Football Transfers: 7 things you need to know

Football Transfers: 7 things you need to know

Despite the intense levels of press coverage, speculation and micro-analysis that exists in modern day football, it’s surprising how little is really known about how football transfers actually work.

This is in some-part down to a deliberate amount of ambiguity; clubs would rather make the technicalities secret to mask the uglier sides of negotiations.

And to be fair, the finer details behind transfers aren’t really that important. What really matters is the overall associated costs and the players involved.

But still, beneath the surface are some really interesting details that you ought to know.

1. Clubs don’t actually receive money directly from shirt sales  

Adidas CEO Herbert Hainer projected that Adidas would earn £1.5 billion from its 10-year, £750m deal with Manchester United, from 2015 – 2025.

When big transfers are made between mega-clubs, there’s always been a common assumption that an incoming player will trigger a sharp boost in shirt sales for the buying club. This is inherently misleading. As it happens, clubs don’t really receive a huge boost in shirt sales when they sign a big player, except for in the home country of that player. How many people do you know who specifically buy a shirt to get a player’s name on the back? More, a fan who was likely to buy a shirt anyway.

In reality, clubs typically receive 10 – 15% of a player’s shirt sales, and this may only kick in once a certain number of shirts have been sold. That may seem low, and this isn’t to say that football clubs are victims of a cruel merchandising world where they’re exploited.

Instead, football clubs essentially allow the manufacturers of their kits (your Adidas’, Nikes and Pumas) to own the right to sell shirts on their behalf. This means that instead of receiving money directly every-time a shirt is sold, club’s tend to negotiate huge sponsorship deals over longer periods. Naturally, the more shirts a club is likely to sell, the bigger kit deal they’ll be able to negotiate. This is where having a presence in foreign markets, particularly Asia and the US, can be so lucrative, and helps best explain why clubs conduct their pre-season tours in emerging football countries.

Don’t confuse kit supplier sponsorship deals with main-body sponsorship deals.

The former refers to the company who will design and merchandise the shirt globally, which is essentially a club granting a license to a company to exclusively sell and profit from their shirts. Football clubs, after all, are just that: they’re football clubs; they don’t have the resources, infrastructure and networks to globally sell their products. Nike, Adidas and Puma do. Manufactures aren’t paying these huge fees for their small logo to be emblazoned on the side of a shirt (although this no doubt does help).

The latter, main body sponsorship deals, just refers to a company getting its brand placed in the middle of the shirt.

Take Manchester United as an example. Since the start of the 2015–16 season, Adidas manufactures Manchester United’s kit as part of a then world-record 10-year deal worth a minimum of £750m. The club’s main-body sponsor is actually Chevrolet, which pulls in £53m a year.

A club’s shirt represents a hugely valuable way of generating commercial income, and it’s interesting to see how the big clubs approach commercialising themselves. Under the ownership of the Glazers, for example, Manchester United appear to have attempted to sponsor every last inch of themselves, down to their training shirts and training ground.

As part of Arsenal’s new deal with Fly Emirates (commencing 2019), they now have the freedom to seek a first sleeve sponsor which is expected to be worth annually between £5m – £10m. Real Madrid are currently receiving nearly £100m a year less than Barcelona at the moment because of the deal they signed with Adidas when sponsorship deals were significantly less in 2012. Expect this to at least treble when it’s up for renewal in 2020.

2. Clubs do tap up players

Chelsea’s acqusition of Ashley Cole in 2006 was essentially agreed a year before it happened, sparking accusations of ‘tapping up’. Cole and his agent Jonathan Barnett were caught meeting up with Jose Mourinho and Chelsea chief executive Peter Kenyon in a London hotel. Cole was later fined £100,000 by the FA.

Tapping up is an attempt to persuade a player contracted to one team to transfer to another team, without the knowledge or permission of the player’s current team. It’s forbidden in football:

“Subject to Rule T.7, a Contract Player, either by himself or by any Person on his behalf, shall not either directly or indirectly make any such approach as is referred to in Rule T.5 without having obtained the prior written consent of his Club.”

Yet it happens all the time. As one agent explains, quoted in the Daily Mirror:

“No transfer happens without an element of tapping-up. What usually happens is that an agent goes to the club, says his player wants to leave, asks how much it will take to get him out and then relays the information to the club that wants to buy him.”

Basically, the act of negotiating a transfer is so complex and difficult that buying clubs make certain that the player they’re after is actually interested in joining them. There would be little point in agreeing a complex transfer deal, only to find the player in question had no intention of actually moving. Liverpool’s pursuit of Virgil Van Djik in the summer of 2017 brought the issue back to light when Southampton complained.

3. Clubs manipulate when they make signings

In May 2010, Manchester United moved quickly to sign Javier Hernandez for a modest £6m from Mexican club Chivas de Guadalajara, a month before the 2010 World Cup. Hernandez scored twice, recorded the fast pace of any player and received a Man of the match award in four games at the tournament. Looking back, Sir Alex Ferguson said: “I think our scouting people deserve 10 out of 10 for identifying him before the World Cup and I think if we had been trying to negotiate after the World Cup it would have been very difficult. I think a lot of teams would have been after him and it would probably have cost us two or three times more.”

Financial Fair Play, a global rule enforced by FIFA that doesn’t allow clubs to make losses of more than €30m across a three year period, has influenced when clubs announce transfers.

While the financial year for most businesses in the world is either 1 January – 31 December, or 1 April – 31 March, the footballing financial year in Europe is typically 1 July – 30 June.

If clubs have over-spent across a financial year, and fear that they may fail UEFA’s Financial Fair Play rules, they may tactically delay announcing a transfer until the beginning of July to allow them to manipulate their financial accounts more favourably. Conversely, if clubs have underspent, they may deliberately report a transfer in June to free up prospective transfer funds for the new season beginning in July.

Within this, clubs may also be inclined to delay announcing a transfer if their sponsor is about to change. There would be little point in announcing a transfer with the player dressed in a soon to be outdated kit.

Beyond this, in World Cup and Euro championship years, clubs will often try and agree fees with hot-prospect players before a tournament begins. Nothing will inflate a player’s value more than dazzling on the international stage, so it’s best to lock them down in advance.

 4. Clubs amortise transfers, and rarely pay full figures up front

An interesting aspect of Neymar’s transfer to PSG was that Barcelona demanded receiving the full figure (approximately £200m) up front, but this rarely happens. This meant PSG could not amortise the fee over the length of Neymar’s five year contract. At the time, UEFA admitted: “We are not in a position to stop clubs from buying players, but the clubs will face sanctions if they fail to abide by Financial Fair Play rules.” With sponsorship deals allegedly overstated by the Qatari-backed club, PSG may well actually fail FFP for this.

Amortisation is a key accountancy tool utilised by football clubs to navigate the restrictions of financial fair play.

Amortisation is basically just a fancy word for ‘instalment’, and allows clubs to bundle a player’s transfer fee and their wages into a single annual cost, spread across the length of a player’s contract. Watch the below video’s breakdown of how Manchester United costed Angel Di Maria’s time at the club to see how this works in practice.

It’s worth emphasising that ‘net spend’ over a year is fairly useless metric of cash flow because clubs will not be paying 100% of a fee for players up front. Player wages, compensation and insurance will all (likely) total more than transfer fees, yet these are rarely considered.

Take Alexis Sanchez’s move to Manchester United, for example. United will record a net spend of £0 considering the player moved for no fee, but the player signed a £14m a year, four and a half year contract. Player wages at the mega clubs are absolutely extorinate in this day and age (often made larger by image rights, which typically add on 20% to a player’s salary), and this all-in cost has to be appreciated when understanding clubs’ approach.

That isn’t to say that club’s won’t pay a full fee up front, or that these approaches can be uniformly applied to every transfer. There are variations, but amortisation is usually the most logical method of balancing the books and remaining financially compliant.

5. Exchange or ‘swap’ deals don’t happen any more

Even though Romelu Lukaku and Wayne Rooney essentially swapped places in the summer of 2017 between Everton and Manchester United, these were still recorded as two separate, individual transactions, instead of being a single ‘swap’ deal.

The complexity of conducting a transfer for a single player, with a buyer, seller and agent all involved is already a very complex process.

Adding another player on top of this, particularly with another agent with their own interests at heart involved, makes it too complicated to become viable.

Again, there are examples of exceptions (Ashley Cole and William Gallas, Samuel Eto’o and Zlatan Ibrahimovic), but these are becoming less and less common as the role of an agent becomes increasingly prominent in a transfer.

6. Release clauses aren’t always binding 

Arsenal’s infamous £40,000,001 bid for Luis Suarez in the summer of 2013, believed to be triggering a release clause, was battered away by Liverpool. Liverpool owner John W Henry tweeted at the time: ‘What do you think they’re smoking over there at the Emirates?’

There are two types of release clause used in football contracts.

The first type is actually binding; if a selling club receives a bid that satisfies the terms and conditions of the clause, they cannot prevent a buying club from negotiating with their player.

The other type is slightly more interesting, and is referred to as a ‘good faith’ release clause. These are, in practice, completely meaningless, and merely imply that a selling club will consider selling the player if they receive that bid.

Naturally, if the player in question is a valued asset, a selling club will pay no attention to it.

7. Multi-representation deals are common

Mino Raiola is said to have represented Paul Pogba, Juventus and Manchester United over the Frenchman’s then world-record transfer.

Multi-representation refers to an agent representing multiple vested parties in a negotiation. Principally, this should be illegal, as it represents a blatant conflict of interest. It should also be noted that clubs, and not just players, hire agents too.

Essentially, an agent should not be allowed to represent a buyer and a seller at the same time. The role of the buying agent is to negotiate the cheapest possible price for their client. The roll of the selling agent is to negotiate the highest possible figure. If the same person is representing both sides, an agent quite literally can’t achieve their purpose.

Yet in football, multi-representation happens quite often, and are completely within the rules so long as all parties agree to the arrangement.

A final word

As shown, there are many grey areas in football transfers, and FIFA (perhaps through no fault of their own) are constantly seeking to clarify and enforce rules to make sure everybody is playing fair.

But to have one organisation try and regulate a global game which brings together so many different financial practices and ideas into a single melting pot is incredibly complex.

We keep reading and hearing of serious tax issues involving top players, and this is exactly why: is it really possible to fully establish what is really happening in so many different countries, involving so many different entities, vested interests and people, with so much money?

And one more thing: football agents are demonised and cast as villains in the world of football transfers. True, for the big transfers they do coup excessive fees and they have been known to unsettle players. But for the most part, they simply act on behalf of their clients (players and clubs), and help facilitate transfers, sometimes brokering favourable deals that benefit both willing buyers and sellers.