Expert predicts when new Leeds United owners 49ers Enterprises will first flex financial might - YEP 21/7/23

Leeds United's new owners 49ers Enterprises will not get to fully flex their considerable financial muscles until they have returned the club to the Premier League.

By Graham Smyth

Leeds have been bought by an investment group composed of many wealthy individuals, some of whom can dip into the deepest pockets imaginable. There is a healthy budget available for expenditure this summer when it comes to transfers. But the Championship title or even promotion through the play-offs is not up for auction to the highest bidder, not any more.

The EFL, in an attempt to safeguard the game as a competitive spectacle, keep clubs from living so far beyond their means that it might kill them off in the event of a financial backer departing. The footballing authority is out to level the playing field even just a little, through financial regulations that go by the title 'profit and sustainability.'

What that means, in essence, is that your spending is capped not by the wealth sitting around the boardroom table but by a limit on the losses you can make over a three-year rolling period. In the Championship, that limit is set at £39m. So forget a £100m summer war chest - the first transfer window for 49ers Enterprises will not be about spending big but spending smartly.

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"The bottom line is obviously that it is much tougher in the Championship," said Dr Dan Plumley, a sport finance expert at Sheffield Hallam University.

"The money that comes in through TV broadcasting is nowhere near as high [as in the Premier League] so you've got a reduction in revenue to deal with, that's offset a little bit by parachute payments. A £100m transfer window spend is unlikely in the current climate. Those days are just not there anymore, partly because of the regulations and also partly because we've seen, certainly at that level, you just can't act like that anymore. I wouldn't expect that to be the case now at Leeds.

"It's a real juggling act because it's not just how much you spend on transfer fees but the whole package in terms of wages as well. Selling players helps because it's not just a fee and profit, it's money off the wage bill. That's the cost control element you're looking at, although the targets are a little different because it's a different calibre of player and recruitment costs will reduce in line with that."

The challenge for 49ers Enterprises, if they want to spend, is to make profit and sustainability headroom by making money. In that sense, they bought the right club because the YEP understands week one shirt sales put Leeds in the top six in the country. The matchday revenue and money pulled in through ticket sales will be top of the entire EFL. The new front of shirt sponsorship deal with BOXT won't be bettered in the EFL and is thought to be a record outside the Premier League. Then there's the parachute payments.

"We've done a fair bit of research in that space, and they do benefit the teams that have them to such a degree that they are more likely to go up than the teams that don't have them," said Plumley.

"From an ownership point of view, what you're obviously looking for is a three-year plan to get back to the Premier League whilst you've still got the security of parachute payments. The quicker you get back to the Premier League, the better."

Parachute payments help but they don't solve the problem of profit and sustainability. Leeds have to help themselves, and believe they have by getting Premier League wages off the books, hence the sale of Rodrigo, their highest earner, and the loan exits of Robin Koch, Brenden Aaronson, Marc Roca, Rasmus Kristensen and Diego Llorente. Contract clauses, like in the case of Koch, have permitted a situation that Daniel Farke has included when addressing the difficulty they face as a club. There have been suggestions that retaining Aaronson and others as assets until Leeds return to the Premier League makes sense, but how much tolerance there would be in the stands should the club decide to reintroduce any of them, in the event of promotion, is very much up for debate. Perhaps the best case scenario is that they have good seasons abroad and push their value back up. For now though they're not costing the club and the wage bill has come down. Significant salary reductions almost across the board will help too.

"In the current climate you absolutely have to do that, it's really sensible business practice to be putting relegation clauses in contracts to counter the reduction in revenue. Not every club is doing that yet, but it's common sense when you factor in some of the numbers,” said Plumley.

Where the new ownership might also help themselves is in exploring ways in which to further boost revenue figures that were super-charged during the Andrea Radrizzani era. Plumley believes that was likely covered in their business plan when the EFL's approval was sought for the takeover.

"I think they'll be presenting these opportunities for growth that come with them being the new owners, looking to grow revenue streams into other markets," he told the YEP.

"You would imagine that America is obviously a natural target and maybe linking up with some other sports properties and people, as we've seen with some of the names mentioned in the investment group."

And then there's the almost inevitable but always painful area of financial opportunity - player sales. Herein lies the greatest balancing act. Keeping players, like Jack Harrison, Willy Gnonto or Tyler Adams, means there is perhaps less need to go out and recruit. Those players are Premier League players who would be expected to push Leeds towards the very top of the second tier table. But their retention would also mean there is less room for spending.

Sales that would make most financial sense are those that would create headroom because they count as profit. This is why the sale of Aaronson this summer would not have helped, particularly, because the £27m initially committed to his addition would not have been recouped. Not even close. Illan Meslier, Crysencio Summerville and Gnonto however are three who were all recruited for sums under the £5m mark. All three would be expected to fetch much, much more if they were to move in this window.

Meslier has made noises about moving but there are no offers on the table. There have been noises about Summerville moving on and he has suitors. The most noise surrounds Gnonto, who is back in training and making no attempt to force a move so currently appears comfortable with the idea of staying. His contract situation means Leeds could hold out for the highest possible fee - one in excess of the kind of money Everton would likely be able and willing to muster - but a serious offer from a Serie A club or a Premier League outfit would have to be looked at by both the player and his club.

If Leeds sell, they'll be better equipped to buy, while staying within the boundaries set by the EFL. There are areas in need of expenditure, unless high quality loans can be secured. Striker, left-back, central midfield and right-sided centre-back, for a start. Oh for a Ben White. Signings of that ilk, along with creativity and flexibility in how they are acquired, will be required to build the squad Farke wants and needs.

And if Leeds' new owners want to spend big, then they need to be back in the big time. That's when Plumley expects 49ers Enterprises to dig deeper into their collective pockets.

"Behind the scenes they've probably got those plans in place," he said.

"It could have gone either way this season, so they would have had plans that they would want to have activated in the Premier League and I think that'll be exactly the same if they do get back there pretty quickly. It opens the door back into new markets, and that international TV audience is the biggest factor in that. So again, going back to that kind of commercial proposition, using their experience and their brand, you can make much more out of that in the Premier League as well. I think it stands to reason that we'd see a bigger push and probably then a little bit more investment, because you've got the revenue coming in to support that."

It's a big, big first summer for the new money men at Elland Road. Just don't expect it to be a summer of big, big money.