Swansea, oh Swansea, oh city, said I...
From my archive, some views from inside the 2016 sale of Swansea City
Back in 2016, I was commissioned by an American outlet to write a piece on Premier League ownership. TV money was about to increase massively, and so the piece had the premise that it was the best ever time to buy a top flight football club.
The piece never ran - most clubs and owners had no reason to talk to me, and so I don't think I hit the brief especially well.
One club that did talk to me, however, was Swansea City.
Over the period of a few weeks as I was writing the piece, it became clear that the club was subject to a takeover bid from the American group who still owns them today.
Two who spoke to me were Brian Katzen, a South African businessman who held 10.5% of Swansea from 2002 to 2016 (his business partner held the same), and Huw Cooze, who was the elected director representing The Supporter's Trust and its 21.1% holding.
At the time, Swansea were five years into a stint in the Premier League, they'd won the League Cup in 2013, played in Europe the following season and had just finished 8th in the league. They'd go on to finish 12th in the 2015-16 season, with the takeover by Jason Levien and Steven Kaplan completed that summer.
Below is the piece as it was written, which I don't suppose anyone will mind me publishing now.
Swansea are now in the sixth consecutive season in the Championship, having been relegated in 2018 - but it's an interesting snapshot of a club that was organically rebuilt and was - for a spell - a well-established, competitive top flight team.
The last of the breed, I think, who managed to do it led by local businesspeople…and with fan involvement too.
As written, 21st April 2016
“It was done by handshake,” says Brian Katzen of the deal that saw he and a business partner take on more than 20% of Swansea City nearly fifteen years ago. “Now there are lawyers, accountants, tax advisers, and advisers for the advisers.”
South African-born Katzen grew up a football fan, and when dreams of playing professionally evaporated, a career as an accountant turned investor opened the door to ownership instead.
“I noticed a one line ad in a newspaper that said ‘Swansea City for sale: call this number’. So I made the call.”
That deal that rested on a handshake was never viewed as an investment, Katzen told me. It was purely an opportunity to be involved with a UK-based football club with the sole objective of ensuring the club’s survival - profit never entered into the equation.
But Katzen and his fellow shareholders are set for a pay day, with US sports investors in advanced talks to buy a controlling stake in Swansea City - a club which not too long ago seemed destined for demise.
“It has become apparent that a consortium led by New York based businessman Jason Levien are looking to conclude a deal,” says Huw Cooze, Swansea’s Supporter Director who has represented the 21% of the club held by The Swans Trust since 2006.
“It would be fair to say that the Trust have been kept at arm’s length with fellow shareholders assuming that the Trust would never sell, hence its exclusion. This is a wrong assumption. The Trust has always taken the stance that we never say never and in certain circumstances would look at any deal and work out the merits and best interest for the football club.”
Katzen is equally pragmatic, suggesting the way the board has run the club - as a business, not a hobby - was crucial to its success, and underpins their reasoning as to why now is the right time to sell.
“At some point in a business’s life cycle change needs to happen,” says Katzen. “That's normally around seven-to-ten years, but our cycle has been a little longer than that. A new sense of energy, ideas and invigoration is needed within a defined period of time in order to catapult the business into a new growth path.”
The Supporters’ Trust have been sympathetic to this view, seeing additional investment as important to the future of the club.
“Fundamentally, we’re solely interested in the best interests of the club,” says Cooze. “We realise that to sustain a good level of Premier League football, we need some investment. We have been punching above our weight for many, many years - this year we almost got found out. It’s going to be tough every year without some outside investment. We accept that, but it has to be the right outside investment.”
A split between the Supporters’ Trust and the other shareholders is a rarity at Swansea, where proceedings have remained remarkably amicable since the consortium led by chairman Huw Jenkins took over the club in 2002. They remain unique in the Premier League in that the Supporters’ Trust sits alongside them on the board.
“It rubs along quite nicely,” explains Cooze. “We have our arguments and disagreements - like any board, I’m sure - but in the main it’s reasonably good and it has been good for the ten years that I’ve been on the board.”
This ability to work together has been one of the key ingredients in Swansea’s success which, according to Katzen needs to be carried over to the new shareholders, coupled with that fresh impetus new blood will bring.
“Football has changed over the last five years,” adds Katzen, “the Premier League is a global brand now, but it's still not an easy task to make a profit when running a football club and it's hard to take out the egos and personalities as well.”
It’s changed on the pitch as well. Huge investment and expensively assembled squads no longer guarantee success, and the impact of Financial Fair Play rules has made it harder to buy your way to the top.
Nevertheless, the record-breaking £5.136 billion television rights deal agreed for 2016-19 will make even the least successful Premier League side among the highest-revenue generators in Europe and capable of buying big-name stars.
All of this adds up to answer the question ‘why now?’, after a period of relative quiet with Premier League investment, first Everton and now Swansea have found themselves subject to bids.
For all its chest-beating swagger and pageantry, the Premier League is still young and impressionable. It is barely 25 years since the founder member clubs sat down and drafted the articles that brought it into existence, having decided that English football needed a break from its past.
The creation of the Premier League pressed the reset button. One of the great branding victories of the Premier League era is to have rendered all successes and failures that took place before 1992—all records set and titles won, every scoring run and unbeaten streak—consigned to the archives.
History was no longer relevant. There was a new king of the leagues and its trophy wore the crown.
A new perception of football clubs as commodities was born with the Premier League and its equally swaggering older brother, satellite television. Their relationship, whilst uneven, is symbiotic - Premier League football is addicted to TV money, and subscription television needs live sport to survive.
"Prior to 1992, football was a relatively cheap product for TV and Sky's initial £191 million deal with the then incipient Premier League looked extravagant, ruinous even,” Professor Ellis Cashmore of Aston University, a specialist in football culture and author of an upcoming book Studying Football, told me.
"Sky was haemorrhaging money and seemed to headed for the abyss. Today, it has rivals, notably BT Sport, and this means Sky is prepared to pay 10 times the original amount."
The most recent deal for broadcasting rights represented a 70 per cent increase on the deal currently running. It means the Premier League’s bottom club in the 2016-17 season can expect to bring in £99 million for TV rights alone.
“I think there’s a misconception with the TV deal - which is fantastic and will help all clubs - but I can imagine the agents lining up already," says Cooze. “If Swansea don’t pay it, somebody else will. We know who we’re competing with in this league - the likes of West Brom, Bournemouth, Watford - and if everybody is getting an extra £30-40 million it’s all relative and we’re no better off than we were last year.”
There are other downsides too, of course, not least in the manipulation of fixtures to fit in with TV requirements. “When you shake hands with the devil you have to pay the price,” Sir Alex Ferguson once said in 2011 of the power TV companies had over the planning of football, referring to Sky as the new "god" of the game.
“The sport has rarely interfered with Sky's or other media's demands for changes,” says Professor Cashmore. "Football's customers used to be admission-paying fans, but now the real customer is the media. Football effectively pimps its millions of fans to media corporations like Sky who are interested only in two things: subscriptions and, more importantly, advertising revenue.”
The constant pursuit of greater TV riches means the Premier League is becoming a financial island, increasingly isolated from the leagues below.
Relegation to the Championship is a crushing blow. Reviving a club’s fortunes requires very deep pockets, and a club on the rocks is not easy to sell on. But for those clubs that manage to stay in the Premier League, commercial success is all-but guaranteed.
Deloitte’s annual Football Money League, ranking the revenues of the richest clubs in Europe, lists 17 Premier League clubs among the top 30 revenue generators in Europe. Nine of those appear in the top 20, with a combined revenue of more €3 billion (£2.28 billion).
With more and more Premier League clubs breaking into the rich list, a new parity appears to be presenting on the pitch.
This season's remarkable title challenge from Leicester City has drawn attention, but they are not alone in invading the top echelons of the league. Tottenham have built slowly, built sensibly, and appear to be in upward trajectory. Swansea, bar a wobble earlier in this season, the same.
Southampton, despite the sale of many key players along the way, have proved themselves a smart model for sustained success—reinvesting wisely and developing their own stars.
It takes time to build a sustainable and successful team on the field. Southampton’s current situation is the result of years of dedication and investment, not least since German-Swiss manufacturing magnates the Liebherr family took ownership of the club in 2009.
At Swansea, this organic approach to growth - on the pitch and off it - has long been ingrained in their way of working, and was crucial to attracting investment.
“Our objective has been to continue to grow the global reach of our football club and to build the brand value,” says Katzen. “The global brand aspect of the Premier League and the instant recognition that it brings is of course a key factor for potential investors. With the planned growth of the game and the Premier League within the United States, Premier League clubs are sure to have a new landscape of opportunity in years to come.
“Swansea’s a very working class city, and if ticket prices were to rise, there’d be outcry - and rightly so,” says Cooze. “We’ve kept our ticket prices as low as we can - since we got to the Premier League our prices haven’t gone up. But, like everything else, you have to run a sustainable business model.”
Swansea, under the guidance of Cooze and The Swans Trust, have made some progress on fan issues, for example through an initiative capping away tickets to £22. Organisations like Supporters Direct and the Football Supporters’ Federation have been gaining traction elsewhere, bringing fans together in concerted campaigns on away ticketing and issues like it.
The movement is growing, and Supporters Direct has worked to help fans organise by setting up supporters’ trusts, with 70 per cent of clubs in the top five divisions in England, including with 13 at Premier League clubs now having their own groups. Importantly, Supporters Direct help with gaining influence, and with fundraising, helping to raise more than £40 million which has been reinvested into clubs and communities.
The issue has political traction too, with support from all major political parties for giving fans more of a say on how their club is run. Last summer, the Labour Party’s Shadow Minister for Sport, Clive Efford MP, brought forward a bill that would require supporters’ trusts to be offered the chance to buy a 10 per cent stake in their club the next time it changed owners.
Efford’s bill is a long way from becoming law, but the debate on supporter ownership is being had and the government are acting too.
A recently-published report from the Government Expert Working Group on supporter ownership and engagement, endorsed by the Premier League, Football League and Supporters Direct among others, calls for recognised fan groups to be given the opportunity to bid for a club in its entirety if it becomes insolvent or enters administration.
All the signals are there that change is coming and the days of a single, all-powerful owner may soon be over.
“The number one factor that has consistently been the most important to us as a group is the fans, says Katzen. “We have always made decisions taking into account the thoughts and ideas of the fans.”
This, he says, should carry over to the new ownership as well.
“Agreements are being structured to ensure that the integrity and history of the club are maintained and that our ethos remains intact over the long term future and in the best interests of all concerned.”
The Supporters’ Trust agree this ethos must be protected, even as the club pushes on towards greater things.
“We’re quite clear as a supporters organisation that we’ve enjoyed growing organically,” says Cooze. “It’s been a challenge, but it’s been an enjoyable challenge. I don’t think it can stay like it forever, and we’re realistic, you have to be.”
“We don’t just want a new owner, we want someone who gets the vision and says ‘we want to work with you, we want to invest in the playing squad’. It’s a big ask for anyone, but that’s what we’re looking at.”
The difference in perspective between fan and owner is at the root of the problem for many unhappy football clubs, with the difference in value and approach that go with it.
“Potential owners of Premier League clubs are always going to lured by the prospect of the media money and the suspicion that they can run the football club like a proper business rather than a licence to burn money,” says Professor Cashmore.
“But ask Villa's Randy Lerner: he underwrote the club year after year until he decided he should sell up. Then he couldn't find a buyer. The Premier League looks attractive, but owners find it tough to exercise restraint when all the other clubs are scrambling for the best players and are prepared to pay top money."
Chelsea famously changed hands for £1 when Ken Bates took over the club in 1982, and Swansea were sold for a similarly small sum when the consortium of which Brian Katzen was a part took over the club. In both cases, the value of a club was counterbalanced by its debts. A trend that continues and in the last financial year, and Swansea, alongside Norwich, were the only two able to show cash in the bank, with debts at the remaining 18 clubs ranging from a comparatively tiny £2 million at West Bromwich Albion to an astronomical £1 billion at Chelsea.
Despite these long term financial burdens, three-quarters of top flight clubs are now turning respectable year-on-year profits, driven mostly by broadcasting and commercial income, resulting in a different kind of investment interest.
"We're seeing a significant undercurrent of appetite, particularly from the Middle East and Asia but the interest at the moment is mostly about equity injection, not full takeovers,” says Adam Sommerfeld, managing partner at Certus Capital Partners, an investment firm which specializes in sports teams and franchises. “What clients are looking for is the commercial alignment with their current portfolio holdings and how it can feed into their existing brands. That's where the returns are, using it as a shop window, like with Mike Ashley, Newcastle United and Sports Direct.”
Although full and long term involvement might not be likely to make money, limited investment, might be a good visibility play to boost your brand, and provide a convenient tie-up with another aspect of your business. But deals take time, and picking the right horse to back might prove difficult.
“The due diligence process takes about three months, then heads of terms another three months,” adds Sommerfeld. “So it takes around six-to-nine months to do a deal.”
Things change quickly in football - a little over a year ago title-challenging Leicester City were bottom of the league, so for the opportunist looking for financial return, the gamble is significant.
“Since we’ve got to the Premier League, things have changed,” adds Cooze. “I think we’ve accepted that there has to be some outside investment, but I think some of the others realised it a bit before us. Of course, we’ve got nothing to gain personally, the others would have a lot to gain and the scare with relegation sharpened the minds.”
Yet the current consortium seem set to take the gamble and take a majority holding, despite how rapidly the landscape can shift in the top flight.
“The new consortium were looking for 75.1% of the shareholding, however, it appears that they have lowered this percentage to just over 60%, which is a lot more palatable,” says Cooze. “We have seen a signed copy of the original Heads of Terms document seeking 75.1% of the voting rights, but nothing since.”
The deal continues to be hammered out behind the scenes, with Cooze bullish that the fans should be part of the conversation.
For Katzen, although the situation is evolving, his reasoning for being involved remains as clear as ever.
“It was simply the opportunity to be involved in a football club and the fun and excitement that came along with that,” says the South African.
“A dream that every boy aged eight to eighty has.”