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Football News: The 'Demise' Of Manchester United

The 'Demise' Of Manchester United
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The 'Demise' Of Manchester United

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Hi ed, As a football fan, we have all seen the demise of Man Utd but know very little of the goings on behind it. Are there any plans for any of the eds to pen an article about this? - Vintagesaint


That is the request which spawned this article, though I am very sorry it took so long to get to it Vintage! In fact they have turned a corner since this request, so I will only talk about the period up until Ole Gunnar Solksjaer's appointment.


It could be said that Red Devils' fans were spoilt by the long period of sustained and repeated success they enjoyed under Alex Ferguson, where they were always, at the very least, a major contender for the Premier League title every season. With the club winning trophies consistently, even in the Glaswegian's final season in charge, it would be easy to overlook his time at the club for any root cause of the problems and say it was all down to him leaving at the same time as David Gill. It was huge blow to lose both CEO of the club and manager at the same time, but the seeds of their decline were planted a long time before, ironically due to the actions of Ferguson.

Like so many others in football, Alex Ferguson was a huge horse racing fan and would regularly attend events all over the country to watch the races. Being a big celebrity name, he was quickly introduced to the big names in the sport and became good friends with horseracing trainers and owners John Magnier and JP McManus, who involved him in the sport at a close level and included him as a part-owner on one of their most famous horses, Rock of Gibraltar. In return Ferguson convinced them to buy shares in Manchester United as an investment through their company Cubic Expression.

At the time Manchester United was still recovering from bizarre episodes such as the failed Michael Knighton takeover (who can forget him ball juggling on the Old Trafford pitch?) and Ferguson no doubt saw an opportunity to not just makes his friends money, but to protect his position and build his power with the backing of powerful friends in the boardroom. It was a good arrangement initially, with the club benefitting immensely as Ferguson took more and more control within the club. But then there was a dispute over the ownership of Rock of Gibraltar that had been gifted to Ferguson. He wanted his cut of the millions it was earning as a stud after retiring from racing. The dispute turned into a feud that went to court, while Magnier and McManus tried to have the Scot removed from his role as manager of the club in the boardroom.

The board fought back and approached investors to help them take power away from the pair of horse racing magnates. It was just at this time that Malcolm Glazer's son Avram was looking into investing in European football and they quickly linked up, with Malcolm Glazer buying 2.9% of the club's shares in March 2003 for £9m, through their Red Football holding company. In September they increased their shareholding to over 3%, which is the threshold requiring them to inform management.

The following month they took it up to just under 9%, then, a month later, they increased it to 15% and spoke to Man Utd's CEO David Gill to outline their plans for the club. In February 2004 they increased it again to climb to 16.31%. That month the Financial Times revealed that Commerzbank had been ordered to explore a takeover bid for the club. On the back of that news, the club's share price rose by 5% to increase its valuation to £741m. More shares were acquired and by June 2004 they were up to over 19% and still climbing as they bought up all the shares they could get their hands on.

By October they were close to 30% and showed no signs of stopping. On 12 May 2005 Red Football announced that they had completed a deal to buy Cubic Expression's 28.7% stake, taking their holdings over 57%. Ferguson and the board had won the battle and forced out McManus and Magnier, but at what cost? The Glazers were not finished and had launched a formal takeover, agreeing to buy Scottish mining entrepeneur Harry Dobson's stock, he was then the third largest shareholder, which gave them 62%. Their aim was to go over the 75% threshold needed to de-list the company from the London Stock Exchange.

Within days they had another 12.8%, making their total 74.81%. Three days later on 16th May 2005 they passed the threshold with 75.7% and began the process of Manchester United ending its PLC status and de-listing from the LSE. In the meantime they continued their efforts to buy up remaining shares reaching 76.2% and making a final offer of 300p per share with a deadline of 3pm on 13 June 2005 to all remaining shareholders. The club's board wrote to them all to inform them that they were taking the offer and advising the rest to do the same. The chairman, Roy Gardner, and non-executive directors Ian Much and Jim O'Neill also offered their resignations in the letter.

On 14 June 2005 Red Football held 97.3% of shares in the club, but were still short of the 97.6% they needed to force a sale of the rest. They extended their offer deadline until 27 June 2005. On the 22nd June Man Utd was de-listed and ended its PLC status. Within a week, on the 28th June, Red Football announced they now owner 98% and forced a squeeze out of all other shareholders. The club was now valued at £790m. However the takeover had not gone down well with the fans, a portion of which walked away and formed their own club, FC United of Manchester. Man Utd Supporters' Trust (MUST) began working on a plan to return ownership to the fans, unhappy with the way the takeover had been finalised.

Initially it seemed fans' fears were unfounded as the Glazers immediately moved to secure Ferguson and Gill in their places at the club, but two of the sons, Kevin and Edward, plus daughter Darcie, joined the board as non-executive directors. Old Trafford's capacity was increased and a big new sponsorship deal with AIG was signed, other new sponsorship deals and increased TV revenue kept the club profitable. There was a reason to worry though as the takeover was paid for by taking on debt, mainly secured against the club's assets. It was the first time since James Gibson saved the club in 1931 that it had been in debt.

Loans totalling £660m had been taken out with three New York hedge funds, one of which AIG had a large stake in. They were Citadel, Och-Ziff Capital Management and Perry Capital, and interest payments alone on the loans totally £62m a year. The rest of the money came from PIK loans (Payment In Kind), which were later sold, to more hedge funds. The PIK loans were secured by shares in Red Football and carried an interest of 14.25% pa. The club span the deals as good business, while MUST feared that the fans would eventually end up paying for the debts through methods such as increasing ticket prices.

The Glazers made no payments at all on the PIK loans for the first five years, which saw the interest rate rise to 16.25% and annual payments were now £38m on them alone. By March 2010, Red Football owed around £207m on the PIKs. A £500m bond issue had already been set in motion to refinance the debt, which totalled £716.5m. £504m was raised and used to pay off most of the £509m owed to international banks. They now had to pay £45m in annual interest on the bonds, but the bond issue had contained covenants which allowed the Glazers to filter large sums of money out of the club to repay the PIKs. This included £95m in cash, the sale and lease back of the Trafford Training Centre in Carrington and allowing the Glazers to pay themselves up to 50% of the club's Consolidated Net Income each year.

On 16th November 2010 the Glazers announced that the £220m of PIK loans would be paid off within the week as loans had exceeded 5 times the EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) which raised interest rates on the loans. While the club claimed none of its money was used to repay the PIKs, it was never explained where the money did come from. Unsurprisingly, all the talk of debts had prompted a series of Love United Hate Glazer (LUHG) protests at both Old Trafford and Carrington, while MUST moved forwards with plans to try and buy the club off the Glazers. Working with a group of extremely wealthy Man Utd fans calling themselves the Red Knights, MUST spoke to another United fan, Keith Harris, the chairman of investment bank Seymour Pierce, about brokering a takeover.

While MUST worked on increasing its membership, even employing Blue State Digital, the internet strategy firm who had worked on Barrack Obama's election campaign, Man Utd were announcing gross debt for the final three months of 2009 totalled £507.5m and pre-tax profits of £6.9m. The Glazers followed it up with a public statement that the club was not for sale and David Gill publicly supported them as "running the club the right way". Meanwhile Ferguson also backed them and dismissed rumours he would invest his own money in the Red Knights bid, calling the rumours "absolute rubbish".

While the Glazers were publicly stating no sale would happen, the Red Knights had appointed advisors for a takeover bid, the same company, Nomura Securities, who advised Man Utd's board ahead of the Glazers' buy out. There were talks held between the Glazers and Red Knights, but they were only willing to go to £1bn, while the current owners were asking more and the bid was put on hold. The Red Knights plan was to buy two thirds of the club, while the rest of the money came from fundraising efforts by MUST. Once the club was secured the shares would be offered to the fans to allow them to eventually take full ownership. However the plan never reached fruition.

In August 2011 Man Utd applied to list its shares on the Singapore Exchange, despite approval arriving the following month nothing more happened there. Instead the club applied to the New York Stock Exchange in July 2012, looking to raise £64m with an IPO. The club announced an intention to sell 16.7m shares (about 10%) at a price of between $16 and $20 each, which could raise a potential £210m. Shares were to be divided into 2 groups, Class A and Class B. Class A would be sold to the public, while Class B shares were kept by the Glazers. The prospectus specified that much of the proceeds would go directly to the Glazers, but some would go towards paying down club debts. The holders of Class A shares would not be entitled to a regular dividend and their shares had a tenth of the voting power of Class B shares. That drove down the interest and the price dropped to $14 per share.

The shares debuted on the NYSE on 10th August 2012 and trading closed with them at the offer price of $14, valuing the club at $2.3bn. £62.6m of the proceeds was used to pay off bonds, reducing gross debt to £359.7m. A new loan deal agreed in May 2013 saved the club £10m a year in interest payments and the debt was now down to £307m. While one of the early big investors in the share issue was George Soros, who bought up about 1.9% of the club, since then, in 2014, an American investment group called Baron Capital has bought up shares to take their stake to over 9% of the club.

While all the behind the scenes takeover and flotation on NYSE was a distraction, along with the 'Love United Hate Glazers' protests, with David Gill as chief executive and Alex Ferguson still manager, the club managed to remain competitive. The oft-heard "no value in the transfer market" line was trotted out regularly to explain why the club was not as active as in the past, but Fergie was Fergie and he could get more out of players than most. Ferguson was also an extremely good buffer between the fans and the Glazers. Ferguson had the trust of fans and so, if he was happy and winning trophies, it kept a large portion of the fans onside.

Then, in February 2013, chief executive David Gill announced he would be stepping down after ten years in the role. The Glazers turned to the merchant banker who had helped broker the deal to buy the club as his replacement. Ed Woodward had mighty big shoes to fill, but at least he would have Ferguson there to make sure the football side of things went well while he learnt the ropes. Except that a few months later, on 8th May 2013, Ferguson also announced his retirement at the end of the season leaving a huge hole to be filled and the two key positions to be filled by people new to the club. In Woodward's case, new to the world of football.

That was the defining moment, when the club lost Gill and Ferguson, who left with the Premier League title won once more, at the same time. The club's future would be decided by how they dealt with the changeover. Unfortunately they made a mess of it, appointing the wrong man to both positions. Woodward proved to be a poor choice, though he did bring in huge numbers of sponsors, that was more down to the attraction of sponsoring one of the biggest clubs in the world than it was down to Woodward's abilities. He showed himself utterly incapable of understanding the game, seemingly thinking the only thing that mattered was buying big names to bring in more sponsors. Woodward also proved himself to be weak, probably because he realised that he did not understand the game, so lacked trust in his decision-making. That weakness manifested immediately as he allowed Ferguson to hand-pick his successor.

That choice was fellow scout and close friend, David Moyes the then-Everton manager, who was immediately dubbed 'The Chosen One' by the United faithful. A 6-year contract in hand, Moyes first step was to increase the turmoil within the club by removing the coaching staff, so he could bring his Everton staff with him. The addition of former Man Utd players Phil Neville and Ryan Giggs to the coaching staff did little to steady the ship. It seemed there was no one with hands on the rudder steering, as bids went in for players but well below the prices that would even make the other team consider selling.

The only player to arrive before the end of August was Guillerma Varela from Penarol, while there were problems holding onto Wayne Rooney, who had become difficult following comments Moyes made publicly about how Rooney would have to play second fiddle to van Persie. Chelsea saw an opportunity but, despite Jose Mourinho's public declaration of interest, United ruled out selling the England forward. It is little wonder Moyes was already admitting that the "transition from Everton to Manchester United has been difficult at times".

Things got really embarrassing as the transfer window came to an end as, after failing in a joint bid for him and Leighton Baines, Man Utd had allowed Marouane Fellaini's release clause of £23.5m to expire. That was in spite of him being Moyes' top target and attempting to sign him long before the expiration date. Instead they ended up paying £27.5m for the Belgian. Attempts to sign Cesc Fabregas from Barcelona, Sami Khedira from Real Madrid and Fabio Coentrao on loan, also from Madrid, were added to the list of failed moves alongside Baines.

There was also the bizarreness of the attempts to sign Ander Herrera from Athletic Bilbao. After Manchester United had been trying unsuccessfully to sign the Spaniard throughout the transfer window, three men arrived at Bilbao to negotiate his signing for the Red Devils. According to the Spanish football league, the trio were lawyers acting on behalf of Man Utd. United denied sending anyone and the three men seemingly vanished into the night when questions were asked, leaving us to wonder what exactly did happen there. No explanation has ever been given.

On the pitch the season began with a trophy, as a brace from Robin van Persie gave Man Utd a 2-0 win over Wigan Athletic in the Community Shield. The rest of the season was mixed, the FA Cup was a bust, with a third round defeat to Swansea City. In the League Cup they managed to reach the semi-final, only to lose on penalties to Sunderland. The Champions League seemed promising, as United topped their group and then beat Olympiacos on aggregate, despite a first leg away defeat, to reach the quarter finals. Bayern Munich awaited them and beat them 4-2 on aggregate.

Even with the signing of Juan Mata for £37m in January, the league campaign was a disappointment, with a defeat in the Manchester derby too much for some fans and, on 29 March 2014, a plane towing a banner which read "Wrong One - Moyes Out" flew over Old Trafford ahead of a match with Aston Villa. Despite winning that match 4-1, a defeat to Everton in April ended United's chances of making it into the Champions League for next season. With just four games left to play Moyes was sacked and he and his staff shared a £5.2m pay-off.

On 22nd April 2014, Ryan Giggs was appointed as caretaker to see out the season, with the Welshman set to hang up his boots as a player at the end of the season, it was his first steps into the field of coaching. When Louis van Gaal was appointed in May, Giggs was given the role of assistant, despite his lack of experience in the role. Ander Herrera (possibly with the help of three mysterious lawyers), Luke Shaw, Marcos Rojo, Angel di Maria and Daley Blind were all brought in, as was Radamel Falcao on loan, while Rio Ferdinand, Nemanja Vidic, Patrice Evra, Danny Welbeck and Shinji Kagawa were all moved on as van Gaal tried to shape the squad to his liking.

Rooney was appeased with the captaincy and it all looked good for an assault on the Premier League title, with no European football to distract United. It was a slow start under van Gaal, as Swansea City went to Old Trafford on the league's opening day and got their first-ever league win there. It was also United's first loss at home in a season opener since 1972. Though it is only fair to point out that Swansea have spent most of their existence in lower divisions than United and that not every opening day are Man Utd at home. United followed up the defeat with two draws, before finally getting a win under their new Dutch manager, by beating QPR 4-0.

Even without European football to distract the team, van Gaal was only able to get them to 4th place in the Premier League, with a style that did little to endear him to the fans. His seemingly complete lack of emotion on the sidelines was not helping his cause either. The summer saw a spending spree as Memphis Depay, Matteo Darmian, Bastian Schweinsteiger, Morgan Schneiderlin, Sergio Romero and Anthony Martial arrived to bolster the team. Despite the spending spree, United finished just 5th in the Premier League, dropped out of the Champions League, at the group stage, and into the Europa League, where they were knocked out by bitter rivals Liverpool. Winning the FA Cup was not enough to save van Gaal, who had failed to understand the club he was in charge of and most of all failed to make any connection with fans with his negative tactics.

On 27 May 2016 van Gaal was replaced by Jose Mourinho on a 3 year deal. Once again, for the third manager in a row, United had appointed a manager clearly at odds with the image the club projects as an attacking football team. It did start well for Mourinho, as his first competitive game was the Community Shield, where Man Utd beat Leicester City 2-1. However the Premier League proved more difficult as the demands of winning both the EFL Cup and Europa League stretched the squad, despite the expensive additions of Eric Bailly, Henrikh Mkhitaryan and Paul Pogba and the free, on exorbitant wages, transfer of Zlatan Ibrahimovic. Even with those players added to the squad, United were only able to finish 6th and only qualified for the Champions League through winning the Europa League.

For Jose's second season the cash was splashed, with Victor Lindelof, Romelu Lukaku and Nemanja Matic being brought in and Zlatan being retained, though he did lose record goalscorer Wayne Rooney. As usual with Mourinho, despite the early season loss in the UEFA Super Cup to Real Madrid, his second season saw league form improve, though the January transfer window swap with Arsenal of Alexis Sanchez for Henrikh Mkhitaryan worked for neither side, the rest of his signings had a positive impact. Man Utd finished 2nd in the Premier League with 81 points, the most since Alex Ferguson retired, and they reached the FA Cup final, only to lose to Mourinho's old club Chelsea.

Even so, despite the team doing better there were clear signs of a problem with Jose, who could not have been more grumpy and miserable if he had been trying. Living in Manchester did not agree with Mourinho, especially not as he was still living in a hotel and his family stayed in London. It is little wonder that the third season under Mourinho was nothing like as successful, though the loss of his assistant Rui Faria no doubt was a huge part of that. By December Man Utd were just 6th and a defeat to bitter rivals Liverpool on the 16th of the month led quickly to the sacking of Mourinho just two days later, with just 7 wins in the Premier League that season.

A day later, the 19th December 2018, Ole Gunnar Solksjaer returned as caretaker manager. Though it is arguable whether he is the man to life the Red Devils from their slump and win them trophies, there is no denying that so far Ole has been a much more popular figure with the players.

The question though is, why is it United have not won anything for so long? Clearly, despite the owners siphoning large sums out of the club, they have not stopped it spending big either, so it is not a lack of investment in the team. Though the stadium and training ground have suffered in that respect. So why have they declined? It is down to the club's administration, the big mistake was letting Gill go at the same time as Ferguson and having no one with football knowledge to replace him. That has led to mistake after mistake as Woodward tried to learn, but never truly managed to understand the club. Players have been signed at times based on what they offer commercially, with little real plan of how they will be used or if they are what was needed.

The managers chosen were based more on name and reputation than they were on how they would fit into the club and its DNA, which, like every club, is unique and requires the right character to get the most out of it. It did not need someone to come in and try and sweep the old away, as Moyes did, or to be so confrontational as both van Gaal and Mourinho were. But the most important change will come next summer, when Woodward finally does the decent thing and walks away. His replacement needs to understand football and run the club to put football first and business second, rather than the other way round as Woodward did. Until that happens Man Utd will always struggle to make the most of their enormous riches, no matter who manages them.

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Written by Tris Burke September 24 2021 03:21:28


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