Why Has Liverpool FC’s Transfer Policy Been So Successful Under FSG?

Fenway Sports Group (FSG) is open to new investors or a complete takeover of Liverpool Football Club (LFC). The American sports investment company bought the club for around £300 million in October of 2010. At the time, Liverpool’s last noteworthy on-field success dated from half a decade earlier, with the 2004/05 Champions League and 2005/06 FA Cup.

When FSG took over, the club was at the brink of bankruptcy with creditors asking for the sale of the club. In the years since, the owners have aimed to grow the club in size and value and to attain on-field success. Along the way they have stumbled with some questionable business decisions but have also brought sporting success.

So how has Liverpool really fared since FSG took over? Have the investments and transfer strategy, in cooperation with managers, been a success? And how does the club compare to other Premier League giants?

LFC’s Value Has Increased During FSG Ownership

If Liverpool were to be sold completely, the sale could generate as much as £4.4 billion for FSG, according to insiders. That is 14.7 times more than the amount the investment company bought the club for more than a decade ago. Although it is below Manchester United’s reported asking price of £6 to £7 billion, it would exceed the £4.25 billion that Todd Boehly and Clearlake Capital paid for Chelsea in 2022.

How does LFC’s value compare to the Premier League Big Six?

When looking at Football Benchmark’s Enterprise Value (EV – club’s worth irrespective of capital structure financing operations) Liverpool has grown immensely in recent years. In 2016, the club was already valued at €1.273 billion. By 2022, this has more than doubled to €2.556 billion (£2.150 billion).

An important reason behind this is the club’s on-field success during this period which resulted in high revenue growth. LFC’s EV only comes second to Manchester United among Premier League clubs. In Forbes’ listing of Europe’s most valuable football teams in 2022, Liverpool ranks fourth overall with a value of £3.6 billion.

Off-Field Growth, On-Field Success, Limited Investment?

During FSG’s ownership, Liverpool has achieved multiple successes. With the 2018/19 Champions League and 2019/20 Premier League being the standout prices.

This is despite relative limited owner funding over the past 10 years. Swiss Ramble noted how in the decade until 2020/21, FSG funded (owner funded is made up of owner loans plus increase in share capital) €124 million for the club. That is more than Spurs and Manchester United, who both had no owner funding. It is, however, significantly less than Chelsea (€791 million), Manchester City (€773 million) and Arsenal (€239 million).

This does not necessarily have to mean much, as spending without strategy or overspending will do no good either. FSG does invest both off-field and on-field and seem to adhere to a strategy aimed at long-term growth, returns and sustainability.

Investments In Infrastructure

Off-field, FSG has made investments in infrastructure. In November 2020, the first team moved their training base to Kirkby Training Centre (also known under its sponsorship name AXA Training Centre) from Melwood, which had been the club’s training home for over 70 years. The club invested £50 million in renovating and expanding the facilities in a bid to improve performance and bring academy and reserves closer to the first team.

In addition, the owners have renovated Anfield to increase capacity and thereby ticket sales. In 2014, renovation on the Main Stand started, increasing capacity to around 54,000. A reported £110 million was invested to complete the two-year project. Before the start of the 2023/24 season, Liverpool will also complete renovation of the Anfield Road Stand for a reported £80 million. Which is £20 million above the original budget.

The redevelopment will increase capacity by another 7,000 to 61,000. This will cause them to overtake Arsenal’s capacity who opened their new £390 million stadium in 2006.

Major off-field investments by FSG

Financial Regulation Limits Amount Clubs Can Spend

Apart from the significant value increase due to the team’s sporting successes during the last few years, the club has also increased its revenue. In 2009/10, the year prior to FSG takeover, Liverpool generated £184.5 million. By the 2021/22 season this has multiplied by 3.2 to £594,3 million. Overall revenue has increased among all Premier League teams during this period, especially due to an extreme rise in broadcasting rights income. Yet, Liverpool’s increase is also due to the club’s running. According to Deloitte, Liverpool was the eight highest revenue generating club in European football during the 2009/10 season. During the 2021/22 season, they moved up to third place, only behind Manchester City and Real Madrid.

Such a rise in revenue and on-field success can cause a virtuous circle, as more revenue gives a club more financial leeway to invest in quality players and staff. This increases the chances of successful performances. Now more than ever, revenue determines the amount clubs can invest and spend on players after UEFA implemented new Financial Sustainability regulations. These regulations will, among others, curb the amount clubs can spend on wage costs relative to revenue generated, with a 70 percent limit set for 2025/26.

These regulations are not new but are becoming stricter and getting modified where needed as time goes on. For example, UEFA is said to alter regulations to prevent or limit clubs’ ability to invest more in players by offering longer contracts. Chelsea’s new owners reportedly made use of this loophole as a longer contract reduces the amortisation fee per year. Lower yearly amortisation fees make it easier for clubs to adhere to financial fair play regulations, but it could result in an unhealthy future financial situation.

Return On Player Investments

Where FSG must (and wants to) look at multiple facets including financials, fans solely care about sporting success. Achieving and retaining this, requires a good structure setup within a club and attracting quality players who fit. This comes down to good scouting and the right manager, thus having the right transfer policy. Yet, with the inflation in the football market, clubs are often overpaying for players. In addition, clubs do not always get a desirable return on their investments.

Since the 2010/11 winter window, FSG has spent around €1,294 million on acquiring and loaning players. During that time, they made €803 million in player sales and loans. This means the club has a negative balance of €491 million.

In those 12.5 seasons, the club spent more than they made in all but three seasons. With the highest positive balance recorded in 2019/20 (€34.1 million), when the club hardly spent any money in the transfer market. While the biggest negative balance was reached during the 2018/19 season, caused by the arrival of three expensive players: Alisson, Naby Keïta and Fabinho.

First Window: Torres & Babel Out, Carroll & Suárez In

FSG’s first transfer window was highlighted by the sale of striker Fernando Torres to Chelsea. The Spaniard had arrived at Liverpool from Atlético Madrid for €38 million at the beginning of the 2007/08 season. During the 2010/11 winter window, the club sold him for €58.5 million, over €20 million more than what the club bought him for.

To replace Torres, FSG bought two strikers that window. Andy Carroll came over from Newcastle United for €41 million and Luis Suárez from Ajax for €26.5 million. The less expensive acquisition, Suárez, gave a better return on investment by having a bigger impact on the pitch and eventually being sold for €81.72 million to Barcelona in 2014. Carroll was sold for a mere €17.5 million to West Ham United in 2013 after a year-long loan (fee: €1.25).

Carroll and Suárez are both still in Liverpool’s top 20 most expensive signings. Of that list, 19 players have arrived under FSG ownership. With Fernando Torres being the only exception. That so many of the most expensive signings have come during the last decade and a half, is mostly due to the evolution of the transfer market. The other Premier League Big Six teams show a similar number (17 to 20) of their top 20 most expensive arrivals, coming since the winter transfer market of 2010/11.

Record Signing Van Dijk Eighth Among Big Six

Virgil van Dijk is Liverpool’s record signing. The Dutchman arrived from Southampton in January of 2018 for €84.65 million. Among the Premier League Big Six clubs, van Dijk’s transfer is the eighth most expensive one. It comes below a City, a Chelsea and five United transfers.

Top 5 most expensive arrivals under FSG ownership

The average cost of Liverpool’s 10 most expensive signings is €55.44 million, while this is €45.19 for the top 20. This is less than United, City and Chelsea, but ahead of Arsenal and Spurs.

Paying Over Market Value

For 16 out of 19 of FSG’s most expensive signings, the club paid above the market value (as defined by transfermarkt.co.uk). The only exceptions being Fabinho, Cody Gakpo and Naby Keïta. The €45 million fee for Fabinho was on par with his market value at the time. Gakpo’s purchase for €42 million during the 2022/23 winter transfer market was reportedly €18 million under his market value. While Naby Keïta was bought for €5 million under market value.

The club bought the former RB Leipzig player in the summer of 2017, paying his release clause taking effect at the end of the 2017/18 season. This resulted in the midfielder playing for Leipzig during the 2017/18 season before making the switch to Liverpool in the summer of 2018.

Overall, the club paid €259 million over the market value for FSG’s 19 most expensive arrivals. Paying over market value could be caused by a player having a release clause. Demand for a player, the need for a specific profile and future potential are also factors determining how much a club is willing to spend on a player.

For example, Liverpool bought van Dijk for almost €55 million over market value. However, the club needed a central defender who could lead their back line. Looking back, the Dutchman may be one of the club’s best signings. In addition, his market value rose to €100 million in September of 2019, more than €15 million over his transfer sum.

A similar story can be observed for Alisson. The keeper made the switch from AS Roma for €62.5 million in 2018, just €2.5 million above his market value. The Brazilian has played a big role in the club’s performances since. His market value reached a high of €90 million in December 2019.

12 Of FSG’s Most Expensive Signings Still At The Club

Of FSG’s most expensive arrivals, 12 (out of 19) players are still at the club while seven players left. Luis Suárez (€55.2 million surplus) is the only player among those 19 who was sold for a higher amount than he was bought for.

The other six players who left were all sold for less than what Liverpool paid for them, including Adam Lallana and Georginio Wijnaldum who both left on a free.

What happened to FSG’s top 19 most expensive signings?

Record Departures

Of the 20 most valuable departures, 16 have taken place under FSG ownership. Chelsea (18), City and Spurs (both 17) have a similar number of outgoing transfers among their 20 most profitable outgoings since the 2010/11 winter transfer window (since FSG took over). While Manchester United and Arsenal have respectively sold 11 and 13 of their 20 most expensive departures during this time.

Especially Manchester City is improving its sales records during the last few years. The Citizens’ six most valuable departures have all come during the last four seasons. Yet, their record sale of Raheem Sterling for €56.2 million to Chelsea is lower than the €63.7 million they paid to The Reds for him. The Liverpool academy graduate made the transfer to the Citizens in 2015 in a deal that was almost €25 million over market value.

Philippe Coutinho is Liverpool’s record sale. The Brazilian was sold to Barcelona for €135 million in the summer of 2017. A record sale that was €45 million over the midfielder’s market value at the time and generated a surplus of €122 million (compared to his incoming transfer sum). It is also the highest transfer fee received by the Premier League Big Six teams. With Eden Hazard’s sale to Real Madrid coming in second at €115 million.

Top 5 most valuable departures under FSG ownership

The average revenue generated by Liverpool’s 10 record sales is €51.11 million, while this is €33.93 for the top 20. This is behind Chelsea but above the other Premier League Big Six clubs.

Receiving Over Market Value

For 14 out of 16 of FSG’s most valuable sales, the club received a sum above the market value (as defined by transfermarkt.co.uk). The only exceptions being Harry Wilson and Sadio Mané. Academy graduate Wilson moved to Fulham for €14 million, €3 million below his market value at the time.

Mané, on the other hand, made the switch to Bayern Munich in the summer of 2022 for a reported €32 million. This while the forward was said to be worth €70 million. Mané arrived at Liverpool from Southampton for €41.2 million in June 2016 and scored 120 goals in 269 matches for the club. With only one year left on his contract and a reported pay increase of £100,000 per week at Bayern, the transfer was probably beneficial to both Liverpool and Mané. Despite the lower-than-expected transfer sum, the sale is still the sixth most expensive departure in the club’s history and fifth under FSG ownership.

The difference in salary on offer hints at a policy Liverpool has in place, of restricting to splash cash, whether it is on transfer cost or wages, to players over 30. Mané was 30 at the time of the transfer and this policy could well have played a part in the transfer despite Mané being an integral part in the team’s successes. It is also one of the reasons why the club lost Georginio Wijnaldum on a free. And while such strategies and policies make it harder to compete with other clubs for the services of quality players, they are beneficial for the clubs’ financial health in the long run.

FSG’s most valuable departures often sold over market value and with surplus. Overall, the club received €216 million over market value for FSG’s 16 most valuable departures. That is on average €13.5 million. While they paid on average €13.6 million over market value for the 19 most expensive acquisitions.

For only three out of these 16 most valuable sales, the club made a lost compared to the amount they bought the players for. Christian Benteke, Sadio Mané and Joe Allen were all bought for more than they were eventually sold for. Overall, the club generated a surplus of €367 million with the sale of these 16 players compared to the acquisition price. This includes the surplus of the sale of three youth products: Raheem Sterling (€63.7 million), Neco Williams (€20 million) and Harry Wilson (€14 million).

Wages Offered As Part Of Transfer Strategy

By having policies in place on how much the club is willing to spend on players in certain age groups and or positions, it may be more difficult to attract quality players. In addition, the financial health of the club determines how much can be spend on quality players and is thus an important factor (or restraint) in transfer policy.

During the 2020/21, Liverpool had the fourth highest wage cost among Premier League clubs with £314 million. This was less than Manchester City, Chelsea and Manchester United, yet above Arsenal and Tottenham Hotspur’s salary bill. Compared to the average Premier League side (£173 million), Liverpool spent over 80 percent more.

Positive is that the wage cost is at a relative healthy level considering the revenue the club generates. 70 percent is considered a healthy wages-to-revenue ratio and one Liverpool stays under with 64 percent during 2020/21 season. This was the fifth best in the Premier League that season and well below the average of 71 percent.

Transfers And Manager Turnover

The transfer strategy, and its effectiveness, is also driven by a manager and his preferences and playing style. Having more stability of the coaching staff over time with little turnover will have a positive effect on how effective transfer strategy is. When FSG came in at the end of 2010, Roy Hodgson managed The Reds. With mutual consent the two went their separate ways and the owners appointed their ‘first’ manager with Sir Kenny Dalglish in January of 2011.

Dalglish was replaced by Brendan Rodgers before the 2012/13 season with the hope of more on-field success. After less than two and a half seasons, the Northern Irish man was replaced by Jürgen Klopp. The German started in October of 2015 and is currently the longest serving Premier League manager.

The three managers under FSG ownership mean a relative low turnover and is on par with the number of managers at Premier League Big Six-competitors Arsenal and Manchester City (both three) during that period. Arsenal was managed by Arsène Wenger between 1996 and 2018 and have stuck with Mikel Arteta since December 2019 despite less than desirable results in his early tenure. City, who were bought by investors from Abu Dhabi for a reported £200 million two years prior to Liverpool, are also going for managerial stability. This is of course aided by and only possible with on-field success.

Tottenham Hotspur and Manchester United have had seven different permanent managers since FSG took over Liverpool. While Chelsea has had 11 different managers in charge, more than Liverpool, Arsenal, and City combined during that time.

Number of permanent managers for the Premier League Big Six since FSG bought LFC in October 2010

FSG’s Ownership Has Brough Success

Stability like this and a long-term strategy will aid Liverpool both on and off the field. Despite paying record fees and above market value for players, FSG has spent a good chunk of their transfer money on quality players who filled a specific need within their team.

12 of FSG’s 19 most expensive arrivals are still at the club. And most of them have given a good return on investment by being essential in a successful era in the club’s history.