This chapter examines the different approaches ‒ part art, part science ‒ used to value a club when it is sold. There's no “correct” price when buying a football club, just as there is no “correct” price for a football player, a house or a piece of art. This is due to the nature of what is being traded. There are some guidelines that help to narrow down prices to a realistic range and then it comes down to the negotiating skills of both parties, the extent of the need to sell and the ability of the buyer to finance the deal. Often buyers and sellers will use professional advisors to estimate a price for the club. Whilst a lot of time and effort can go into determining these values, they are potentially flawed for many clubs because of the elephant in the room that is the impact of relegation or promotion on a club's finances, especially in relation to the Premier League. Cynics might also suggest that some of the methods used by “professional” advisors are there to justify their exorbitant advisory fees, rather than to give an accurate measure of the true worth of a club.

Our case study will be Newcastle United, which, according to media reports, is up for sale, with owner Mike Ashley allegedly looking for a price of £300– 350 million.

Balance sheet value

The simplest way to value a club is to look at the net assets total in the balance sheet and use this as the figure. Newcastle's accounts at 30 June 2019 (see Table 11.1) show the club had net assets (assets less liabilities) of just over £43 million. The footnotes to the accounts also show that the club owed their owner Mike Ashley £111 million in loans on top of this sum, so a buyer would presumably have to repay him these loans too, which would take the net total to £154 million.

A balance sheet valuation method is a poor one to use. We’ve already established that the balance sheet tends to vastly undervalue players. This is because some players are not shown as assets in the accounts due to being recruited via the club academy system at a zero cost, or Bosman transfers with no purchase fee but a potential sale value if the player has joined and signed a long-term contract, or increasing in value due to market inflation.