Article From Jon Pritchett - Financial Meltdown Of Rangers!!

[Zappa 0]

der Berliner, you didn't post the whole article. Here's the rest of it:

 

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For winning the EPL last season, Manchester City received £61 million.

 

When Rangers play Celtic each season, the match is one of the greatest spectacles in all of sport. The entire country of Scotland is watching and the environment inside the venue is remarkable. This is why ESPN has ranked “The Old Firm” as one of the top three rivalries in all of football. Yet, despite this truly unique and powerful atmosphere, very view people around the globe can actually watch the derby live. By contrast, there were 460 million potential live viewers of the Manchester Derby (United vs. City) at the end of last season. In a global competition for viewers and buyers of shirts (jerseys), the EPL teams have a huge advantage. And it doesn’t stop there. The EPL clubs are building global brands by setting up business units in Asia, the Middle East and North America. These units will produce player academies &camps, merchandise sales, event tours and sponsor relationships. Over a few decades, this will produce generations of fans around the globe who pledge their support to Manchester United, Chelsea, Arsenal, Tottenham, Liverpool or Manchester City. While they build their global brands, the clubs are also producing significantly greater revenues and profits. One of the obvious results is a level of player wages that almost no other clubs in the world (other than a handful of the best clubs from around the globe) can match.

 

When my friend, Bill Miller came within an eyelash of buying the club back in May, lots of people wanted to know why he decided not to acquire Rangers. Much of the speculation was tied to the intensely negative reaction of fans. In truth, the fan sentiment played a much smaller role in the decision. In the end, the deal came down to the numbers – and the numbers just didn’t add up. Revenues were in a free fall. The most important revenue stream to Rangers, season tickets, was projected to be down by 20%. The club expected to lose nearly £10MM in 2012/13. Cash-flow from sponsorships was minimal and the administrators had already pulled out the cash from player wages, kit sponsorship and future payments due the club from the sale of several players. Worse, because the administrators had to make a deal to cut player wages to keep the club afloat, the new owner of Rangers would lose a substantial portion of asset value. In exchange for agreeing to reduce its wages for a period of three months, many players were able to negotiate an exemption from transfer fees. Kudos to the player reps and union who used the club’s insolvency to their advantage but effectively rendered the club impudent as a result. When HMRC ruled against the CVA exit from administration, which should not have surprised anyone, the die was cast. Forced to acquire the club through a Newco acquisition, the new Rangers owner lost somewhere in the neighborhood of £9MM – £15MM in player asset value. So, in exchange for a savings of £3MM this spring, Rangers lost three to five times that. As if that wasn’t enough, the analysis of management and executive contracts revealed more grim news. Due to the long-standing largess of the club, fully 70% of the fixed salaries and benefits of the employees were insulated from reduction or elimination. Without the ability to significantly reduce overhead expenses, a commercially reasonable turnaround of Rangers FC was not feasible. From Bill Miller’s perspective, there appeared no possible return on his considerable investment. I agreed with his assessment. Upon full inspection, Rangers was not a “turnaround” opportunity. It was (and is) an opportunity for someone with great wealth and a love of football and/or Scotland to give away tens and tens of millions of pounds. Unless some major, systemic changes occur within the current configuration of UK and European football leagues, I don’t think the Rangers math works.

 

Any critic can tell us what should have been done. The question now is what can Rangers do? The first step for Rangers is to admit that significant, fundamental shifts have occurred that will force it to make major changes to its business model. Like with any major shift in strategy, the hard part is often admitting that the previous strategy did not work. Having spent several months analyzing Rangers, here are four steps I recommend as the way forward for Rangers:

 

1) Culture Change. The football club may have been operated as a lifestyle for some or as a place for passionate fans to find a good job, but those days must end. From the top to the bottom, the organization must embrace a new way of doing business – one that focuses on accountability, productivity and accomplishment. While the previous 140 years were remarkable and worthy of great celebration and pride, they do not ensure financial or playing success in the future. Rangers may dominate Scotland but they no longer compete on the global stage. To get back to being ranked as one of the top 20 clubs in the world, Rangers must become hungry again. Rangers must develop the attitude of a gritty challenger – compelled to prove something rather than simply resting on the foundation built by the ones who came before.

 

2) Austerity. It may be unpopular and an affront to the personal sensibilities of some, but Rangers needs to learn to live within its means. It’s time to cut the fat from every department and rebuild an organization that values every pound and demands a return on any and all expenses. The club can’t afford to pay its manager over £1MM and then give every coach and executive premium healthcare, generous pensions, six weeks of vacation, exotic cars, free fuel, appearance fees and other perks. The club can’t afford to provide 45 employees with free cars. The club can’t afford to pay directors annual fees to simply attend matches, socialize and run up a large food and beverage tab. It’s also time to gently manage out that business line from every sporting club that is occupied by expensive past players who hold well paid positions, are protected from downsizing with overly generous notice periods and who do not bring professional skills to the table. Every financial and playing assumption must be challenged. This will not be easy and the new owner of Rangers, Charles Green, must be prepared to say “no” to people and processes that exist today. The right leader will be comfortable being unpopular. Any new owner who is unwilling to stand up to what will be a powerful hue and cry from Rangers fans and supporters is not going to be successful. Rangers, like an undisciplined child, needs tough love. Rangers needs a strong hand now. There will be plenty of time for love and respect when the child grows into a mature and responsible adult.

 

3) Money Ball. In the reality of the SPL, Rangers do not have the revenue streams to compete with the best clubs in the world. Building a financial budget around a deep run into Europe is a form of gambling. Paying a first team wage bill of 3-7 times the other teams in the SPL (not including Celtic) is silly. That ship has sailed. Rangers can’t keep up with the Jones’ on wages. What the club needs to do for now is to develop a much more efficient process for identifying, recruiting, signing and developing players. It’s a big world. The goal should not be to sign players that the fans know today. The goal should be to sign players than can contribute within a system that leads to winning football. Using a smart, worldwide scouting system, maximizing the Murray Park Academy, teaching a style of play that is attractive and developing promising players into good and great players is the way forward. This is not done by gut, instinct and long-held beliefs of how the game was played. This can only be done by embracing a methodology that employs metrics, science, training, teaching and coaching. This requires a manager with experience and relationships well beyond Western Europe. Under this system, Rangers can win and operate without loss making because its player costs will be recalibrated to match the new reality of Scottish Football and because there is now a worldwide market for players. If done properly, Rangers should be in the export business – making a tidy profit from its new customer base.

 

4) Drive Revenues. Over the course of many years, Rangers has seen a decline in its major revenue streams. Large sponsorship deals are not generating the amounts of cash they should. In some cases, they are not even generating cash at all. Instead of paying with cash, Rangers have some sponsors who actually provide goods and services to the employees of the organization in return for the sponsorship benefits. This is a slippery slope that leads to oblivion. In the worst cases, these sponsors may actually be costing the club cash when the full analysis is done. It is time for a full and complete overhaul on the commercial side of things. The club needs new and better sponsor deals. The club also needs to reevaluate its offerings to the community in the form of tickets, hospitality and premium seating. Additionally, it needs to consider how to drive maximum value for its merchandising programs. Despite being one of the top clubs in the world in terms of shirt sales, the club does not generate nearly as much profit as does Celtic – even though Celtic sells fewer shirts than Rangers. Add to this the commercial areas of catering, digital media, friendlies and Ibrox events and you can see that there is much opportunity for driving new and existing revenues, but it will take a smart plan and a team of equally smart and dedicated employees to get the revenue growing again.

 

Rangers is a peculiar club in many ways.

 

It reminds me of “Solo George”, the last surviving tortoise of its kind on the Galapagos Islands. Steadily growing older and becoming slower, fatter and lonelier until the inevitable.

 

In order to ensure that its fate does not follow that of “Solo George,” Rangers need a business strategy worthy of its status, worthy of its fan base and worthy of its history. It needs a sea change, and fast.

 

If Charles Green is not willing to face the fans, explain the economics and risk the torrent of abuse that will follow in the short term, then Rangers will find themselves shortly back in the same place.

 

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Green must embrace change, cut back and then reshape the business plan, invest on a long term basis by accepting short term failure in order to remain relevant.

 

Like any insolvent business, Rangers needs to cut costs, reign in salaries, demand better quality commercial revenues and build a business that is lean, profitable and produces attractive, vibrant, talented players that, over time, will take it back into European football. It needs to spend no more than 50% of all revenues on player salaries (probably much less) and in the meantime it needs to work the “Old Firm” brand hard to fully exploit what that brand can mean on its (and Celtic’s) balance sheet and ensure that sponsorships are actually additive to cash-flow.

 

Most importantly, all of Rangers Nation needs to understand that the time has come for change. The soldiers on the battlefield are dying. The glories of the past, while spectacular and worthy of celebration and remembrance, are not going to ensure future success. The future marches on. Rangers should not only be a part of that future, they should be influencing it through their bold actions. However, until bold action is taken, the future for Rangers remains in serious jeopardy.

[simplythebest 0]

Malcolm Murray has nipped it in the bud.

[chilledbear 16]

Malcolm Murray has nipped it in the bud.

 

He says they have a clear plan.

 

Not sure I have heard it, apart from asking Supporters for money.

[Zappa 0]

Pritchett is clearly a smart guy, but it's worth keeping in mind that most of us didn't want his Club 9 sports company anywhere near us during the administration bidding process. Was it Sheffield Wed' fans who called the company "Cloud 9" as opposed to Club 9?

[Zappa 0]

As previously posted by forlanssister -

 

In terms of Club 9, some interesting reading here:

 

Hard to find any examples of deals that they (or their "affiliates" Tobacco Road Capitalists, Prometheus Capital and Dornoch) have actually done.

 

However, Tobacco Road does list 5 deals on its website. Turns out 4 are just companies that Jon Pritchett used to work for so not ACTUALLY deals. The one proper "deal" - you know, money in, investors etc, was Total Sports Entertainment, which they list as an "achievement" went bust in 2004 owing millions and losing shareholders a small fortune which led to lawsuits in 2004 accusing Jon Pritchett (partner in Club9 and potential future owner) and a gentleman named Bill Miller of breach of contract, wrongful conversion of company monies, mismanagement, breach of fiduciary duty and fraud - not saying they DID these things, but there were lawsuits.

Interesting linky no.1 - http://charlotte.bizjournals.com/charlotte/stories/2004/03/01/daily36.html

 

last month "Club 9 Sports" was touting a deal to take an Ice Hockey team to San Diego (deal never actually happened) and the supposed "money man" - remember C9S has no money of their own - was a guy named Bill Miller who in the 4 years since declaring TRAC/TSE bankrupt had apparently moved to Tennessee and become a "towing tycoon".

Interesting linky no.2 -

http://www3.signonsandiego.com/news/2010/mar/09/no-home-for-hockey-sullivan/

 

Made me worry that this Bill Miller (bankrupt/accused crook/towing tycoon) might be involved in our deal. After all Club 9 has no money of their own - they are just a special purpose vehicle set up purely to do a deal with Sheffield Wednesday apparently - so they must have backers. I just hope Bill Miller is not one of them - if anyone would care to ease our fears, because these Club 9 blokes seem hard to get comfortable with and they certainly have not always had a successful track record, if indeed they have a record at all other than this one failed company-that-never-was.

Their advisor Joe Kosich heads up Dornoch Advisors which he claims is a merchant banking and advisory firm with offices located in Chicago, Birmingham, U.K., Milwaukee, Beverly Hills and Orlando, FL and headquartered in the Village of Pinehurst, NC. yet by his own admission in a post of Owlstalk there are only 2 staff and one office plus an "affiliate" in Chicago My aunt's old shop in Attercliffe used to do more turnover than them.

 

http://russellblackandassociates.com/Downloads/DornichCapital.pdf

 

Lee Strafford himself says that Club 9 has never done a deal because they are an "SPV (Special Purpose Vehicle) set up to invest in Wednesday" - on OT yesterday - and yet how confused must they have been about their Special Purpose if they were trying to buy an ice hockey team in California at the same time.

 

Lee did say that their predecessor firms, Tobacco Road and Prometheus Capital, have long histories in what he called the small-med cap markets (he means mid-cap).

 

Except http://www.tobaccoroadcapital.com/Experience.html

 

states 5 deals - Scheer Sports, French/Vaughan and General Sports Venue were companies where Pritchett worked, not "deals" - this would be like my baby brother starting a bank and claiming to have Barclays, Coca-Cola, Tescos and Marks and Spencer's as "engagements" just because he's worked for them all.

 

Prometheus Capital is no more help, there is no record on any file or database of them having completed a deal since 1992 when, under a different name, John Prutch bought a door maker.

 

So a Walter Mitty who is bigging up his company (actually all 3), one failed racing business that never actually held a race, and maybe a door maker 18 years ago - hardly fills me with confidence.

 

Can we find real investment? Not sure, and frankly unless this latest fiasco turns around quickly - not sure I want it any more.

 

Last thought - remember that movie "Boiler Room" where the guys from JT Marlin go in to town and the guys from JP Morgan are there and he says "hear your a con shop on Long Island, even changed your name to make it sound like ours".

 

There are 2 Dornoch Capital Advisors - Joe's little one man band in North Carolina USA and a large energy financing firm in BC, Canada

There is a Tobacco Road Capital (large Private Equity group in Durham NC) and then there is Tobacco Road CapitalISTS run by Jon Pritchett with no actual address just a mobile phone number on their website that rings off.

There is a $1billion sized hedge fund called Prometheus Capital in Russia, and then there is Prometheus Capital Partners based out of a temp. office space in Chicago run by John Prutch.

 

I have asked elsewhere for an example of one completed deal and been ignored. I have asked if anyone has actually established there is money here and same thing - attacks on me but no answers to the questions, which are really quite simple.

[foggy dewhurst 0]

as the yanks like to say bullshit

[Zappa 0]

Here's another post of the database -

 

The Jon Pritchett mentioned in the following piece is the CEO of Club9 sports

 

 

 

Four shareholders have filed a lawsuit against former executives of Team Sports Entertainment Inc., which failed to create a stock-car racing league that would compete with NASCAR. That effort, Huntersville-based Team Racing Auto Circuit, was abandoned in August. Its first season was supposed to begin this spring.

 

The suit alleges breach of contract, wrongful conversion of company monies, mismanagement, breach of fiduciary duty and fraud. Named in the suit are William Miller, former chief executive of Team Sports, and Jon Pritchett, former president.

 

In an Aug. 14 filing with the Securities and Exchange Commission, the public company reported a cumulative loss of nearly $7 million since its creation in 2001.

 

In a press release about the suit, shareholder Edward Garland says, "The company and its directors thought they were getting an experienced CEO capable of completing the company's team auto racing concept. Instead it got a man full of greed who wanted control of the company for himself."

 

The suit, filed in Fulton County, Ga., Superior Court, pins Team Sports shareholder losses of more than $50 million on the former managers.

 

Miller left TRAC in August 2002 and Pritchett departed soon after.

 

Company officials were unavailable for comment.

 

Team Sports Entertainment is a sports and entertainment-marketing company based in Huntersville

[Shane 0]

Just out of fairness, the lawsuits against TSE we tossed out and Miller successfully counter sued.

 

Can't believe I'm talking about Bill Miller again....

[the gunslinger 3,366]

more criticism of d&p from people involved I see.