Chelsea: Club face off-field shake-up once Abramovich era ends
Change is in the air at Stamford Bridge, where a new owner is likely to be installed before the end of the season after Roman Abramovich was forced to put Chelsea up for sale.
US bank the Raine Group has told bidders to register their best offers by Friday, with interest reported from suitors in North America and the Middle East as well as the UK.
A takeover is likely to just be the beginning of the changes at Chelsea, however, who will almost certainly have to redraw the operation that propelled them to the top under Abramovich.
The business model – from sources of income to personnel and transfer policy – could all be overhauled in the weeks and months that follow a change in ownership.
Here City PM examines why several aspects of the way that the Premier League club is run could be poised to change and what they might look like under new owners.
Funding
It is unlikely that the next owner of Chelsea will be willing to subsidise losses to anything like the level that Abramovich did, unless they are a state-backed entity.
Abramovich provided around £700m in financing in the last 10 years and £365m in the last five years. Both figures are higher than at any other English team.
The funding helped to absorb cumulative losses of £260m over the last decade – again, more than any of their rivals – resulting from operating losses of £769m.
Chelsea did balance the books better in the second half of Abramovich’s 19-year ownership but remained propped up by loans from the Russian that grew to £1.5bn.
US suitors, who have been the most prominent so far and includes co-owners of baseball franchises the LA Dodgers and Chicago Cubs, have tended to be less keen to pump in cash.
The Glazer family have been infamously frugal at Manchester United, while Liverpool’s success under Fenway Sports Group has cost around £110m in funding over 10 years.
With private equity focused on generating a return, its involvement in any successful bid for Chelsea would only make covering a loss-making business even less likely.
A state-backed entity, such as those from Abu Dhabi and Saudi Arabia which own Manchester City and Newcastle United, would in theory be able to provide more generous funding.
But US bids are thought to be the frontrunners, with a preference among all parties involved in the sale for a swift deal not held up by regulatory red tape.
Chelsea’s transfer policy
One of Chelsea’s great achievements of recent years has been in generating income through player sales, but that model is under threat for reasons unrelated to Abramovich.
Over the last 10 years they have banked more than £600m in transfer fees, which is at least £250m more than any of their Premier League rivals.
That strategy has relied on identifying and signing talent at an early stage and then fostering it in the club’s academy or in a series of loan spells.
But Brexit has made it harder to sign promising youngsters from outside of the UK, outlawing transfers involving under-18s from the EU which were once popular with English sides.
And new rules limiting the number of loan deals clubs can do, which are set to be introduced by world governing body Fifa this summer, are also likely to impact Chelsea policy.
From next season, teams will be allowed to have a maximum of eight players out on loan at any one time. Chelsea currently have 10 but the number has been higher in recent years.
Potentially significantly, the rules do not apply to players aged under 21 or “club-trained players”, so there may still be some mileage in the strategy.
But overall it is only getting more difficult for Chelsea to rely on developing and selling players generating the same level of income as currently.
Chelsea sponsorship
Sponsorships are a major component of the approximately £150m that Chelsea earn from commercial revenue streams every year.
The sanctioning of Abramovich by the UK – the EU followed suit on Tuesday – plunged the club’s future into uncertainty and forced sponsors to reassess their positions, however.
Telecoms company Three, Chelsea’s main front-of-shirt sponsor, swiftly suspended its £40m-a-year contract and asked the club to remove their logo from the kit.
Carmaker Hyundai, which appears on the teams’ sleeves, has taken the same step as Three over its deal, which is reported to be worth between £6m and £10m.
Kit manufacturer Nike, which has an agreement with Chelsea worth £60m a year until 2032, and training kit partner Trivago have so far stood by the club.
If Three and Hyundai choose to terminate their deals, the club will face the difficult task of going to market for new sponsors at short notice and while their brand has been damaged.
That could mean accepting less than they currently receive or spending time without a sponsor if they choose to hold out for a certain amount.
The directors
Only after a successful bidder is declared are we likely to find out what vision they have for the make-up of Chelsea’s board of directors.
But some of the incumbents have such close and long-standing links to the Abramovich regime that they may not be wanted by any new owner seeking to give the club a fresh start.
Chairman Bruce Buck joined Chelsea in the same summer as Abramovich, while the club’s official website details the long associations between its owner and directors Eugene Tenenbaum and Marina Granovskaia.
Buck is a vastly experienced operator who chaired the Premier League’s audit and remuneration committee until last year when he stepped down in the wake of the aborted European Super League project, while Granovskaia has earned praise for her savvy dealing in the transfer market.
Any new owner may want to appoint their own board of directors, whether for strategic reasons or to put distance between the new regime and the old one.