The Everton Board Thread (Inc. Bill Kenwright / Blue Union)

[neil999]

basically we will NEVER get taken over unless kenwright and co change their current position

 

[Sharpys top lip]

can one of the mods explain why iv just recieved 2 infractions..???


I didnt have a pop an any one, just the board??

 

[Brennan]

can one of the mods explain why iv just recieved 2 infractions..???


I didnt have a pop an any one, just the board??

To be fair mate you can't make accusations like the one about Kenwright (even if it is true), it could land the people who run this forum in hot water.

 

[steken1]

No doubt.

I'm just pointing it out for the masses that refuse to believe when it doesn't take a genius to see it

True.

 

[pfim]

I found this interesting reading:

I've been involved in the purchase and sale of private companies for a good few years and, believe me; the complexities of these transactions shouldn't be underestimated. Putting a structure together that works for all parties, making the tax ?work?, trying to get financing (especially when banks aren't lending) and negotiating with buyers/sellers (and their lawyers, accountants and bankers) and (heaven forbid) the Government can be a logistical minefield.

However, in my experience, any difficulty can be overcome (yes, even the Government) and the most complex transactions can be executed as long as everyone agrees on one thing: Price. And, for me, herein lies the problem.

I think even the most financially illiterate individuals could come to the conclusion that if Everton was put on the market this afternoon for £1, we would have new owners by tea time, such would be the appetite to own one of the oldest, most prestigious and famous football clubs in the world, currently in a secure position in the most lucrative league in the world (for now).

Following that logic must bring you to the natural conclusion that Everton's ?fair value? lies somewhere between £1 and the current asking price. You see, the above complexities can delay a sale by six months, maybe a year, but assets that have been on the market? for ten years and have not been sold are over valued by the vendor. To borrow an Americanism, it's economics 101?.

The devil is in the detail (valuation)

I'm not going to bore everyone with the finer points of valuation because, to be honest, it's irrelevant and I've already bored you enough. You show me a private company valuation (including one of my own) and I?ll show you why it?s inaccurate. The reason for this is that they are all subjective and built on the architect?s assumptions.

However, two areas that always get focussed on in private sales, without fail, are: The level of debt at the point of sale and the historical lack of capital expenditure.

The reasons for this are that they will both be netted from the total value of the business or ?enterprise value? when arriving at the all important number, the amount of cash that will change hands at completion or ?purchase consideration?.

Leverage: Everybody's friend except the vendor

Debt (and debt-like-items eg, historical transfer fees outstanding) gets knocked-off the enterprise value because it's how the vendor has chosen to fund the business expansion (stop laughing at the back). He could have used his own cash (equity) after all.

We don't know what Everton's debt is today but at 31 May 2011 it was £47.7M. Let's be kind and assume that the outstanding debt is now £35M due to player sales (which might not have gone to the bank depending on your choice of newspaper) and wage reductions. I'm also ignoring debt-like-items here as they would only be uncovered during due diligence but I've seen buyers try to include onerous finance leases in here too!

That's a £35M reduction in purchase price before we've even started.

The Old Lady

The buyer is acquiring the right to the future cash profits of the business (that?s right, I said profit). This number is always estimated using EBITDA (earnings before interest, tax and amortisation) but after taking the required level capital expenditure into account i.e., all businesses need a certain level of capex and this will impact (reduce) the return a buyer can make on his investment.

Here comes the incumbent shareholders? second issue: There has been no investment in capex since the Park End stand was built with the proceeds of Alan Ball's sale to Arsenal. This means that a buyer is going to need a large out-flow of post-acquisition cash in order to keep the business in its current state, never mind fund expansion. The buyer will add up the historical level of under-spend and knock it off the purchase price.

To be honest, this number is difficult to estimate for obvious reasons, but the Board has suggested in the past that Goodison needs substantial investment to avoid a safety certificate revocation. Again, let's be kind and assume that £20m of investment is required to keep Goodison and its limited corporate facilities in working order. Remember, this isn't money for a new stadium (which might also be needed) it's money that really should have been spent already.

For those of you thinking I've overestimated this number, remember that there has also been significant under-spend on the playing side too. We are effectively renting players.

The final reckoning

You don't need to be Warren Buffet to see that (based on my rudimentary assessment) a buyer could be looking for a £55M (maybe more) reduction in purchase consideration before even discussing enterprise value i.e., even if you conclude that the business is valued at £80M based on its potential future profits, the outgoing shareholders would only get £25M.

In conclusion, it's my view that the main reason the club hasn't been sold to date is price. I don?t really see how it can be anything else.

ps I don't think the value of the business is anywhere near £80M given that all you're effectively buying is a tired, ageing brand and the right to incur future losses, but that's a story for another day. Remember that, based on the above, the shareholders need a valuation of £55M to sell the club for £1.

Good read. And your point at the end that the enterprise value needs to be 55M to get your 1 pound is a good one. the assumption above that anyone would buy this club for 1 pound isn't necessarily true. If the club doesn't generate free cash flow, it is worth nothing (would cost you money) and no one would take it over.

 

[davek]

Anyone any idea why the Everton being sued thread was closed?

Only Everton, eh? Great summer. A transfer window cull on wages and 8 players getting shown the door, and two court cases in the offing.

The Bill Kenwright consortium and their takeover that just keeps on giving.

 

[pfim]

Another point I'll make about enterprise value is that assets are valued as the sum of the free cash flows they generate, as mentioned above.

For example, say I own a club with player registrations, a stadium and a training ground. All of these assets generate cash flows, together.

But if I have a go, buy this club, and it fails to generate the free cash flows to service debt, invest in capex etc. then what are these assets worth to me as a going concern? Nothing, they're costing me money.

I can sell them, can't I? Sure, but if I sell the stadium (which probably isn't worth much of anything), where would I play? I won't be able to generate cash flows.

If I sell all my player registrations, they have value. But how would I field a team to generate cash flows?

Training ground? Will my players train on the street?

So what are all these assets worth? They're not worth the sum of their liquidation values, because if I liquidate one, the others will be worth nothing. And the point of purchasing the club is to keep it going.

Enterprise valuation is the sum of future free cash flows, discounted to the present day's currency value. If the sum of those is negative, why invest any money?

As the post states, valuation is incredibly subjective because it relies on future cash flow projections, which are inherently biased as they're based on the opinions of an individual or firm.

More basic stuff that I put together quickly here. Point being, the club isn't necessarily worth a dime just because it has assets. And it's equity isn't really as simple as subtracting the debt from the book value of the assets.

 

[Ihaters]

Good read. And your point at the end that the enterprise value needs to be 55M to get your 1 pound is a good one. the assumption above that anyone would buy this club for 1 pound isn't necessarily true. If the club doesn't generate free cash flow, it is worth nothing (would cost you money) and no one would take it over.

I think both are true, we are over priced but we are also a very poor prospect to buy as a business..
Buying Everton even for free will still cost you plenty of millions to do anything with, you need 50mil to just stand still in terms of players, a new stadium or complete refurb, several projects have been put on hold that should be completed and then you are still potentially either losing money, breaking even or making a profit small enough it could take decades to pay back your intitial outley (certainly it would be financially more viable just dumping a few hundred mil in the bank and getting the interest back).. Add a daft 130mil asking price on top and the fact that you don't even end up owning the whole club because only a certain amount of shares are available and I can understand a lack of a big queue to buy us to be honest.

 

[pfim]

Go on then, explain how an unpaid director with no recorded loans to the ltd company uses ltd company funds to pay a private debt causing harm to that limited company while leaving no trace in the accounts WITHOUT committing fraud.

The only route he can do that is if he can no longer guarantee a loan he is guarantor for (though I'm pretty sure as a guarantor he needs to be declared in the accounts as well). In which case it is nobodies business how he became fiscally embarrassed, just that he is.

And yes, I am well aware what constitutes corporate fraud through abuse of position

Yeah, I mean, that didn't happen. How many different stakeholders would need to approve that? Board of directors, banks, other lenders etc. Common sense.

 

[Sharpys top lip]

I think both are true, we are over priced but we are also a very poor prospect to buy as a business..
Buying Everton even for free will still cost you plenty of millions to do anything with, you need 50mil to just stand still in terms of players, a new stadium or complete refurb, several projects have been put on hold that should be completed and then you are still potentially either losing money, breaking even or making a profit small enough it could take decades to pay back your intitial outley (certainly it would be financially more viable just dumping a few hundred mil in the bank and getting the interest back).. Add a daft 130mil asking price on top and the fact that you don't even end up owning the whole club because only a certain amount of shares are available and I can understand a lack of a big queue to buy us to be honest.

OK i get this but why??

Why was City & Chelsea a good option, why noy us?

 

[Del]

OK i get this but why??

Why was City & Chelsea a good option, why noy us?

City had a brand new ground free of charge and Chelsea are based in London

 

[nigelcoyb]

I found this interesting reading:

I've been involved in the purchase and sale of private companies for a good few years and, believe me; the complexities of these transactions shouldn't be underestimated. Putting a structure together that works for all parties, making the tax ?work?, trying to get financing (especially when banks aren't lending) and negotiating with buyers/sellers (and their lawyers, accountants and bankers) and (heaven forbid) the Government can be a logistical minefield.

However, in my experience, any difficulty can be overcome (yes, even the Government) and the most complex transactions can be executed as long as everyone agrees on one thing: Price. And, for me, herein lies the problem.

I think even the most financially illiterate individuals could come to the conclusion that if Everton was put on the market this afternoon for £1, we would have new owners by tea time, such would be the appetite to own one of the oldest, most prestigious and famous football clubs in the world, currently in a secure position in the most lucrative league in the world (for now).

Following that logic must bring you to the natural conclusion that Everton's ?fair value? lies somewhere between £1 and the current asking price. You see, the above complexities can delay a sale by six months, maybe a year, but assets that have been on the market? for ten years and have not been sold are over valued by the vendor. To borrow an Americanism, it's economics 101?.

The devil is in the detail (valuation)

I'm not going to bore everyone with the finer points of valuation because, to be honest, it's irrelevant and I've already bored you enough. You show me a private company valuation (including one of my own) and I?ll show you why it?s inaccurate. The reason for this is that they are all subjective and built on the architect?s assumptions.

However, two areas that always get focussed on in private sales, without fail, are: The level of debt at the point of sale and the historical lack of capital expenditure.

The reasons for this are that they will both be netted from the total value of the business or ?enterprise value? when arriving at the all important number, the amount of cash that will change hands at completion or ?purchase consideration?.

Leverage: Everybody's friend except the vendor

Debt (and debt-like-items eg, historical transfer fees outstanding) gets knocked-off the enterprise value because it's how the vendor has chosen to fund the business expansion (stop laughing at the back). He could have used his own cash (equity) after all.

We don't know what Everton's debt is today but at 31 May 2011 it was £47.7M. Let's be kind and assume that the outstanding debt is now £35M due to player sales (which might not have gone to the bank depending on your choice of newspaper) and wage reductions. I'm also ignoring debt-like-items here as they would only be uncovered during due diligence but I've seen buyers try to include onerous finance leases in here too!

That's a £35M reduction in purchase price before we've even started.

The Old Lady

The buyer is acquiring the right to the future cash profits of the business (that?s right, I said profit). This number is always estimated using EBITDA (earnings before interest, tax and amortisation) but after taking the required level capital expenditure into account i.e., all businesses need a certain level of capex and this will impact (reduce) the return a buyer can make on his investment.

Here comes the incumbent shareholders? second issue: There has been no investment in capex since the Park End stand was built with the proceeds of Alan Ball's sale to Arsenal. This means that a buyer is going to need a large out-flow of post-acquisition cash in order to keep the business in its current state, never mind fund expansion. The buyer will add up the historical level of under-spend and knock it off the purchase price.

To be honest, this number is difficult to estimate for obvious reasons, but the Board has suggested in the past that Goodison needs substantial investment to avoid a safety certificate revocation. Again, let's be kind and assume that £20m of investment is required to keep Goodison and its limited corporate facilities in working order. Remember, this isn't money for a new stadium (which might also be needed) it's money that really should have been spent already.

For those of you thinking I've overestimated this number, remember that there has also been significant under-spend on the playing side too. We are effectively renting players.

The final reckoning

You don't need to be Warren Buffet to see that (based on my rudimentary assessment) a buyer could be looking for a £55M (maybe more) reduction in purchase consideration before even discussing enterprise value i.e., even if you conclude that the business is valued at £80M based on its potential future profits, the outgoing shareholders would only get £25M.

In conclusion, it's my view that the main reason the club hasn't been sold to date is price. I don?t really see how it can be anything else.

ps I don't think the value of the business is anywhere near £80M given that all you're effectively buying is a tired, ageing brand and the right to incur future losses, but that's a story for another day. Remember that, based on the above, the shareholders need a valuation of £55M to sell the club for £1.

Simply excellent post.

This, or variant of, should be posted on all EFC websites and a mailshot to all press outlets commenced, it is bereft of ranting plus it is professional, READABLE! and very informative.

Well done Mick truly great work.

 

[Tex]

basically we will NEVER get taken over unless kenwright and co change their current position

Its quite simple, STOP going to the games and buying merchandise and the board will know that they have to sell. Everybody who is complaining about Kenwright but still giving your hard earned money to them is stupid to say the least.

Every year I import about £500 worth of merchandise and I've decided that this year or any year that this board is in charge or it doesnt change its ways, I refuse to spend another penny.

 

[steken1]

Its quite simple, STOP going to the games and buying merchandise and the board will know that they have to sell. Everybody who is complaining about Kenwright but still giving your hard earned money to them is stupid to say the least.

Every year I import about £500 worth of merchandise and I've decided that this year or any year that this board is in charge or it doesnt change its ways, I refuse to spend another penny.

Saying to men (and women) who go the match "just stop going" is like saying to Pavarotti "just don't have a slice Pav" It's not as easy as it sounds.

I understand your point completely but there's no way on earth I wouldn't go.

 

[pfim]

Its quite simple, STOP going to the games and buying merchandise and the board will know that they have to sell. Everybody who is complaining about Kenwright but still giving your hard earned money to them is stupid to say the least.

Every year I import about £500 worth of merchandise and I've decided that this year or any year that this board is in charge or it doesnt change its ways, I refuse to spend another penny.

Only way to hurt them for sure. Don't know that it really makes a sale more likely. May make an insolvency more likely.