There’s been something reaching media hysteria over the idea that a group of Red Knights led by Jim O’Neill, chief economist at Goldman Sachs, will sweep into Manchester in something akin to a boardroom coup and snatch the world’s most famous football club from the grasp of the Glazer family.
And create a healthy return on investment for the secretive US family firm in the process!
Suggested valuations on the club swing ever more wildly from week to week– the latest was at the weekend when a value of £1.25 billion was being mooted by The Sunday Times.
All this conjecture is the stuff of great sports journalism, but does it make good business sense?
There is a lot of discussion on the level of debt that the club is currently carrying and how this will be removed by the Red Knights.
But have these well-endowed individuals agreed on what the Man Utd brand is actually worth?
I doubt it.
How much of the £1.25 billion is for the intangibles that the Glazers own and how much of it is wrapped up in the tangibles like Old Trafford stadium?
The reason I raise this is because in essence the Red Knights will be expected to pay a premium price for the brand, rather than the computer system or quality of the dressing rooms at Old Trafford.
So brand valuation will be a key issue.
And it’s one area that traditionally accountants love to hate as there’s never been an agreed method of measuring this value with some clarity.
Which is why 1st April 2010 could be a turning point in the Man Utd saga as the International Organization for Standardisation (ISO) publishes the long-awaited standard on the thorny issue of brand valuation.
Aimed at both brand consultants and finance and marketing professionals, the general requirements of the new standard will include greater transparency of the process of brand valuation in deals like the one being contemplated by the Red Knights.
There are likely to be enshrined within the standard – and adopted here in the UK by the British Standards Institution (BSI) – three distinct approaches to brand valuation:
- The Income Approach – which measures the value of the brand by reference to the present value of economic benefits
- The Market Approach – which measures the value of the brand based on what other purchasers in the market paid for similar assets
- The Cost Approach – which measures the value of the brand based on the cost invested in it.
Valuation inputs include assessments of market data, brand strength – based on factors such as awareness and loyalty, brand relevance in its specific market and legal aspects such as intellectual property rights (IPRs).
It will be the application of these standards that are likely to become a major area of contention in any potential sale involving a global brand like Man Utd.
Each side will claim that its workings achieve the right financial outturn for each measure – except they are unlikely to agree!
Which could mean that the Red Knights pay less for the club than is currently being mooted.
Alternatively, the Glazers may decide that this isn’t the right time to sell and put this off until the club is likely to have increased in brand value relative to the size of other English Premier League Clubs.
In which case the asking price could be double what’s on the table today.
