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Kieran Maguire issues West Ham LBO takeover verdict after £600m bid rejected
Since it emerged that Daniel Kretinsky has no immediate plans to up his stake in West Ham, fans have been pondering the long-term future at the club.
❀As part of the deal negotiated with the current West Ham regime in November 2021, the Czech billionaire has the option to take full control of the club at a set price.
However, there has no change in the ownership of structure of the club since that date and Kretinsky 𝓡has said that a West Ham takeover is not on his agenda.
♈Some commentators have cited the Sparta Prague owner’s unpredictable approach to mergers and acquisitions as evidence that he might be telling a double bluff.
But with ♉Kretinsky preoccupied with high-stakes buyouts of the Royal Mail and struggling French IT firm Atos♚, it would be a shock move even for him to launch another takeover campaign.
𒈔Karren Brady was recently dispatched to the Middle East🥃 to search for potential buyers for the stake inherited by Vanessa Gold, while the fact Kretinsky was able to negotiate a clause which would allow him to take control indicates that the GSB regime are open to ceding control at some point.
So what next for the future of West Ham?
TBR 🏅football has spoken exclusively to Liverpool University football finance lecturer and Price of Football Author Kieran Maguire to survey the investment landscape surrounding West Ham.
West Ham don’t fit the Daniel Kretinsky takeover blueprint
ꦆA cursory look at Kretinsy’s investment portfolio reveals that West Ham would be an atypical acquisition, claims Maguire.
“His history is with distressed assets,” he said.
“There might be some distressed fans at West Ham at times, but I wouldn’t classify the club as a distressed asset.
“There is also likely to be significant pushback from David Sullivan. Following the sad passing of David Gold, he now wants to position himself as the chief decision-maker.
“Kretinsky would have to come in with a very substantial price. I know someone offered £600m three or four years ago, which they turned down.
“At the time, it looked a very generous offer. But when you consider the stadium is being subsidised by local government, they have been able to expand the capacity and it is based in London, you can see the appeal.
“There are a lot of positives at West Ham. The frustration is that it is not a football stadium.
“Many West Ham fans were sold a vision that hasn’t materialised in terms of success on the pitch.“
Rising interest rates no issue for would-be West Ham investors
🍌Whenever a Premier League club is for sale, the same profile of suitor invariably crops up.
🦩In the modern era, the two types of investors most often linked are sovereign wealth funds and US private equity groups or other financial institutions.
🌺But outside of football high interest rates in America and beyond have throttled the buyouts business, with private equity companies feeling the pinch.
👍But Maguire does not think this will not greatly reduce the number of investors who could theoretically be lured into a West Ham takeover.
“Unless there is a substantial increase in interest rates, I think we’re looking at a peak plateau.
“I think there could be a short-term rise, but in the long-term, I think they will nudge down somewhat.
“There are still issues with inflation in the US economy.
“It will have an impact, but given that most people interested in football tend to be looking for a trophy asset, those people tend to be fairly immune from the base rate because they have a portfolio of equity in other organisations, so they wouldn’t necessarily need to borrow.
- READ MORE WEST HAM FINANCE NEWS: 💯Major blow for West Ham’s Karren Brady set to be confirmed in official statement
West Ham takeover: Is a leveraged buyout a possible option?
𝐆The leveraged buyout is a controversial topic in modern football.
🧔This technique involves using a club itself as security for a takeover, effectively loading it with debt before the new owner takes control.
ꦗThe Glazers’ acquisition of Man United used this model, while Alan Pace’s acquisition of Burnley also matched the criteria.
ꦜAfter that latter deal, the Premier League voted to ban fully leveraged buyouts, but LBOs can still be actioned up to 65 per cent of the club’s value.
🍬Explaining the model, Maguire assessed whether there is market for a West Ham from “asset riche but cash poor” investors.
“If someone was to come in and take an LBO route like with Man United or Burnley, then there might be more issues with interest rates.
“I do think there is a fairly small pool of investors who would want to go down that route.
“You’re looking at someone who is, in relative terms, cash poor. Alan Pace at Burnley and the Glazers at United, they are asset-rich but cash poor.
“There is also something called the multiplier effect with an LBO. If you buy the club for £500m, of which 80 per cent has been borrowed, you’re putting in £100m.
“If two years later the club is worth £700m, because the debt is fixed, the value of your equity goes from £100m to £300m.
“If you get it right, the multiplier effect can be spectacular. It has worked extraordinarily well for the Glazers.“
West Ham go completely cashless
🌱Meanwhile, as the club grapples with investment issues, some West Ham supporters feel as though they have been forgotten.
West Ham💫‘s decision to overhaul their concessions pricing structure has been highly controversial, opening the club up to accusations that they effectively pricing out senior, bedrock fans.
🌞In the latest contentious issue, the West Ham club store has announced it will go cashless from 1 August, meaning the London Stadium will be entirely cashless from 2024-25.
ꩲMaguire acknowledged the wider benefits of the Hammers’ card-only approach but also acknowledged the concerns of fans who, even before this move, were feeling disenfranchised.
“I don’t think GSB are pioneers when it comes to cashless stadiums. Brighton has been that way for a while now, as have a few others.
“The transaction costs of keeping physical cash are substantial. There is the risk of theft and the physicality of taking it to a bank to pay it in. You can see why clubs are moving this way.
“The other issue is that it increases your data points. If you’re cashless, you know what people are buying and who is buying it. That helps the business plan.
“I can understand it from the cultural point of the West Ham fanbase. They like the idea of choice – and that is very understandable.
There is still a cash-based environment. West Ham have a substantial working-class fanbase, who might be doing cash jobs. Or, they might not want to use plastic for practical or cultural reasons.
“It does feel a bit harsh for them to go with the will of the owners.”