Professional services firms make thousands from struggling London Stadium

23 July 2018 Consultancy.uk

The former Olympic Stadium has enjoyed a turbulent life, following London 2012. Now the home of West Ham United Football Club, the ground reported huge losses last year, but despite this, consultants employed by London Stadium owner London Legacy Development Corporation (LLDC) are making hundreds of thousands in fees.

The figure that seems to have most incensed the public regarding the troubled stadium’s performance is that nearly £450,000 of taxpayers’ money has been spent trying to find a sponsor for West Ham's London Stadium home, while a backer is still being sought. While West Ham pay an annual rent of £2.5 million as tenants, the venue is still set to lose £140 million over the next 10 years. Research by global valuation advisor Duff & Phelps suggested that naming rights for the venue could bring in at least £4.8 million annually, and could subsequently offset some of those aforementioned losses.

According to figures reported by the BBC, two companies were paid a total of £447,000 to try to find a naming rights partner, but after two potential deals – one from telecoms giant Vodafone for a £20 million six-year naming rights agreement, and one for Indian conglomerate Mahindra – collapsed, no discussions are currently taking place. Professional services firm IMG was paid £260,000 after being hired by the LLDC in 2013. Then fellow industry expert ESP was given £187,000 when retained by LLDC's subsidiary company E20 for 16 months from March 2015. The hope was that the know-how of the two agencies would pay for itself, as the potential sponsorship revenue would dwarf their costs. This did not materialise, however, leading to fierce criticism of LLDC’s choice to hire them.

Professional services firms make thousands from struggling London Stadium

Gareth Bacon, Chair of the London Assembly's Budget and Performance Committee, told the press he was "mystified" by the failure to secure a suitable sponsor, adding, “It's taxpayers' money that has been wasted. When you pay that kind of money and get absolutely nothing in return, that's not great.”

The stadium has been plagued continuously by controversy surrounding its finances in recent years, particularly after its cost of conversion from an athletics venue into a football ground ballooned to £323 million when the original estimate was £190 million. Further to this, according to a Freedom of Information request by West Ham fan site Claret Hugh, the consulting spending by the ground did not end there. Pragma Consulting has also been employed by the LLDC. The consulting firm was hired on the brief of agreeing “a future vision for the London Stadium and validate that it is achievable,  Achieve consensus across stakeholders for a shared purpose, Define a set of clear and measurable goals to work towards and Outline a framework for making commercial and strategic decisions.” Pragma’s contract also released under a Freedom of Information request shows the firm has been paid £77,750 for its troubles.

On top of this, last year, LLDC appointed a retail restructuring consultant to be the Stadium’s Chief Restructuring Officer. Alan Fort’s contract with the stadium owners together with invoices he has submitted in the last 12 months quotes £4,000 per day for services provided, discounted to £2,500 per day. This essentially means the CRO could charge up to £40,000 per month, having already invoiced several hundred thousand – another bill which the taxpayer would ultimately foot.

Related: Premier League continues stadium expansion to chase Bundesliga attendance levels.

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Champions League glory hard to buy for football’s economic elite

15 March 2019 Consultancy.uk

The thrills and spills of knock-out football can still be one of the sport’s great levelling forces, with the Champions League’s second round having shown that the biggest spenders aren’t always able to buy their way to glory. While a league format broadly favours the squad depth of the beautiful game’s richest teams, half of the tournament’s wealthier teams exited in the first one-on-one elimination round.

As the Champions League burst back into life in February, following an agonising winter break, only two of the 16 teams re-launching their Champions League last-16 bid were from outside the so-called Big Five football leagues. With the exceptions of Portuguese champions FC Porto and Dutch footballing powerhouse AFC Ajax, teams from the world’s biggest spending leagues monopolised the second round. As outlined by analysis from KPMG’s Football Benchmark, the Premier League was represented by four teams, with three clubs come from La Liga and the Bundesliga respectively, while Serie A and Ligue 1 both retained two clubs.

This followed a grimly predictable group phase, which had seen the two most expensive squads progress in all but one of the eight collections of four teams. The one team to buck that trend, Ajax, had last won Europe’s premier club competition in 1995, but those halcyon days have long since faded into memory, and Ajax had failed to progress beyond the group stage in 13 years. With the second youngest squad in the tournament, what now seems to be an awakening football giant had some shocks in store for the second round too.

Group Stage values

Despite an impressive Europa League run which saw the team reach the final two years ago, Ajax had not progressed in a Champions League knockout stage tie since the 1996-97 campaign. That all changed this time, as Erik ten Hag’s men overturned a first leg deficit to trounce Real Madrid 5-3 on aggregate. Having felt hard done by in a 2-1 defeat at the Johan Cruijff ArenA, the Amsterdam club cruised to a 4-1 victory at the Santiago Bernabéu, a result which saw the tournament’s fourth most expensive squad crash out to the third cheapest remaining team.

The supremely expensive team, which had won three Champions Leagues on the trot, had crashed out in spectacular style. For many footballing purists, the end of the seemingly invincible Galacticos would have been enough to restore some of their faith in the sport – but there would soon be more schadenfreude to revel in, as a succession of Europe’s most bank-breakingly costly teams would soon join Los Blancos in their exit.

The pick of the bunch was unquestionably Paris Saint-Germain, who forfeited a 2-0 first leg advantage to somehow crash out of the Champions League. The team, who are fast becoming known as the foremost bottlers in Europe, faced a grim dissection in the French press following a 3-1 defeat by Manchester United at Le Parc de Princes. While it would be over-egging it to paint United as ‘giant killers’, the Red Devils squad is worth markedly less than the club bankrolled by Qatari oil money. PSG hold two of the most expensive players of all time in French World Cup winner Kylian Mbappe and Brazilian playboy Neymar.

Second Round values

Elsewhere, the round’s cheapest squad proved further that money is not everything, as Porto overcame Roma (the Italian club has since parted ways with manager Eusebio Di Francesco in the wake of this humbling) – while Juventus battled back to beat Atlético Madrid. The most ‘balanced’ tie of the round, there was a squad value difference of only €22 million between the two squads, in favour of the Spanish giant. With that being said, €113 million of Juve’s price-tag came from the summer acquisition of Cristiano Ronaldo. Ronaldo’s tie-settling hat-trick went to show that money spent in the right place ultimately makes the difference.

Spending wisely

At the same time, there were also four teams which lived up to their large price-tags. Manchester City pummelled Schalke over the course of two legs, hammering the German team 7-0 in the second game. With the largest squad market value in the tournament, the Citizens showed that their spending had not merely been a frenzy provoked by having large amounts of money to throw about – a la PSG – and that every penny had in fact been used to craft one of the continent’s most well-balanced and dangerous teams, to ultimately contend for the title.

Tottenham Hotspur similarly brushed off Borussia Dortmund, while Liverpool eventually overcame Bayern Munich, to leave no German teams in the tournament. Meanwhile, Barcelona similarly did for the French contingent of the Champions League, bundling out Olympique Lyonnais 5-1.

Operating Revenues

Going forward, the humbled economic superpowers of European football will take solace from the fact that their huge operating revenues will allow them to buy up talent which has emerged in this year’s Champions League. With Real Madrid having re-installed Zinidine Zidane as Head Coach, the club has already committed itself to spending big in the summer, cashing in some €50 million of its €743 billion revenue stream from last year to sign Éder Militão from Porto – who has impressed in this year's Champions League – in the summer.

Whether the PSG project is financially sustainable in the long-term remains to be seen, meanwhile, but with a huge portion of commercial revenues including shirt-sales from the club’s array of superstars, it will likely also seek to bring in more big names in the summer. The club was reportedly in the running to sign Ajax star Frenkie de Jong, before Barcelona finally secured his services from the end of the season.

The likes of Ajax will meanwhile face an uncomfortable wait, as a range of its new crop of outstanding players inevitably attract the attentions of Europe’s top spenders. With the lowest operating revenues of any team left in Europe, the club will face an uphill struggle to hang on to the likes of teenage captain Matthijs de Ligt. However, it would not be the first time that the club has been plundered for its top talent, and what Ajax and clubs of its size can take forward is that with the right eye for lower-key recruitment, they can rebuild, and still challenge Europe’s elite.