANY REALISABLE VALUE other than any cash remaining in the bank from Stones and Mawson. I know that you have intimated intangible value in the football league share, and in players at the club - but again - you're wrong - our best players have short contracts remaining and therefore expectations of future transfer receipts have to be low. Where exactly do you think we will generate player sales receipts from?

Setting all this aside, in any case, again, in the example you stated you are yet again not necessarily right, as it is possible under IAS16 to upwardly revalue land and buildings to bring them in consonance with fair market values. This gets credited to Revaluation Reserve within Capital Reserves (ie. you can't distribute it for dividends).

Thanks for the lecture in "practical accounting for beginners" but you're alright thanks.

 

Again you're extrapolating ideas that aren't there.

I'm not saying a football club 'should' own its ground - what I am saying with regard to BFC is that BFC owns nothing except the value of players contracts, cash in the bank and the theoretical future sale value of players. So how is that an attractive proposition to anyone other than a Barnsley fan, given also the limited uplift in crowds (future revenue) given a 25000 seat stadium that you wouldn't own. If you don't follow that owning 35 acres of land (if memory serves) is an asset worth buying then I think we're on very different pages indeed.

 

This debate seems to be getting serious. I quoted an illustration of why a Balance Sheet is a historical statement rather than a current reflection of value and you respond by quoting back at me an International Accounting Standard. I am well aware that under certain, very limited, circumstances Fixed Assets can be revalued, but that was not the point that I was seeking to illustrate.

Transfer fees are exceptional only because of the reasons that I state. They are though, and always will be, a normal part of the business model for a football club. The difference is that our club has become more actively engaged in seeking to maximise this source of income.

I have asked Extremely Northern to explain to me why it is important that the club owns its own ground, and I repeat that request to you. As I said to him, "sure, it is a tangible asset, but the ground would cost any prospective new owner £6m on top of the price he pays for the football playing side. What could he do with the ground that he cannot do without it? The training facilities lie in an area of green belt so he cannot sell it for housing and because of that it has only agricultural value. He could sell the ground and car park, but where would the club play then. He could pledge it against a loan, but he already paid £6m to buy it, so how would he be better off. I do not follow this tangible asset argument at all".

 

The reason I quoted IAS at you was your patronising tone - "practical accounting for beginners" indeed - you seem to be under the misconception that you're the only one on this board with any knowledge on certain subjects, and there's a certain schadenfreude in out smart-arsing a smart-arse.

You honestly don't think a business with 34 acres of land and buildings worth several million, and beholden to no landlord or having no monthly outgoings, isn't worth more to a potential investor than a sitting tenant at the whim of his landlord with zero salaeable assets or ability to secure finance on? Sorry, I can't help you then.

 

Sorry, but you have not addressed my points.

The club will cost the new owner more to buy because he has to buy the land as well. If he could make money out of that investment, I would understand your logic, but he cannot do anything with the land, so he has tied up £6m in an asset that he cannot do anything with. I'm sorry, but the business logic of your reasoning still escapes me. Please run it by me again with an explanation of how the new owner makes money from owning the ground.

 

Benefits of owning the stadium

1) He has no landlord and no commitment to the monthly outgoing associated with it and the risk that the landlord will begin charging him an exorbitant rent (see Coventry City)
2) You assert that he cannot make any money from the land and buildings, but how do you know that? There have been planning applications already put forward by the incumbent owner. There are restrictions on greenbelt, sure, but is ALL the land subject to this? No, it isn't.
3) He can make money from leveraging the facilities and land and buildings for other purposes than football during the week and the offseason
4) He can secure loan finance against the fixed assets should the need arise
5) He can sell up and move somewhere more cost effective should the opportunity present itself...
6) ...Or extend the current stadium if that is required
7) He can sell naming rights, sponsorships etc against the land and buildings.
8) He does not have to work with a third party every time he wants to do something.

Will that do?

 

Your point was that there was no benefit in owning 35 acres of land & the stadium as it would cost money to buy.

Assets cost money. The key is making the assets generate more money than they cost.

 

Was it not you who started the patronising tone when you said, "finally, you are incorrect in your interpretation of a balance sheet", and preceded to quote Wikipedia at me. I think that debate is far more informative if all parties have respect for the other person's opinion and intelligence, don't you. At no point have I told you that you were talking "Bilge Water", nor accused you of being "Tapped".

As I have said, the Land and Buildings would cost any prospective new owner an additional £6m. There is nothing that he can do with it that he cannot do now and he has tied up £6m of capital. OK, he does not have to pay rental on the ground, but he has lost out on the interest that the £6m would have been earning if it was on deposit at the bank, or the interest he needs to pay if he has borrowed the money. He has no saleable asset anyway because he needs a ground for the team to play in. Please do not insult my intelligence again. I am simply asking you for an explanation that stands up under scrutiny. After all Mr Cryne is an accountant and it was he who made the choice to split the club into two. I am simply agreeing with his judgement, so if you are quarrelling with me about that decision, you have a quarrel with him as well.