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Monaco and their absurd spending

The_Steve

By The_Steve
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The_Steve Grand Master

The_Steve

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MONACO — Atletico Madrid's Colombian striker Radamel Falcao was in Monaco on Tuesday negotiating a transfer to the principality club as Real Madrid's Portuguese defender Ricardo Carvalho completed his move to the Ligue 2 champions.

 

Sources close to Monaco said the duo were set to undergo their medicals later, but added that Barcelona goalkeeper Victor Valdes was not present despite also being close to a move to the Stade Louis II.

 

Monaco are believed to have agreed a fee of some 60 million euros (£51.3m, $77.2m) for Falcao, which would make him the most expensive player in French football history.

 

Falcao, 27, won the 2012 Europa League and has netted 28 goals this season for Atletico, whom he also helped to glory in the Spanish Copa del Rey.

The Colombian international initially made his name in Europe with Portuguese club FC Porto, helping them win the Europa League in 2011 before moving to Atletico for a reported fee of 40 million euros.

 

Meanwhile, Carvalho, 35, has signed a one-year contract with the option of a further year after his deal with Real Madrid expired.

 

"I am delighted to join Monaco and participate in this new adventure. It is a new challenge for me," said Carvalho, who played in the Porto team that beat Monaco 3-0 in the Champions League final in 2004.

 

Valdes, 31, was believed to be in the Mediterranean principality on Monday but his current club Barcelona are yet to finish their season and he took part in their training session on Tuesday.

 

Valdes has a year remaining on his contract at the Camp Nou but announced in January that he wanted to leave for a new challenge elsewhere after spending his entire career to date in Catalonia.

 

However, his agent, Gines Carvajal, is believed to also be weighing up an offer from a Premier League club.

 

Monaco's reemergence as a major power in the French game has come since Russian billionaire Dimitri Rybolovlev - the world's 100th-richest man according to Forbes magazine - bought the club in December 2011.

 

Their Russian sporting director, Vadim Vasilyev, has been given carte blanche to spend big since their promotion to Ligue 1 was sealed recently and last Friday they announced the double signings of James Rodriguez and Joao Moutinho from Porto for a combined fee of 70 million euros.

 

However, Vasilyev has sought to play down expectations in an interview with L'Equipe.

 

When asked if his team could compete for the Ligue 1 title next season, he said: "No, no...PSG have a great team. There are others too like Lyon, Marseille, Bordeaux, Lille...It will be difficult. It is still too early to envisage being French champions."

 

On the club's transfer policy, and despite the huge sums already spent, Vasilyev added: "We don't want to pay more than the market price. If we give the impression that we can spend without counting, it's not the case."

Indeed, doubts have been raised as to how they can sustain such a policy as UEFA seeks to implement its Financial Fair Play (FFP) rules, which encourage clubs to live within their means, only spending money they earn rather than living off donations from wealthy owners.

 

Monaco are one of the most successful clubs in French football history, with seven league titles to their name, but FFP looks set to pose a serious problem to a club whose average attendance this season was just 5,295.

 

Even when they reached the Champions League final in 2004, their average domestic gate that season was just 10,394.

 

"These are the rules, so we must follow them," Vasilyev told L'Equipe. "But to begin a project, you need to be able to invest in order to make a profit afterwards."

 

Monaco also currently benefit from the favourable tax laws in place in the principality.

 

Foreigners playing for the club do not pay income tax, while French players have paid less in national insurance contributions than they would at other clubs in France.

 

However, a decision taken in March by the French football league (LFP) means Monaco will be subject to the same tax laws as other French clubs from June next year.

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Zatman Grand Master

Zatman

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Read an interesting article about 3rd partner ownership that the players really have little say in these matters hence why Tevez and Mascherano were parked at West Ham.

 

Also that his owners had moved him from Porto to Atletico to reach a wider audience

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Voinjama Newbie

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£8.5 million a year AFTER tax for Mr Radamel Falcao. Although he is putting money before football, for that much money most footballers would do the same. That puts him on more then the likes of Yaya Toure and John Terry. An insane amount of money.

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turnbull Mentor

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Their transfer activity is symptomatic of everything wrong with the game.

You're right, but it would be nice if a foreign club spalshed some cash on players from the PL for a change instead of squillions going the other way.

 

Can't see it happening though.

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The_Rev Mentor

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Total waste, shame he chose money over Champions League.

 

He didn't have much choice in the matter by all accounts.   There was an excellent post on his transfer on Reddit a couple of weeks ago which I will link here. 

 

You have probably all already seen that Falcao is destined for Monaco. There were a lot of rumors about a potential move to Manchester United, Chelsea, Real Madrid and others - so why does he end up moving to Monaco?

The answer is because of the complicated third-party ownership involved with Falcao. There was a very similar situation with Hulk when he moved to Zenit.

To explain this, we need to take a step back and first see how third party ownership works. Those in England would have previously seen this topic as it reached prominence when Carlos Tevez and Javier Mascherano signed for West Ham United. Here were two stars from Argentina signing for a club in London who were struggling to stay in the top flight. The controversy lead to West Ham paying compensation of £18M to Sheffield United, and lead the FA to ban third party ownership.

But third party ownership is still alive and well on the continent. It is most often applied with South American stars making the jump across the Atlantic to Europe. The way it works is that investment groups will purchase the registration rights of an upcoming player. This is sometimes done while the player is at a club, and sometimes as part of a transfer.

For eg. one scenario would be that a 16 year old star in South America would be approached by an agent and asked if he wants backing with marketing and making it big in Europe. These deals usually involve paying the player a better salary, hooking him up with a better agent, better management, sponsorship deals etc. If and when the player agrees, the third party owners will then go to the club he is registered to and negotiate to buy his registration rights - either all of or part of.

The player is then in the hands of the management and third party ownership group, who manage every aspect of his career from that point on. That usually involves paying him a larger salary on top of his club salary, placing him in clubs where he will get more exposure, etc.

The other way third-party ownership happens is that the investment group finances a transfer for a player. For eg. Porto want to sign a player from Brasil but don't have the funds, they would approach an investment group and have them stake 50-60% of the deal in return for the players registration rights.

The investment group make all of this upfront investment with the hope that at some point in the future the player proves himself, becomes a star, and can then exit at a very large valuation.

Some examples: Tevez and Mascherano were placed into West Ham by their investment group as a way of getting them more exposure. It worked out well in both cases as Liverpool purchased Mascherano (buying out the investment group and giving them a good return) and City eventually ended up buying out Tevez - albeit via Manchester United (who never owned the entirety of his transfer rights).

Back to Falcao. He was purchased by a third-party ownership group as part of his transfer to Porto. They bought 55% (likely more) of his transfer rights, supplemented his salary while he was paying at Porto and then moved him to Atletico for the purpose of getting him more exposure (likely with an eye on moving him eventually to Real Madrid). During the time Falcao was there, the investors were supplementing his wages again (infact paying most of them) and working on negotiating his big move which would see them cash out.

Porto's financials show the following for the Falcao transfer:

sale of 60% of the economic rights of the player Bolatti to the entity Natland Financieringsmaatschappij B.V., on July 2009, by the amount of, approximately, 1,500,000 Euro, (transaction perform under the acquisition process of 40% of the registration of Falcao)

There is another section where it is disclosed that they sold another 5% option in Falcao, and another section where it is disclosed that there is an option for a third party to purchase a further 10%.

The same filing shows that Porto only owned 45% of Hulk.

What is more interesting is who is involved in the Falcao ownership. The group is called Doyen Sports and it was founded by Jorge Mendes (most famous as Ronaldo's agent, but an infamous player agent who is involved in a lot of third-party deals) and Peter Kenyon (former Chelsea chairman).

On their website they have a page for Falcao and you can also see the other players listed. Falcao, like Hulk, ended up in a situation where there was so much invested in him that it would take a lot of money for the investors to see a return (known as being highly leveraged). They were paying his salary for a few seasons, had floated Atleti some money to keep them alive (they got some shirt sponsorship in return) and had made the initial investment when he first transferred.

Falcao ends up moving to Atletico in a 40M move - despite Atleti the previous season stating that they had to clear players out because of their 220M euro tax bill with the Spanish government. What this ended up being is a 20 + 20M deal. 20M never gets paid because its just the third-party owners paying themselves, and of the other 20M only 18M is owed by Atleti, who take an option of paying in two 9M installments (they were late on the first one, they only paid 2.5M and defaulted to the point of Porto threatening to sue and taking the issue up with FIFA). End situation is that around 60% of the rights are with the Doylen group. It also appears that while Falcao was at Atletico that Doylen took an option for a larger stake in him since Atleti were late on their payments. Something weird happen which involved Doylen taking a sponsorship. Either way, they had the majority stake and Atletico had no say or control of the player. For all purposes it was nothing more than a loan with Atletico having a small stake in his registration rights.

The president of Atletico Madrid continuously insisted that they own all the rights to Falcao, but this simply isn't true.

Falcao is on a wage of 10M euro per year, and the return the investors wanted is 60M euro in transfer fee. This narrows down the list of potential clubs that can buy you out to very few. Atletico had no say in where Falcao goes, they had an option in the winter transfer window, but that expired. The owners needed their return and they were going to get it one way or the other.

The list can be narrowed down to PSG, Monaco, Real Madrid, Chelsea and City. City aren't making large investments any longer, PSG have their fix of strikers. Of the remaining three, it is apparent that Real Madrid didn't want to pay up the 60M + 50M in contracts for Falcao (for whatever reason). Apparently Chelsea matched the 60M clause but to pay Falcao the 10M per season in wages would involve a total gross salary of 300k+ per week, which just isn't manageable.

Chelsea also have the issue of not being allowed to directly purchase a player from a third-party owner (apparently this is what turned ManU off a move) so it would have required a two-step sale with Falcao going to one club outright and then to Chelsea. Apparently with the David Luiz transfer on the same day he moved to Chelsea Benfica bought out the entirety of his rights from third-party owners (so you can summize that Chelsea gave them the money to buy out that deal so that they could purchase 100% of Luiz directly from Benfica, thus avoiding the third-party rule in England).

With all of these factors you end up with only one target: Monaco. They have the 60M to pay out the investors, they have the funds to pay his wages of 10M per year and better yet they have no income tax so they don't have to supplement the gross.

So in the end Falcao is moved around Europe by his investors with the only goal of making a return for them. He has little to no say in his final destination because of a deal he agreed to years ago while he was still in South America.

Links and further reading:

edit part that I missed which some people might not know - Monaco were purchased by Russian billionaire Dmitry Rybolovlev, the 79th richest man in the world. Similar MO to the Al Thani's at PSG except he is investing as an individual, rather than with the backing of a state.

When he bought the club in December 2011 they were bottom of the second division in France. He rescued them that season and has now seen them promoted back to Ligue 1.

Edit some more links, this time from UEFA, who have strong words against third-party ownership (but it still goes on):

This is why, as asked below, Atletico insist in public statements that they own 100% of Falcao - they don't want to risk any potential clampdown from UEFA.

 

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The_Rev Mentor

The_Rev

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Individual sponsors too, especially Adidas and Nike doing their best to ensure the players who's boots they sponsor end up in one of their shirts too.  It probably pisses them off no end that Messi (Adidas) wears the Nike shirt of Barcelona and Ronaldo (Nike) wears the Adidas shirt of Madrid. 

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