Peter Lim, Not the ‘Jeque’ Valencia is Looking For

When I say Valencia, I mean the fans — the club no doubt has more informed expectations.

Peter Lim has completed the buy-out of Valencia C.F., made necessary by the club’s €275 million debt and low income stream. The Singaporean will invest €100 million, probably to reduce the club’s debt with Bankia (that Spanish bank that asked for the largest bailout in the history of Spain — their reported 2012 losses were €19 billion, as well; the largest corporate loss in Spanish history). Being one of the top 40 wealthiest people in the world, many Valencia fans are celebrating his arrival as ushering a new era of millionaire spending.

Maybe, not as many millions as you might think. Spending is now regulated by UEFA Financial Fair Play rules, and UEFA is serious about enforcing these rules: the proof is in the $82 million fine they slapped on Manchester City and Paris Saint Germain. Fair Play rules are designed to force smaller clubs to draw down their debts, by eliminating the incentive. Smaller clubs, which earn smaller revenues, have to lever their spending if they want to compete with larger teams, and especially teams taken over by wealthy men, who then allocate massive cash gifts to the club — e.g. Manchester City, Paris Saint Germain, Chelsea, et cetera. Now, your spending is determined by your revenue.

Valencia’s 2012/13 budget was €103 million, reduced from the previous year. This includes a very large wage bill — which, unfortunately, tends to increase over the years if you want to keep the same backbone (because good players have the market power to get the raises the want). Lim has promised to inject €60 million (additional to the other €100 million) for transfers. But, over the years, Valencia fans should expect a pretty standard transfer strategy, because the rules simply no longer allow for indiscriminate spending by very wealthy moguls. (And, it’s a good thing, too — because either the league would become incredibly uncompetitive, or the majority of the clubs would have had to declare bankruptcy.)

This being said, if Valencia can reduce their debt through Lim, they might very well have the third largest transfer budget in Spain next year. Atlético Madrid has the third highest revenue, after Real Madrid and Barcelona (although, a good ~€400/yr. million less), but it also has one of the largest debts in Spain (over €500 million, I believe). I predict that our transfer budget, on net, will be just about €0, which is what it has been these past few years (we’ve actually made a net return, on transfers, these past two or three years — after many years of spending more than what we earned). Although, I don’t think we’re going to sell any of our big ticket players this year — there is still ambiguity surrounding Diego Costa’s €40 million move to Chelsea.

However, the last time a mogul bought a team in Spain — Malaga C.F. — it did not turn out too well. After two decent seasons: fourth place finish in 2011/12, and then quarter-finals in the Champions League the following year. Then, the club was forced to let go of most of their better players, and is now lingering in the middle of the table. Valencia will hope that their experiment will turn out differently, and I think that will require a tamer transfer strategy. So, I do not expect Valencia spending on par with the Manchesters, Chelsea, Real Madrid, Barcelona, et cetera, simply because they don’t make nearly enough revenue.

Football is on mind mind, because in about half an hour Atlético Madrid and Barcelona will play in Camp Nou, and the winner will take La Liga (Atlético would also win the title with a draw). Next weekend, Atlético play Real Madrid in the UEFA Champions League final. So, I’m excited, although there’s the unfortunate (and nerve-racking) possibility that we might end the season title-less.

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