Dear Mr Hicks and Mr Gillett,
It is good to hear that you have both taken steps to sort out your differences. I’m sure that you will both agree that personal pride sometimes has to take place to business dealings when millions of pounds are at stake.
It has been a little over 15 months now since you both assumed control of Liverpool Football Club and I think it is worth taking a few moments to assess the current position so that you can ensure suitable planning is made for the future.
The Team Performance
I’m sure you’ll agree that the lack of a trophy or a serious challenge to the Premier League title was not the ideal season you had in mind. There were however some substantial positives about the season that should not be forgotten. Some of the performances from individual players and the team in general suggest that we have the foundations of an excellent squad.
Once again we proved to be one of the strongest sides in the Champions League, again getting to the later stages for the 3rd time in 4 years. In the league the start and end of the season suggested Champions form but the middle of the season ensured that we were unlikely to still be challenging in April and May and that no domestic cup competitions would be won.
The Competition
Though the team eventually finished comfortably in 4th place, this is the minimum acceptable position for the club due to the potential revenue available through the Champions League. Next season this will be available as long as the club makes it through the 3rd qualifying stage.
However, there are other clubs who will do everything they can to get into the top 4 places. Some of these clubs, Aston Villa, Tottenham, West Ham, Man City to name a few have the kind of financial backing to compete with Liverpool now in terms of buying players and paying wages. Having finished 4th, Liverpool are currently the most vulnerable team in the top 4 who could be overtaken by one of more of these teams.
The implications of finishing 5th or 6th in the league could be devastating. Not only would the Champions League revenue be gone but the top players in the game no longer want to be playing the UEFA Cup. The loyalty of Gerrard, Mascherano and Torres would be seriously tested if the club were to take a step backwards. Losing players of this ability would be a disaster and the ability to attract further world class players would be severely reduced.
This summer is absolutely critical for the club. We can not only offer the top players the chance to play in the Champions League but (with our record in the competition) a realistic chance of winning it. It is imperative that we use this to our advantage.
The Players
Clearly the stand out player in the team was Fernando Torres. He clearly showed the difference that a World Class player can make in a team compared to a number of good squad players that have been bought over the last few years.
The spine of the team now contains the players that we need to challenge for the top honour of the Premier League title. Reina, Carragher, Agger/Skrtel, Gerrard, Mascherano and Torres are players that almost any other Premier League team would be keen if not desperate to acquire. The problem remains in the wide positions where there are good but not established world class players.
There is little point in buying players in these positions in the £5-£8 Million range unless they are young players bought with a great potential for the future. Players expected to slot straight into the first team would usually attract a minimum of £10M and it is only these kind of players that will take the club forward.
The Finance
Buying 3 or 4 players for £10M plus is clearly going to involve some serious financial outlay. It is unlikely that this level of finance can be raised from the selling of squad players alone. It is therefore evident that further funds will have to be provided for the manager to acquire the players he wants. This may be easier said than done and in the current difficult economic conditions, spare cash may not be available. If this is the case you are left with 3 options:-
OPTION 1 – SELL THE ENTIRE CLUB FOR A PROFIT
It seems apparent that you have the option to sell your whole stake in Liverpool for a substantial profit to a company like DIC. Mr Hicks, you in particular seem unwilling to do this and we can assume that this is because you either feel some emotional football related connection to Liverpool as a fan and want to continue to be involved or that you feel there is even greater potential profits to be made over the longer-term.
OPTION 2 – SELL PART OF THE CLUB
This would allow you to retain a part/controlling share in Liverpool for future profits but would raise extra funds for player purchases. Options may include willing companies such as DIC or an alternative option to sell to the fans who have already expressed their desire to buy the club. In addition to the financial benefits, this option would be extremely popular with the fans and offer considerable PR rewards.
OPTION 3 – HOPE
Rafa Benitez is a proven manager of exceptional ability. Not only does he have superb tactical awareness and an unquestionable level of commitment to the job, he also has the support of the vast majority of Liverpool fans. Without significant player purchases, he may be able to challenge for the league title next season and once again for the Champions League. However, managers such as Wenger, Scolari and even sadly Ferguson also have excellent records in management. It is possible but not really very likely that Benitez will be able to surpass all 3 of these manager with no less ability but considerably less resources.
Risk Assessment
You are both businessmen and we hope now Liverpool fans as well. However, this assessment is measured purely on a financial basis.
In the following table, failure is measured as failing to realise a substantial profit on your investment in Liverpool FC.
LIKELIHOOD OF FAILURE IMPACT OF FAILURE
Option 1 Very Low (DIC shown high interest) Very low (DIC’s offer considerable)
Option 2 Low (If extra funds are used to buy players) Low (Risk of failure now shared)
Option 3 Possible (with other clubs investing heavily) V.High (lost revenue and players)
The Recommendation
The first course of action must be to provide the manager with the funds he requires. This does not need to be in the realms of £70M that clubs such as Chelsea or Man Utd spend without a second thought. With the funds brought about by player sales, an additional £25-£30M would enable 3 world class players to be purchased instead of more squad players.
If £25-£30M is simply not available then Option 1 or 2 must be selected. If you do not want to miss out on the potential future profits that Liverpool FC may provide, then Option 2 is the least drastic option that will still provide a share of this potential but with accompanying very low risk.
Unless you are prepared to gamble significantly with your investment, you should not choose Option 3 under any circumstances. If 1 or 2 clubs were to overtake Liverpool in the league, the value of your investment would fall substantially. In a couple of years you may be looking at selling Liverpool for no profit at all if events take this course and wishing you had been able to raise just £25-£30M when it was so badly needed.