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by Chester Perry » Sun Aug 25, 2019 11:09 pm
As FFP controls (primarily from UEFA) become of greater concern to the big clubs across Europe (the rewards for Champions League participation especially are very significant as we have seen), clubs have become very careful in meeting these requirements while still being eager to pursue their interests. IT also means that some clubs are more susceptible to approaches for their players because they may be flying close to the FFP limits
The New York Times looks at the growing prevalence of loan-to-buy deals
Play Now, Pay Later: How Loans Became Soccer’s Favored Accounting Tool
Loan-to-buy deals are on the rise, favored because they allow top clubs to comply with Financial Fair Play regulations without losing any of their purchasing power.
By Rory Smith - Published Aug. 24, 2019 - Updated Aug. 25, 2019, 12:28 a.m. ET
On the surface, Paris St.-Germain’s victory against Strasbourg in February 2018 was unremarkable. It was unusual that Strasbourg took an early lead, but it only lasted four minutes. Julian Draxler equalized. Neymar scored, Angel Di Maria scored. P.S.G. led by two goals after 22 minutes and won by 5-2. Strasbourg was just another opponent swatted aside on its parade to the French title.
Yet it was a game of considerable significance: That single victory meant P.S.G. had to pay Monaco — the team that finished second in Ligue 1 that year — $200 million.
The previous summer, not long after it had stunned the world by buying Neymar, P.S.G. had agreed to a deal with Monaco to sign Kylian Mbappé, global soccer’s nascent superstar. The arrangement was not quite as straightforward as the deal for Neymar, in which P.S.G. had just matched the even larger release clause in his contract at Barcelona.
Instead, P.S.G. acquired Mbappé on loan for a season, with a stipulation in the contract that it would pay a set fee — 180 million euros, or roughly $200 million, plus bonuses — the next summer if certain targets were met. One target, in fact: P.S.G. would be compelled to buy Mbappé the moment it was mathematically safe from relegation. It was hardly a tall order. P.S.G. only had to wait until February, and the final whistle against Strasbourg.
P.S.G.’s motivation for structuring the deal in such a way was not difficult to discern: Conscious that buying both Neymar and Mbappé in the same transfer window would, most likely, lead it to breach UEFA’s Financial Fair Play regulations for a second time, it made the loan deal to allow it spread the total cost of its investment in Mbappé across two assessment periods, and avoid the possibility of a heavy fine or, worse, ejection from the Champions League.
The strategy has caught on. As has been the case for the last several years, this summer’s transfer window produced a slew of deals that seemed tailored to help clubs function within the boundaries of Financial Fair Play without losing any of their purchasing power; more and more clubs are moving away from traditional deals and finding new ways to work. This has been yet another summer of “loans with an obligation to buy.”
“Teams are adapting to the new environment, just as they adapted to the Bosman ruling in 1995,” said Omar Chaudhuri, an executive at the sports intelligence agency 21st Club.
Chaudhuri’s figures indicate a significant rise in the number of loans that subsequently became permanent deals across Europe’s big five leagues in recent years. A decade ago, for example, only 10 players in England, Spain, Germany and France were sold to the club where they had spent the previous season on loan.
This summer, that figure stands at 32. Next year will doubtless be similar: Bayern Munich has an option to buy both Philippe Coutinho and Ivan Perisic, both in Bavaria on loan; Tottenham’s deal to sign Giovani Lo Celso from Real Betis was a loan with an obligation to buy (his second in two years), as was Inter Milan’s capture of the Italy midfielder Nicolo Barella from Cagliari, among dozens of others. (Serie A, Chaudhuri noted, is a “different beast,” where loans have always been more prevalent, but if anything the pattern there is even more pronounced: five such deals a decade ago, 35 this year).
Some of those transfers, of course, are simply traditional loans that have worked out well. Others may have been loans with an “option” to buy for a set fee, should the player prove a success. In many cases, though, they follow the Mbappé model: loans which are, in essence, deferred sales. According to one executive, the language is a little misleading: so as not to arouse the suspicions of UEFA’s auditors, the “obligation” has to be dependent on something, but the bar is often set so low that it is impossible not to meet it.
The appeal, in many cases, echoes P.S.G.’s intentions: a deferred purchase enables clubs access to a better quality of player than it might otherwise be able to acquire immediately while complying with F.F.P. It is why, for example, Barcelona’s most recent offer to P.S.G. to reacquire Neymar was not a purchase, but a loan-to-buy deal structured along the lines of Mbappé’s.
There are benefits to these arrangements for the clubs seeking to offload players too, and not only in reducing salary commitments at a time when wages have become so inflated that few clubs outside of Europe’s richest leagues can afford elite salaries. As far as clubs’ accountants are concerned, a guarantee of future income enables teams to forecast more accurately their total revenues for the seasons ahead. “It’s a relatively new concept, but it can be a sign of good practice,” Chaudhuri said.
It is not the only way F.F.P. has started to mould the transfer market, though. “There are so many types of creativity available to the clubs,” said Esteve Calzada, the chief executive of the agency and marketing firm Prime Time Sport, and a former chief marketing officer at Barcelona.
Long-term loans have grown in popularity — Chelsea has sent three strikers to Atlético Madrid on such terms in recent years — while the recompra, a contract clause that has long been a feature of transfers in Spain, in which the selling club has the right to buy back a player for a set fee, has spread across Europe.
Increasingly, teams do not simply consider their own financial projections, but those of their rivals, too. Several Premier League teams, for instance, keep track of the budgets of clubs across the continent, to see which ones might be at risk of running afoul of F.F.P. rules, and therefore might offer less resistance when it comes to cherry-picking their surplus players. The same summer P.S.G. was signing Neymar and Mbappé, for example, Tottenham was taking the fullback Serge Aurier from Paris. A few months later, Lucas Moura followed the same route to Spurs.
A more extreme example is the case of the goalkeepers Jasper Cillessen and Neto. In June, Cillessen moved to Valencia from Barcelona for 35 million euros. The next day, Neto moved from Valencia to Barcelona, for 26 million euros, and 9 million euros in various add-ons. In Calzada’s eyes, there was a “sporting” justification for the moves: Cillessen wanted to play regularly, after two years as Marc Andre Ter Stegen’s backup at Camp Nou; Neto’s relationship with his coach at Valencia had deteriorated, and he relished the chance to play at Barcelona.
The nature of the deals, though — not a straight swap, but two separate sales to make the numbers match — and particularly the curious timing of them, at the end of last season’s F.F.P. accounting period, raised eyebrows. It looked to be a way for both clubs to ensure their books were in order, while not weakening their squads.
To those who monitor soccer’s transfer market, it was inevitable that UEFA’s regulations — and the threat of punishment for not complying — would change the way clubs operated.
“There is now a far more dynamic, proactive regulatory framework,” said Mark Goddard, a former head of FIFA’s Transfer Matching System, the global body that oversees the transfer market. “You have an active F.F.P., and you have an active T.M.S. The clubs then move and shake within that framework.”
This summer — like the last few summers — has been the consequence of that moving and shaking. The clubs are changing to suit their new environment, finding new and innovative ways to spend money, but making sure that, whatever the rules are, they can still get what they want, and who they need, even if they have to wait a little longer than they would like.