Christian Purslow - Liverpool FC Managing Director, 2009 - 2010 HARDtalk

Welcome to HARDtalk, I am Stephen Sackur. No other sport can match the

global popularity of football. I'm not just thinking about the vast

audience that will tune in to the World Cup in Brazil later this

month. The English Premier league has become one of the most lucrative

entertainment brand on the planet. But the fear is, the games riches

inflating a bubble that is bound to burst. My guest today is Christian

Purslow, a former managing director of Liverpool FC. Is there a money

sickness at the heart of full ball? `` football.

Christian Purslow, welcome to HARDtalk. Yellow map thank you. You

had established a strong reputation as a businessman. A pretty ruthless

venture capitalist style of businessmen and yet, you decided in

2009 to venture into the crazy business world of football. Why?

Well, I think it's precisely because of business background I had which

as you say was in the financial world. For nearly 30 years I had

been in the financial world, buying and selling companies as a private

equity venture capitalist executive and Liverpool was indeed a failed

venture capital deal by 2009. It was a club that had been bought with

large amounts of borrowed money in so`called leveraged buyout. It was

in great financial distress because the owners were unable to meet the

terms of those borrowings. So I think it's there to say that

although I love to believe it was because I am and was a Liverpool

fan, I had been shareholder, a small shareholder for many years and only

the club. I think it's fair to say the reason I was asked to step in as

an interim CEO and try and sort bubble out was precisely because it

was absolutely familiar territory for me. I can see that is why they

wanted you could you brought business expertise to the table. I

am struggling to see why you wanted to be involved with them because

never mind being fan, you had a track record of being and

unsentimental businessmen. The only reason you would have been attracted

to Liverpool would be sentiment. Your absolutely right. A lot of

people thought it was a tough assignment. Liverpool had become not

really a football story, it had become a boardroom story. The owners

were disagreeing, themselves, they were publicly criticising my

predecessor, there were publicly criticising the manager and it was a

terrible mess. That happens when any business is in financial distress.

These were Americans and they had come into Liverpool frankly knowing

very little about football it seemed to Liverpool fan in the city and

around the world that this was a symptom of something deeply rotten

in the professional game that such a story `` stories and celebrity club

could be taken over by guys who knew nothing about the sport and appeared

to understand little about how to run it as a business. They were the

first Americans to buy a famous massive in wishful club in a

leveraged buyout. The Glazer 's had bought Manchester United a couple of

years previously. I would tend to stay `` is a that the takeover of

Liverpool was actually a microcosm of a much broader problem, are much

water set of circumstances that culminated in the credit crunch. And

that was that really, with no relevant previous experience

operating in any market in a new geography, a new sport two people

were able to borrow 100% of the purchase price for a business

and... What might close to ?200 million. ?220 million with no money

down. The idea being that all the interest that debt would be serviced

from the cash revenues inside the club. That is what a leveraged

buyout is. Anyone can see now with the benefit of hindsight, that model

depends on one thing being true and that is that the value of the club

rises such that the owners can sell rosy in the garden. But it is not as

simple as that. Is a sport and in the end, the business model could

only have worked if it will have every trophy every year popular you

are entirely right and let me say, I think that leveraged buyout of

football clubs are wrong at two levels. The old`fashioned, I think

they are wrong at a moral level. I do not believe the revenues that

flow into a club from fans through buying shirts or even through their

TVs and scratches, I do believe if asked, any fan would want that money

to be used to finance money used, borrowed money, used to buy that

club. Christian Purslow, you then are telling me that you engaged in

what you at the time must have regarded as morally reprehensible

enterprise. You took the money of Hicks and Gillett to run this

business. Now you are telling me it is morally reprehensible. At a very

little money for running Liverpool. I did not do it for the money, I did

it because they were in a financial mess and I care deeply. As you said

at the start of the conversation, it was a tough assignment to step in

there. We are talking the middle of a nuclear winter in the financial

world. If we were to pull`out today, the number of companies being taken

over, raising money in 2009, not many were happening. But the job was

to get that club back to where it was when it was first taken over. To

remove it off huge amounts of debt under which it was drowning. I knew

I could do that because I had relevant experience. Does not go

into orbit detail because it is complicated. In essence, it is

perhaps wise to remember as we sit today with Liverpool finishing

second in the Premier League and clearly enjoying some great excess

on the field. It is sometimes wise to remember that just four years

ago, the club was in such dire straits that many people thought it

was going to go under, going to go bust. How close to going bust did it

come? We sold the club 24 hours before those of very ?300 million

were due and payable. If we had sold the club and had repaid the debt,

the club would have had to go into administration. This went right down

to the wire. Did you think at the time it was going to go into

administration, to be declared insolvent? No. I was absolutely

thrilled to have not one but two companies that were willing to buy

the club. After an extensive sale process searching left and right

around the world. Obviously, the critical issue was to get one of

those clubs to complete on the takeover. You were the architect of

this, at least one of the three main architect of the accusation is that

you are so desperate to sell Liverpool to somebody and wipe out

some of the debt, or write all of the debt, the desperation was such

that you essentially gave the club away at a ridiculous price. Given

the brand and history, you could have got much more for Liverpool

than he did. Is that your opinion? If the opinion of Hicks and Gillett.

They took it to court because there were so furious. They would say

that. I am delighted to say that those arguments have been

ventilated. All I will say, I will quote my learned friend who said you

would have to be on planet Zog that an experienced financier is here to

sell the club. Over the next 18 months, that is what we did. 150

people kick the tyres of Liverpool and at the end of the day, the two

remaining it is turned up and we sold the club to the highest bid so

I am very proud of that. By the way, it was over 11 times profit which

was a very high price. You can make the argument. The fact is Hicks and

Gillett did sue you and the other two key layers in the sale, there

was ultimately a legal settlement. I don't know whether you can tell me

now because the dust has settled, did you have to take Hicks and

Gillett money? Of course not. They withdrew all allegations and claims

and that on the record. All right. Let's laud the picture from

Liverpool FC and let's go back to your point about this being

systematic of something wider in the game. You said Manchester United,

perhaps the most famous leveraged buyout, are you suggesting that

because of what happened to Liverpool, something akin to that is

still possible at Manchester United? No, I'm not actually.

Because, as we discussed, the nature of leveraged buyout is that they are

very high risk. You are Ms King operating risks are the risk of

succeeding with your business with the financial risk of borrowing

money and having interest. The operations of Manchester United have

been so successful the profits of that club have grown so

substantially, for lots of reasons. The principal one being the dramatic

rise in the value of television. It would be fair to say that the

financial cost of that leveraged buyout are very well covered by the

operating profit. They rolled the dice and they won. Liverpool rolled

the dice and for a while, they lost. Exactly right. I consider it again

to rolling dice. That is the risk. They got away with it. Here is what

strikes me. We wanted you to talk about football and business.

Frankly, there's an awful lot of business and not much football. Is

there not a problem in the sport, professional elite sport today that

in the end, there isn't anything like a level playing field. For the

footballers themselves. We can predict who are going to be the

successful clubs across Europe, maybe across the world just by

looking at their financial resources. And in the end, for a

sport, that makes it boring, predictable and maybe, long`term

unsustainable. Well, it's a very fair and good question. I must say

that I think we have to make comparisons across geographies. I

don't think words like boring and unpredictable would be applied to

the Premier League. Indeed, unpredictable would be applied to

Sorry to interrupt but we do know that friendly, the richest clubs

backed by the most sought of egregiously rich owners, I'm

thinking Manchester City, Chelsea and banks to their success,

Manchester United. We know those teams are always going to be at the

top or very close to the top of the Premier League. I think the nature

of recessional soccer in Europe has always been that there are very

strong teams, they are lesser size teams and there are smaller teams.

If you look over 100 years in each of the key geographies in Europe,

you will see three, sometimes to, in the EPL today, four, five or six

teams who are competing to win the league. Critically, I think the

magic of the Premier League is on any given Saturday, any of those

teams can lose to anybody. It's not me saying that. The value of the

television rights around the world suggest that it is compelling for

the fans. For now. From now. There is a genuine issue in other

geographies in Europe. Spain, for example which until this year has

been essentially a two horse race. Germany which is now more less one

was race. Bayern Munich one this year by over 20 points. And then

bought the best player of the team that came second. Those leaders will

have an issue with the competitiveness. I don't see that in

England. Do you... Reflecting on your own experience with Americans

at Liverpool and talking about the Glazer 's as well and Abramowitz at

Chelsea and... You make that a different model. How do you acquire

a club to the identity of the club itself. And the relationship between

the owners and the fans. I think 11 out of the 20 Premier league clubs

in his last season were foreign owned. Does that matter? It does not

matter to me. As I see it, football has definitely become a very global

industry. There is no question about it. Is nothing more than a

commodity. The fans may care and cry if their team loses on a Saturday

afternoon before the owners, it is nothing more than a commodity. I

would beg to differ, I think it is a valued possession which a number of

people owed for purely business reasons were stopped I think that

the thrust of what you are describing.

You are absolutely right and that is indisputable. Some people are

uncomfortable with that but your question was, two I have any concern

about foreign owners. I have no more concerned about them and I do for

and players, foreign managers... The game is global. And England is a

pretty rare thing in our country today, I say this as an

international businessman, we do not have many local economy leaders in

England, defined as leading competitors within a global industry

and the English Premier League is the leading league within

professional football today and I think that is good for the sport and

our country. And a lot of people coming to England with a lot of

money and huge promises, wanting to buy into this entertainment brand,

obviously we have talked about the Glazers and we should remember that

Malcolm Glazer has just died, but the family is still there. Clubs

have been taken over by foreigners who have been, how can I put this?

Shady at best. Tests are supposed to be carried out to ensure that the

owners are suitable and responsible but it doesn't work in many cases.

Would you agree with that? I think the direction of travel on those

issues is promising, meaning on two levels, the financial fair play

regulations in UEFA and subsequent initiative in English football in

the Premier League, those rules have at their heart, a notion that is

completely mainstream in the financial world that I come from and

that is the notion of disclosure. But before a club is to be acquired,

the potential buyers must disclose the financial plans, the sources of

their funding and where the money comes from and prove that it will be

sustainable. That hasn't been true when many teams were taken over. But

I am also talking about personal integrity. Manchester City is owned

by someone who is languishing in prison after being convicted in Hong

Kong of serious financial offences. That shouldn't happen. Take Leeds

United. It has been taken over by an Italian businessman who, it turns

out, has just been convicted of illegally importing a yacht into

Italy and faces other financial charges going forward. It shouldn't

happen, should it? I thought it was a very bad day for football when the

very owners test that you just referred to was applied to be

potential takeover of Leeds... The lawyers took over and as I said, the

Italian was convicted of illegally importing a dog which many people

would say, would raise questions about his suitability as a football

club owner, his suitability and he took over the club. I am not

familiar with the details but I am familiar with the regulations that

have been the stop in this area. When it is turned down without being

challenged, I think that is bad for football, I agree with you. Let's

talk about financial fair play because you were instrumental in

drawing up the rules. Clubs are no longer able to buy their way to

success with unlimited money but are supposed to show that they have a

business model which either breaks even and doesn't lose too much

money, or they have to adapt their salaries accordingly and if they

break the rules, they will have Manchester City already have been,

he punished. Is that going to change European elite football? I think so

and I can already is. I think the direction will travel in terms of

what those rules are doing. The behaviour is already modifying. This

your total transfer spending was down. You look at Manchester City.

Their first period of transfer, they were spending two or ?300 million

and this year they are only spending ?50 million. Arsenio Bangor said the

only way to break these rules is to throw them out of the Champions

League but that is not going to happen because there are too many

vested interests and you want to take all of the big teams to the big

games. UEFA has a willingness to support the sanctions but let's note

homey two of the principal targets of these regulations, you refer to

this oligarch model, Paris St Germain and Manchester City from Abu

Dhabi, all funded by equity, not borrowed money, not get, just giving

money away. No Manchester City is in New York and Melbourne... What that

is what I'm saying about it not being fair. If fans want a sport

they can believe in as legitimate come petition, if you are allowed to

splurge in unimaginable ways... But you are not and that is the point of

your question. You are not allowed to run losses greater than 50

million euros. I think that will do two things, it will stabilise

football, it will take out that terrible inflation at the top of the

market for players wages and transfer spending, but it will not

make a level playing field. I must say, as you talk, you must be an

extraordinary optimist because I think of how football is today and

you say that fixes are in the works and I look at it as an industry that

is spiralling out of control. As an insider who has seen the game

absolutely from the inside, are you prepared to say to me that greed

drives so much of elite football? Greed is very prevalent in football

and I say that having been in the city of London and in many respects

you see not dissimilar behavioural patterns. I am not idealistic about

that at all. It seems to me that we could have, in England if we wanted

to, learns lessons from Germany where they have imposed real

regulations on foot all. Clubs have to give a stake to the fans for

example, they have to put a cap on ticket prices so that ordinary

people can afford to watch and they also borrow foreign owners. Germany

has done things differently but in England, such as the greed that we

are not prepared to go there. It is very difficult to convert from a

capitalist model... Germany is a capitalist country. Yes, at English

football was a capitalist model from the day that it was bought. I don't

need to tell you... I would love Liverpool to have been bought by a

fan but the cost was way beyond multiple hats all around the world

even tried, let me tell you. That transition is impossible but the

lessons are important and the lesson is that having fan ownership... What

does it translate to? It means that fans have a voice and I think

English clubs could learn from that. German clubs use their less affluent

fan base to take up certain parts in the stadium and England could do

that. It seems to me that the German game has a certain sense of moral

responsibility within it, compared to the English game. I want to end

with this thought about morality because we have talked an awful lot

about big money and the money today, for example pretty much 100 million

euros for an elite player like Gareth Bale or Wayne Rooney to be

sold or to re`sign a contract, for ?300 a week `` ?300,000 a week, I

can barely get my head around it. Is that morally acceptable? The only

way I could justify it, and I am not a champion of these matters, but I

would leave you with this thought. We have talked about the explosion

of wealth in football generally which is essentially driven by

international audiences loving the sport. It is not that different to

international audiences loving Hollywood movies or loving

incredibly talented musicians. If you had a choice as to where that

money would go, to a carpet offshore owner, to some suit executive were

running a football club or to the town on the pitch that knows

audiences are tuning in, that is where I would want to see it go.

Christian Purslow we have to end it there. Thank you for being on

HARDtalk. On Sunday, eastern parts of the UK

will have had a fine and warm day but there are changes out in the

west and that is a sign of things to come. The week ahead will be

changeable with some rain, some