Even with no Jurgen Klopp, FSG aren't selling Liverpool for a long time. Here's why
Fenway Sports Group must find a new man to lead the Reds after Klopp decision
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When it comes to bombshell announcements in football, the reveal last Friday that Liverpool manager Jurgen Klopp would, along with his coaching staff, be leaving the club at the end of the season ranks up there with the very biggest.
In late 2021 and into early 2022 it had been suggested that the charismatic German boss would be seeking new pastures at the end of the 2023/24 season, the demands of being an elite boss at one of the world’s biggest clubs, where the pressure is relentless and energy needs to be boundless, playing into Klopp’s thinking.
But then in April of 2022, a new deal was inked through to the end of the 2025/26 season, on the back of a campaign in 2021/22 where the Reds came within a whisker of winning every major prize that was available in club football in one season. They would eventually have to settle for an FA Cup and Carabao Cup after seeing their Premier League title hopes dashed in the last 15 minutes of the season and falling to a 1-0 defeat at the hands of Real Madrid in the Champions League final.
But last season was a grind for the Reds and took a toll on Klopp. A fifth-place finish in the league saw them miss out on the Champions League for the first time since 2017, and the season ended without silverware.
It was a season that highlighted the requirement for an overhaul of ageing parts of a squad that had been so successful. Klopp could have walked, the task of undertaking the reshaping of a squad he wasn’t sure he would be at the helm of long-term a significant one. He did, though, and he committed to ‘Liverpool 2.0’ being his to own and deliver.
Friday’s announcement came as a shock to the football world, and Liverpool and its owners Fenway Sports Group now have to find a way to hire a successor who can carry on the remarkable work that Klopp has done.
But his decision was communicated to FSG chiefs in November via a phone call to president Mike Gordon. Klopp had already seen the signs that this new Liverpool squad, stacked with young talent with a remarkably high ceiling, perhaps didn’t need him for as long as he thought. Perhaps the foundations had been laid and relinquishing control earlier would allow for the squad to be shaped as a new management team would want. Whoever comes in has inherited a remarkable side, and it is hard to think of a time when a manager has left such a fine situation for a new boss to step into. The tools are all there, and for the long-term too.
Klopp knows the end game, here. At the end of this season, his time will be up at Liverpool. However, the decision has created uncertainty for the ownership and a challenge they did not expect to take on so soon.
So, what next for FSG?
In March of last year, I threw something of a Hail Mary.
FSG principal John W. Henry isn’t a man to engage often with the media. Seldom, in fact. His appearances before reporters have been nearly non-existent in the British media relating to Liverpool, while in Boston, where FSG has owned the Boston Red Sox since 2002, Henry hasn’t spoken to reporters in a press conference setting since 2020.
Liverpool fans did hear from Henry in 2021, but that was via a recorded video apology to fans by the FSG chief in the hours after the European Super League plot collapsed. Liverpool had been one of the 12 clubs dragged into that conversation, and Henry copped the flak for it, shouldering the blame for the decision and how it was handled.
In late 2022, the reveal that FSG was willing to listen to offers for the club dominated the agenda.
A sales deck had been created and major US investment banks Goldman Sachs and Morgan Stanley were engaged, with Gordon, Klopp’s closest FSG ally at Liverpool, seconded to lead the search for a period.
But the narrative was wrong from the outset. FSG wanted to know the value of the Reds following the sale of Chelsea to Todd Boehly and Clearlake Capital for what was seen by some US investors I spoke to at the time as an over-the-odds price. The £2.5bn sale, with £1.75bn committed on top of that further down the line, prompted Henry, FSG and Liverpool chairman Tom Werner, and Gordon, to test the water.
Very quickly, in some part due to the Glazers putting Manchester United on the market just a week later, the position quickly pivoted to a search for a minority partner, one that might be able to bring something more than just capital to the table, and that would potentially be able to take a greater stake as time went on.
There were erroneous links about Qatari royalty and sovereign wealth funds from the start. Social media was rife with rumour and conjecture, and I quickly lost count of the number of times a deal was ‘close’ and ‘talks were held’. No talks were held about FSG selling the club to Qatar or sovereign wealth funds. It made for great engagement for some social media accounts, though. Oh, and the Twitter (as it was then known) Spaces that emerged, how fun they were!
I’d spent time in America before that announcement and been fortunate enough to build a strong contact base. That helped inform the coverage I provided for the Liverpool Echo as well as being able to get some time with Henry. I informed the club just before the interview dropped that I had spoken to him, but it wasn’t, as had been suggested to me at the time on social media, done via the club’s PR team.
Henry made some time to answer questions about the search for investment, reaffirming the stance he made in an interview with the Boston Sports Journal the previous month, where he said there would be no sale. He also spoke about the strength of the team in place, on and off the pitch, at Anfield, and how the commitment to creating “new history” was a thread that ran through the club and was a driving force for the ownership, underpinning their long-term commitment to the club.
“While we formalised a process that has identified potential investors for the club, we remain fully committed to the long-term success of the club,” Henry told me.
“That has been the case since day one in 2010. Our efforts every day have been and continue to be focused on the long-term health and competitiveness of the club. Investment in the club is never for the short-term. This approach has been successful over the long haul with patience necessary from time to time.
“In regard to Liverpool Football Club our commitment remains stronger than ever. The club continues to make great progress with youth on the field and off. Our Foundation is well supported and continues to quietly expand the importance of its work in different ways looking for as many small kindnesses as possible individually and hopefully cumulatively.
“The people of this club starting with its manager, its players and everyone from stewards to management are committed to the club locally, committed to maintaining the club’s great history and equally committed to making new history in a way that our supporters can be proud of.
“Being a part of this club is something no one takes for granted.”
In September of last year, two months before Klopp informed Gordon of his decision to leave at the end of this season, New York-based Dynasty Equity took a small, single-digit stake in the Reds in a deal worth some £150m. It closed the chapter on the search for investment.
“The people of this club starting with its manager, its players and everyone from stewards to management are committed to the club locally, committed to maintaining the club’s great history and equally committed to making new history in a way that our supporters can be proud of.” - JOHN W. HENRY
That deal was concluded for a business valued at some £4bn to £4.5bn. Now, the success that Klopp brought to Liverpool on the pitch in recent years has helped drive revenue growth forward, and FSG has been able to leverage that growth into growing the brand domestically and overseas, which, in turn, has helped bring on board new, lucrative commercial partners.
But the club’s value isn’t tied to one man’s work, and the notion that FSG would be considering upping and leaving now due to Klopp’s decision is a fallacy. They aren’t looking to sell the club, not for some time yet anyway.
FSG is a company that deals in value creation. Guess what? Football clubs are, for the most part, loss-making businesses with payrolls that have in most cases outpaced revenue growth.
But in terms of the value of the business, Liverpool is not close to reaching the peak that some investors think it will. An investment proposal that I saw last year, not related to Dynasty Equity, projected revenues of £1bn annually by 2030 and a potential team value of between £9bn and £11bn.
Those figures may seem far-fetched, and investment proposals are supposed to present a rosy picture of what is to come, but when you look at the value of North American sports teams across the major leagues, particularly in the NFL and NBA, they have grown by double-digit CAGR for some time now, with some teams already pushing the £8bn mark in terms of valuations.
North American sports leagues operate differently than European football. There is greater cost control through the existence of salary caps and luxury tax, there is also no relegation or promotion, and the collegiate draft system promotes greater competitive equality year-on-year.
But it is a market that surged forward early, and there is some pessimism from investors I spoke to in New York in October about what the future holds in terms of growth, with some signs of the rate of growth slowing down as media companies domestically start to try and fathom out what the long-term future looks like for live sports.
FSG is in this for the longer term at Liverpool, and losing Klopp doesn’t change that, even if it makes the task more difficult and the future a little more uncertain.
With regards to the Premier League, the headline figure that was agreed for the next domestic cycle last year (£6.7bn) was more than the previous £5bn, but it was for an extra year, four rather than three, and 70 more games per season were being shown for that. In terms of value, giving away more inventory diminished the value per game.
Those signs of stagnation point to an eventual decline, but the growth of international markets is where team owners see the opportunity, and that is fertile ground for some time yet, and that will be key to driving forward team values.
FSG knows this. In Boston they will have to contend with how to market a baseball product that is long in form, has a huge competitive calendar, and is struggling to attract bums on seats in the ballparks. Liverpool does not have that problem.
Werner told fans gathered at the Red Sox’s annual precursor to Spring Training, the ‘Winter Weekend’, earlier this month that they had no intention of selling the Red Sox, what he described as being the “cornerstone” of FSG. The Liverpool chairman stated that they could be around for “two or three more decades”.
Will FSG be around Liverpool for that length of time? I seriously doubt it. Football valuations are surging at the moment for the biggest clubs, but that won’t continue forever. There will be some major changes to the way that the game is governed and competition structure at home and abroad in the next decade or more, and the landscape will change once again, with it likely to be near impossible to get hold of a team without sovereign wealth, private equity, and family offices coming together to meet the sticker price.
But FSG is in this for the longer term at Liverpool, and losing Klopp doesn’t change that, even if it makes the task more difficult and the future a little more uncertain.
The criticism of FSG from Reds fans less than enthused with their ownership has always been related to a lack of transfer spend. The transfer market provides the dopamine hit for football fans, and when your fan base is as global as Liverpool’s, where most can’t get to games, it is transfers and transfer news that maintains the interest in between games.
“JUST SPEND SOME MONEY, JOHN!”
Yeah, the approach isn’t going to change. Liverpool’s wage bill has increased through success, and that is because the players are heavily incentivised to achieve success. The transfer market has long been the Wild West and values have gone up and up.
But there is a problem that the Premier League has indirectly created in that it has become almost too big. The other major European leagues of Italy, Spain, Germany, and France, cannot pay the kind of fees they demand from English clubs and can’t match the wages to take top stars from the Premier League, except for the likes of Real Madrid and Bayern Munich. Even clubs like Juventus and AC Milan can’t engage in that market anymore.
The Saudi Pro League has propped things up for a bit, but it is spending ahead of revenue right now, and it is a tactic that won’t last forever, there will need to be a return.
The transfer market will contract, it has to, and so will payroll. There will be a move to a more business-minded approach to running football clubs, focused on the biggest maintaining their brand strength globally and finding new avenues to monetise a fan base that has touchpoints around the globe.
All this is something that is in FSG’s wheelhouse. It is also important to remember that FSG’s aspirations don’t just align themselves with however long Henry and Werner, two men in their 70s, stay involved. This is now a sporting empire that will seek to grow and grow.
Replacing Klopp is a huge challenge, but one thing that FSG has been pretty strong about across its sporting interests is getting the right people in the right places to do the best job. They already know the blueprint that works, and they will need to find the candidate who can best align with that, not someone who wants to take a radical approach to changing things.
This is not a revolution for FSG, it is evolution.
I was asked on social media last week “Who is going to be deciding on the new manager?” The answer to that question is the same people who decided on the last.
Gordon is heavily involved at Liverpool again right now, and that is likely to be the case for some time to come. He and Klopp had an understanding and a rapport, and that allowed for a smooth relationship between the owners and manager. Gordon and FSG will seek something similar for his successor.
But as for the task being too much like hard work and FSG choosing to cut and run, yeah, not going to happen. That will please some, and for others, it won’t. However, football is going to change and the gluttony of the transfer market isn’t going to last forever. These clubs will become entertainment companies in their own right, and no investor is checking out while there remains a considerable road left to travel down.
Very interesting read, thank you.