Is it possible?

messi

 

 

 

 

 

 

 

 

Could Messi actually arrive at Stamford Bridge?  Let’s dig into the financials.

There is a lot of info that some “experts” out there are close on, but are still missing the point.  To start, let’s get it right out of the way and address that big, smelly £200m release clause.

There are two different kinds of release clauses:

1) The release clause.

2) The Spanish buy-out clause.

Messi, if you haven’t guessed, has item 2).  We’ll come back and address this difference, and why it matters, in a bit.  Is Messi actually worth £200m?  The inflated transfer market and inflated media system may tell you so.  Honestly, I’d say no, he isn’t.  And furthermore, I think Barcelona know it.  I understand those are both bold statements.

First of all, not every player has either type of clause in their contract.

A release clause, by the way, is something slightly misunderstood.  It is NOT actually something that a club pays to another club solely because they want to – the player in question must agree with the buy-out clause being activated.  The contract is between player and club, not between player, his club, and whichever clubs feel like jumping in when July or January comes.  So, when a release clause is “met,” what actually happens is the player in question will tell his new club “go ahead” and then the check will be sent.  Multiple clubs can meet a release clause, but if the player doesn’t want to go, the check is never written.  That’s why I said “his new club.”  If the deal is going to happen, the check is written and it’s going to happen.  Negotiations at that point are a foregone conclusion.  So, there’s no case of “Well crap, they met his release clause, he might think about leaving now.”  No, it’s entirely up to the player.  This is also why clubs have no power if a release clause is met.  That amount of money cancels a contract, if the player wants it to.  As a result, the club is powerless.  Quite simply, Bayern met Mario Götze’s release clause, he wanted to go, he left.  Cruel and unusual, it seemed, but it’s how it works.

Here’s where things dig in a little more: Release clauses in Spain work differently – they are actually required by Spanish law.  As a result, clubs can set these prices exorbitantly higher, usually well above a player’s actual market value (see: Messi).  But the differences don’t stop there.

Release clauses in Spain can be met by other Spanish clubs with great ease.  Meet the release clause and as long as the player wants to go, he’s gone, that’s it.  The reason why we don’t see this happen as often, however, is because Spanish clubs generally want to maintain good relations with each other.  Otherwise, a club could easily just decide to retaliate – eye for an eye.  Other than going from Barcelona to Madrid, that’s something else that made Luis Figo’s transfer so shocking.  Even with the intense rivalry between the two clubs, there’s always a degree of respect.  “Madrid couldn’t, could they?”  How often do you see players transfer between those two clubs?  A transfer for Messi to Madrid would equally shake the foundations of the footballing world, but if Madrid paid the fee and Messi decided “sure, I’ll go,” it’s as simple as that.  There’s no negotiation.  Essentially, this means that in order to avoid the possibility of Madrid doing another Figo, Barcelona set Messi’s price at £200m.

I am therefore implying that Barcelona would not actually demand £200m from a club in another country for Messi’s services.  Rather, it’s simply a “Madrid tax.”  A bold implication, but I will explain why later.

However, things change completely if we bring another country into this equation.

Let’s keep that release clause in the equation for now.  If the transfer becomes between Spain and England (or more recently, Spain and Germany in the cases of Javi Martinez and Thiago), tax authorities and lawyers get involved, due to these clauses being required by Spanish law.  Therefore, negotiations among all parties are required.  These authorities must make sure the deal is compliant with FIFA and UEFA codes of conduct, Spanish and EU contract law, and Spanish tax law.  Only then can the deal move forward.

Do you think Lionel Messi wants anything to do with Spanish tax authorities right now?

Just in case you think he might, here’s the deal, and here’s why this becomes considered more of a buy-out clause than a release clause:  If a non-Spanish club wants the release papers, the player has to pay up.  This means that as far as contracts are concerned, it is technically the player, and not his new club, that is directly canceling the contract, rather than approving the activation of the clause.  His new club, of course, would provide him with a check for the fee.  The player would then take the check personally to his soon-to-be-former club.  Therefore, it is more than one transaction; the first being that the player is paid, which means that it’s income, which means that it’s taxable income.  That income would be taxed for nearly DOUBLE the amount, meaning that nearly £400m would be required for Chelsea to meet Messi’s buy-out clause AND satisfy Spanish tax law.  Lest we need to mention Messi’s already-prevalent tax issues.

In the case of Javi Martinez, it was widely reported and accepted that Bayern Munich paid his €40m release clause and then the player signed the contract.  Not true, as it would’ve ended up in a nearly-€80m deal.  Buy-out clauses are required in Spain, but meeting them in order to transfer a player is not.  Bayern actually obtained permission from Martinez (after negotiations with Bilbao) to pay a lesser amount, thought to be closer to €35m, to the Spanish FA, who regularly act as intermediaries to avoid this income tax problem.  The money was then paid to Bilbao and the deal was done, but not before a bunch of money was spent on lawyers and such.  By Spanish law, the amount negotiated must be less than the actual buy-out clause.  A similar deal was reached for Thiago, whose release clause would’ve jumped to €90m (again, a Madrid tax) at the end of that July.

What this means for any Chelsea fan’s either incredibly slim or unrealistically large hopes of signing Messi?

It means that first of all, Messi would have to plainly state his desire to leave, whether public or in private, because Chelsea need his desire to leave and permission to negotiate.  Then, Chelsea would have to enter negotiations directly with Barcelona, and the £200m price would be thrown out.  The two clubs would have to agree a fee.  Messi would have to then give Chelsea permission to pay the money to the Spanish FA, and then the Spanish FA would pay the money to Barcelona.  Nothing is paid to Messi in the deal and no income tax is applied.  A successful contract negotiation later and Messi would be our player.  It’s that “simple” (except for what would still be a huge fee).

One more thing that is usually involved in transfers: amortization.

Most adults should know what that means: fixed repayment.  It’s your car loan or your mortgage.  What a lot of clubs typically do in negotiations is set an amortization schedule to lessen the weight of a transfer fee, especially with Financial Fair Play in mind.  Just like you don’t want to pay for your house all at once (unless you’re really cool), clubs don’t want to pay an entire transfer fee in one sitting.  Even at Eden Hazard’s comparatively small (ha!) £32m transfer fee, we still set amortization on that fee.  That means that we didn’t lose £32m on one player in a single season, but rather, maybe closer to £6.5m for the next five years.  If you ever see a club get in trouble for failed payments for transfers over time, they’re not meeting their amortization schedules; they’re not paying their mortgages.

If Hazard’s amortization is around £6.5m per season for five years, let’s say at an incredibly optimistic price of £120m, we set Messi’s amortization schedule over five years (IF Barcelona agree to that!).  That’s £24m per season that we’re paying to Barcelona.  Next, consider Messi’s current contract.  Right now, Messi makes around £31m per season with Barcelona.  You’d assume he’d want a pay increase, and certainly wouldn’t take a pay cut.  Maybe we take that up to £35m a season.  If we do, we’re paying nearly £50m per season for Lionel Messi.  And that’s with an unrealistic transfer fee.  We paid £50m for one Fernando Torres, and we didn’t do it all at once, and we were happy to get rid of his additional wages, remember?

You can go into our various sponsorship deals and how much we earn from them all you like.  Everything considered, our record profit turned was £18.4m.  As you can see, we don’t have an extra £50m laying around to pay every year.  Yes, profits could increase as our financial structure has improved radically over the past few seasons, along with a rumored kit sponsorship deal with Turkish Airlines and overall increasing popularity worldwide.  You could also guarantee increased sales from bringing Messi in.  But, as you can see, there are a lot, a lot, a lot of financial hurdles to jump through, even with a “simplification” of the process, and those UEFA overlords would certainly be very interested in our dealings.

It would take nothing less than a stroke of absolute financial genius (and that means no backdating, PSG) to pull this off and do so responsibly and sensibly.

Do Chelsea have it (or will they)?  Possibly.  Is it worth it?

One party will say “No, it’s not worth it.  I’d rather spend the money on getting more quality players to the club.”

Others will say “Yes, it’s worth it.  It will greatly increase sales at the club and increase the profile of the club worldwide, which in turn will bring more money in and higher profile players.  If the best player in the world will join, everyone will want to come here.”

Which side are you on?

 

You can follow me on Twitter @sverige1089. 🙂

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