Chelsea’s owner blues: Incompetence at Stamford Bridge shows private equity at its worst

Among the tens of thousands of words about Chelsea FC’s chaotic start to the Premier League, one key element is missing from the noisy debate.

Ownership is vital for football clubs, as it is for any other business – whether they are supermarkets, department stores or cutting-edge aerospace and engineering companies.

Private equity owners and managers are often portrayed as panaceas for sclerotic, poorly managed listed companies and as signposts for amateurishly run sports enterprises.

The proponents want to bring the magic of debt financing to a company and manage the underlying businesses in a more robust and focused manner.

There have been notable commercial successes (although not for consumers), such as fintech innovator Worldpay, retailer Pets at Home and the turnaround and value creation in Formula 1 racing.

But there have been calamities too: Debenhams, Asda and care home provider Southern Cross. Chelsea fell into the hands of private equity in May 2022.

The club had been seized by the British Treasury from a Kremlin friend, Roman Abramovich, after the Russian invasion of Ukraine.

The new owners were a consortium of investors called BlueCo, led by Todd Boehly and largely financed by California-based Clearlake Capital. The group took over the club for $3 billion (£2.4 billion).

Clearlake owned 60 percent of the company and Boehly and his partners owned 40 percent.

Boehly became the face of the club and has an equal share in the club’s ownership with Hansjorg Wyss and Mark Walter.

The winning Boehly team won thanks to the prize and a track record not only of leading but also of getting struggling sports enterprises back on track.

By the standards of his baseball team, the Los Angeles Dodgers, Chelsea was in excellent health when Boehly took charge.

But all private equity has brought Chelsea is a little too much clever accounting.

To circumvent the ‘fair play’ rules that limit transfer spending, Boehly and co. have employed financial engineering.

Instead of two, three or four year contracts, players have ‘long-term contracts’ of six to nine years, which means their value decreases over the life of the contract.

That’s a clever calculation, but it also means that if mistakes are made, the players with the highest salaries will be the hardest to move.

Instead, the Chelsea-born and bred young lions are cannon fodder to be sacrificed.

In 2021, under the leadership of German coach Thomas Tuchel, the club won the most coveted club trophy in the world, beating the superstars of Manchester City to become European champions.

The future looked bright as the Boehly consortium pledged to invest at least $1 billion to renovate or replace Chelsea’s historic but underperforming Stamford Bridge stadium.

So far, little has been done. Stairs are narrow, steep and difficult. Toilets are not exactly hygienic. It is the least impressive top club location.

When the team was a reliable, trophy-producing operation, the shortcomings were tolerable. All this despite the fact that Stamford Bridge sits on some of the most valuable and grandest real estate in the world.

Abramovich had plans to invest £1bn or more in west London before he was ousted.

It’s easy to understand why there was so much confidence in Boehly and company. They turned the Dodgers from series losers into World Series champions and developed a beautiful new playing field.

They added British commercial expertise in the form of property magnate Jonathan Goldstein.

What could possibly go wrong? Football is a notoriously unpredictable business, but generally a bottomless pit of money, stable ownership and skilled management and coaching will yield trophies.

At Chelsea it has been the opposite. A carefully assembled team of experience and youth has been demolished, with many of the best players now at rival clubs.

Instead of assembling a well-functioning team, the private equity owners started with a bizarre collection of potential stars, whose names most fans can barely recognize.

A £1billion investment has resulted in one of the most inflated squads in football history, featuring 54 players (at last count), eight of whom are out on loan.

Instead of stability, they have brought the volatility of hedge fund traders to the club. The owners treat their greatest asset, the enormous talent of established stars, with contempt.

Expensive and hard-working players like Raheem Sterling and emerging talents from the academy like Conor Gallagher are being humiliated and traded away as if they were objects rather than people after his excellent season.

In order to achieve rapid success, a third new manager in as many years has been appointed in the person of 44-year-old Italian Enzo Maresca. He came from Leicester City and had no experience as a manager in the Premier League or in conquering Europe.

He replaced Mauricio Pochettino, who left by mutual consent after finishing sixth in the 2023-24 season.

The patience of loyal, intelligent supporters with a vast knowledge of the game and football finances has been tested.

One of them, who has an acclaimed podcast, said she “didn’t turn on the TV for the first time in 20 years” for the early-season match against Manchester City.

A lifelong supporter and renowned advocate and campaigner against racism in football wrote: ‘What a mess.’

With the change of players, many fans want a guide to their own team full of unknown players in the program, rather than easier to recognize visitors.

Football has become increasingly scientific, analytical and statistical. Techniques have been brilliantly deployed by teams such as Brighton and Brentford, who punch well above their weight in terms of spending power, stadium size and international support.

But such mathematical precision only works in combination with expert coaching, brilliant psychology and leadership.

Around 2,550 private equity giants in the UK benefit from a tax break known as ‘carried interest’.

The industry defends itself by arguing that it employs millions of people and contributes enormously to the success of the City. But there is a tendency to sweep under the carpet the ill effects in terms of wasted jobs, over-reliance on debt and an ability to circumvent good governance.

Chelsea represents private equity fraud at its worst: culturally blind and indifferent.

It delivered the worst of both worlds: a financially driven franchise headed for self-destruction.