After 12 years of ownership, Fenway Sports Group are exploring the possibility of selling Liverpool FC.
The American group have won every top-level trophy available to them during their time as owners of the Reds and are now quietly looking at potential offers from around the world.
Having purchased the club for £300m in October 2010, Liverpool are now worth more than 10 times that amount and a presentation has been produced for anyone who declares a serious interest in an outright takeover.
FSG president Mike Gordon is overseeing the process and the Boston organisation have instructed two major US banks in Morgan Stanley and Goldman Sachs to see what might be on the table for a club now valued at more than £3.5billion.
Here, the ECHO's Business of Football reporter, Dave Powell, and Liverpool correspondent Paul Gorst deliver this special report.
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The ECHO has learned that senior figures at Anfield were stunned when the news of a willingness to sell was made public on November 7. It is thought that FSG had hoped to quietly explore their options before it was reported by The Athletic that the owners were searching not only for external investment but also for the possibility of an outright buyer.
It's been suggested the quiet attempts to survey the landscape was done so without explicit knowledge of some executive-level Liverpool employees in a move that bore a resemblance to the European Super League debacle that was foisted upon those inside the club itself in April 2021.
There is also a feeling that now is the right time to capitalise from the owners' perspective. Anfield will play host to regular crowds of 61,000 from next season, while the AXA Training Centre - a £50m facility that Liverpool believe rivals any other in Europe - is barely two years old and the club have won every top-level trophy available to them since June 2019.
On top of that, there's a private acceptance that it's getting harder and harder to keep pace at the top of the English game without a significant injection of capital and failure to qualify for the Champions League - and all the subsequent riches that follow - would make it even more difficult for a squad that will be in need of investment, particularly in midfield, by next summer.
While the expectation has always been that Liverpool must be able to sustain itself through the annual revenue created, FSG have never taken a penny out of the club, safe in the knowledge that their £300m investment 12 years ago would eventually net them a much healthier profit. It seems as though that time is finally here, even if key figures within the Boston-based group, like Reds chairman Tom Werner, have played down the urgency to complete a sale.
But what exactly would a potential new owner be getting for their buck?
Liverpool FC's virtues as a sporting institution are clear. The Reds have a team that almost swept the board last term; becoming just the fourth team to win both domestic cups in the same season before finishing runners-up in the Premier League with 92 points and contesting a hard-fought Champions League final where they were narrowly beaten by Real Madrid.
With one of most gifted coaches of his generation, in Jurgen Klopp, barely six months into a long-term contract in charge of a team of elite performers, investment in the squad need not be as sizable as most other football clubs who are up for sale, from a general perspective.
Liverpool have proven under the FSG model of self-sustainability that it can thrive and while any takeover or partial investment in a football club is usually rubber stamped with the expectation of significant squad investment, the Reds don't need hundreds of millions to address their areas of concern, even if there should be an acceptance that a more proactive approach must be needed at times during the player-trading months to keep pace at the top.
There is no doubt that Chelsea's sale earlier this year has expedited FSG's plans to seek fresh capital. The Americans have never shied away from their willingness to look at any serious proposals, but crucially they have always insisted the club was never for sale, until now.
Having won all there is to win at the top level and having improved club infrastructure almost beyond recognition with the Main Stand, AXA Centre and soon-to-be-complete Anfield Road projects, the question is likely to have been floated inside the Boston boardroom that perhaps FSG have taken Liverpool as far as they can inside this particular model of ownership?
With Newcastle and Manchester City powered by the unimaginable wealth of Abu Dhabi and Saudi Arabia, respectively, Chelsea committing close to £2billion on improvements across the board after their own takeover this year and Manchester United's financial might also an enduring factor, FSG may believe their seemingly non-negotiable policy makes it difficult to sustain the level of success that's been prevalent since Klopp lifted the Champions League over three years ago.
And while fresh investment provides the club with an injection of capital needed to match their rivals, maybe, after well over a decade of presiding over matters, those inside the group believe a potential sale of anywhere between £3.5-4bn ultimately represents great business?
Walking away now and handing over the keys to the Shankly Gates to the right type of new owner will see FSG able to toast to a hugely successful stewardship. Despite the well-documented mistakes, U-turns and apologies, there would be few truly denouncing their reign if they abdicated the throne with Liverpool in the position they find themselves in now, off the field.
A key issue, though, is just whose billions FSG would be happy to accept, should an outright buyer be sourced from the overtime currently being worked in the offices of Goldman Sachs and Morgan Stanley.
Sources have shared with the ECHO their concerns over just what type of buyer the news opens the club up to. Newcastle United's supporters have been, on the whole, largely happy to ignore the issues that have engulfed their Saudi Arabian owners since they took charge in October last year, but Liverpool's are likely to be more vocal if a group with a similar stance on same-sex relationships and history of human rights' abuse make known their interest.
It's been made clear that some view the Premier League's Owners and Directors' Test to be unfit for purpose, which could create a divisive issue further down the line if certain offers arrive into the FSG inboxes.
Where things stand at present with regards to a sale has dialled back somewhat from what had been proclaimed a little over a fortnight ago.
Ever since the desire for FSG to explore a full sale, there have been numerous names linked as potential bidders, many of them erroneously.
The name Mukesh Ambani is one that has been floated on the rumour mill. The Indian businessman is listed by Forbes as the 10th richest man on the planet, with an estimated wealth of £77bn. Ambani was one of two businessmen, alongside Subrata Roy, who were reportedly willing to pay off Liverpool's debt in return for a 51% stake in the club back in 2010.
Emails to the Reliance Industries' offices in Mumbai have simply been met with stock responses when contacted by the ECHO earlier this month, while FSG sources reiterated their public statement when rumours of Mr Ambani's interest was put to them.
Major Indian media outlet ABP News, however, has since claimed that a representative of Reliance Industries has branded the reports as 'fake' and that Ambani is not in the running to purchase Liverpool.
There has been the desire to look at the obvious links that already exist, such as RedBird Capital Partners, the US investment fund that acquired 11 per cent of FSG for $750m back in March 2021. Founder and managing partner of RedBird, Gerry Cardinale, has been an active investor in sport over the past two years, acquiring controlling stakes in both Toulouse and Italian giants AC Milan, as well re-launching the XFL in the US alongside Hollywood megastar Dwayne Johnson and pursuing minority investment in the Rajasthan Royals Indian Premier League cricket team.
Cardinale, when at Goldman Sachs, had looked at acquiring Liverpool in 2008, while last year he told the Financial Times' Business of Football Summit in New York that he would never rule out a move for the Reds but stressed that was not part of his thinking then or the reason why RedBird concluded their investment into FSG.
Having paid £1.1bn for a controlling stake in AC Milan, RedBird have no interest in divesting that and they have a long-term commitment to their Italian project, one that includes a new stadium for the Rossoneri. There will be no move made for Liverpool, not least because of the clear conflict of interest that would exist from a UEFA standpoint.
Steve Ballmer, the former Microsoft CEO and owner of the Los Angeles Clippers NBA team, told the LA Times earlier this year that he had no interest in adding more sports teams to his portfolio, largely because he did not have the time to invest in another sporting passion.
One name that has remained a link is that of Harris Blitzer Sports & Entertainment (HBSE), the firm owned by billionaires Josh Harris and David Blitzer, both 18 per cent shareholders in Crystal Palace.
HBSE already own sporting assets through their majority stakes in the Philadelphia 76ers (NBA), New Jersey Devils (NHL) and Real Salt Lake (MLS), while Blitzer has an investment vehicle called Global Football Holdings that owns stakes in Brondby, FC Augsburg, AD Alcorcon and ADO Den Haag. HBSE also have a minority stake in the Cleveland Guardians Major League Baseball team.
Attempts to contact HBSE have so far been met with silence but the ECHO has learned from US sources that the firm have an interest in potentially making some kind of investment play but have yet to take a solid stance on their next steps, although other well-placed US sources believe that a full takeover from HBSE is unlikely due to the likely heavy price tag of $4bn-plus that it is expected to take to even get a foot in the door with regards to a takeover.
HBSE, despite Harris and Blitzer's Crystal Palace shareholding, were in the running to acquire Chelsea earlier this year before the Todd Boehly/Clearlake Capital/Hansjorg Wyss bid won through. As part of their consortia they had former Liverpool chairman Sir Martin Broughton on board, the man who stewarded the early months of FSG's Reds reign, as well as Wall Street financier Michael Klein, a man who was a key player in making the deal happen to put the club into FSG hands from the near-ruinous regime of George Gillett and Tom Hicks back in 2010. HBSE would have to divest in Palace had they any desire to become bedfellows at Liverpool or explore a takeover, something that their Chelsea approach hinted would be a possibility.
Blitzer, when speaking at the Sportico Invest in Sports conference in New York last month, where the ECHO were present, said: "There are a handful of teams/brands out there on a global basis, and Chelsea is one of them. The opportunity to invest in that particular situation with a very small number of people, frankly, given it was a complicated situation, we were comfortable giving that our best shot.
"We would have had to divest our interest in Crystal Palace had that come through. If that had happened it would have been a really sad day in one sense, but again back to the investment part it would have been a really interesting investment in terms of what's out there for Chelsea."
Liverpool chairman Werner and FSG partner and president of the Boston Red Sox, Sam Kennedy, both spoke publicly to the Boston Globe when pressed on the potential sale of the Reds when they appeared at the MLB owners meeting in New York last week, with both confirming that a sale was something being explored but stressing that it was "business as usual" and that FSG were exploring their options and could yet remain as custodians of the football club for a long time yet.
From sources that the ECHO have spoken to in the US, FSG's motivation at present is simply "testing the waters", the £2.5bn sale of Chelsea prompting them to see where they sit in the market place and weighing whether the sale of a minority stake or a full shareholding would be a better option.
It is worth remembering that John Henry, FSG's principal, made his fortune as a commodities trader, the idea being to buy cheap and sell high. Liverpool were acquired by FSG, then New England Sports Ventures, for £300m back in 2010 in what was described by the outgoing owners of the club, Hicks and Gillett, as an "epic swindle".
The valuation for Liverpool now has varied between £2.7bn and more than £4bn based on conflicting reports, but sources in New York have told the ECHO that a sum of around $4bn (£3.4bn) would be deemed reasonable to open the door to a conversation. That would represent a return on their initial investment of 1,033 per cent.
But valuations are continuing to rise, the football landscape showing remarkable resilience on that front when the macro-economic factors such as rising interest rates and continued financial recover from the pandemic are factored in. That is why sports is such a valuable asset class, particularly for American investors who believe the Premier League in particular to be significantly under monetised when compared to the likes of the NFL.
Teams tend to be purchased using the rather basic metric of a multiple of revenue. When Chelsea were sold they were sold at a revenue multiple of around six, having posted revenues for 2021 of £416m. Liverpool, using the expected revenue figures of £600m for the 2021/22 financial accounts, which are yet to be published, would be valued around £3.6bn on that basis.
But when compared to the NFL, a competition with a remarkable $100bn 10-year media deal but having a fraction of the global pull of the Premier League, the multiple of revenues to acquire on of the 32 franchises are significantly higher. When the Denver Broncos were sold earlier this year they were acquired at a revenue multiple of more than nine, with revenues of £433m for 2021 against a sale price of £3.95bn. That is why US investors see the Premier League as undervalued.
Valuations are expected to continue to rise for the next few seasons at least, and the interest from the US is likely to continue to be strong, not least due to the 'soccer' boom that is being experienced across the Atlantic, buoyed by an improving domestic competition and the World Club heading stateside in 2026.
There is also tremendous scarcity value around the 'big six' in the Premier League, teams that are as close to risk free as you can get in football due to almost zero threat of relegation and high chance of securing lucrative Champions League football.
FSG will know that valuations are likely to continue to rise and by selling Liverpool now they would be leaving a considerable amount of money on the table. That's why one prospect that is being given consideration is the potential for someone to acquire the club on a piecemeal basis, raising capital for FSG via a stake sale that may allow them to either free up funds to aid the very pressing need to address their requirements in the transfer market, or potentially to see them cash out a portion of their shareholding for growth prospects elsewhere. That, over time, would allow for someone else to acquire the club bit by bit and also allow for FSG to realise the financial benefits of continued rising values.
But while valuations are rising, so is the cost of keeping pace with the spending power of the clubs backed by the deep pockets of sovereign states, and clubs whose simpatico relationships in certain parts of the world have allowed them to leverage their commercial deals to the point where it is almost impossible for the likes of Liverpool to compete with their ability to generate commercial revenue streams, despite their major global pull.
It is understood that Mike Gordon, FSG's president and the most hands-on of Liverpool's ownership group at Anfield, has candidly shared his concerns in a private setting for months about the club's inability to compete in a financial sense with the likes of State-owned clubs like Manchester City, Newcastle and Paris-Saint-Germain on the European stage.
FSG will know that they need to spend money in the coming seasons to maintain the challenge for honours year in, year out, and they will want to leave a winning legacy to whoever comes next. How they approach the next two transfer windows will give plenty of clues about the longer term plans.
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