Intriguing facts about the Ibrahimovic transfer... and all that Jazz!! (The figures have been edited after the transfer)
Ibrahimovic is all set to transfer from Barcelona for Milan. Its a 1 year loan deal, after which Milan have the option to buy Ibra for Eur 24m. But here are some very interesting facts about this transfer... Milan were ready to buy Ibra outright this summer, it was Barca who insisted on a loan deal!! If that sounds strange, how about this fact - Barcelona will lose only Eur 17m in the entire Ibrahimovic saga!!
Intrigued? Shocked? Read on....
Lets first understand the Ibra deal between Milan and Barcelona, as reported by most papers. Milan will take Ibra on loan for 1 year, where they will pay him Eur 9m. Next season, Milan will exercise their option to buy Ibra at Eur 24m from Barca (apparently the cost of not exercising this option will be set very high in a way forcing Milan to buy him). While we don't yet know the actual figures, but these figures are widely reported, and this analysis is about what deal these figures represent to Barcelona from a business perspective.
The world of football accounting is a funny one. Since its so difficult to value players, most clubs use creativity to value these assets the way it suits them... but first lets understand the entire Ibrahimovic economics from a logical business sense. We will make a few assumptions as we go along, as some of the information is not publically available.
1. Value of Eto'o last summer = Eur 30m. There was a reported bid from City of that amount, and I believe it was a decent valuation for the (at tha time) 28 year old Eto'o. This despite the fact that the "book value" of Eto'o at Barcelona was Eur 20m at the time of his transfer. But as we all know, book values and market values are often very different.
2. Addition Revenue earned by Barca from Ibra = Eur 5m. This is from sponsorship deals / shirt sales / etc - not sure what the actual number is, but this looks like a fair assumption for the purpose of this analysis.
Business Analysis: How much did Ibra logically cost Barcelona??
Total OutFlow: Money Barca will have spent on Ibra:
49m to Inter last summer
+ 30m (Eto'o) to Inter last summer
+ 17m to Ibra in wages (pre tax annual wage, conservative estimate, 27% tax rate in spain)
Total = Eur 96m
Total InFlow: Money Barca will have got from Ibra:
24m from Milan next season
+ 5m from sponsorship revenue / shirt sales (as per assumption)
Total = Eur 29m
So one season of Ibrahimovic costed Barca about 96-29 = 67m euros! Forget all the accounting mumbo-jumbo for a moment, this is the actual moolah Barcelona lost. From a business perspective, this was a horrible deal for Barcelona... Its looks like the two Milan based clubs spit roasted Barcelona ;) But the real beneficiary here was Ibrahimovic, and the credit must go to Raiola, an agent I dislike a lot, but credit where its due. He does good for his clients financially I guess. We can safely say that Raiola out-negotiated both Galliani and Rosell on this one.
But then, how did Barcelona only lose about Eur 1m from this transfer?? Lets enter the world of creative football accounting jazz... This is how Barcelona's book works:
Acccounting Analysis: How much did Ibra cost Barca in their books?
2009 Value of Ibra (last summer):
49m that Barcelona paid Inter
+ 20m (asset value of Eto'o in Barca's books)
Total = Eur 69m
2010 Value of Ibra (this summer) = 69m - 20% amortisation (due to a 5 yr contract) = Eur 55m.
Since Ibra signed a 5 yr contract, Barcelona depreciate his value in their books by 20% (14m) every year. And Ibra remains a Barca player this season (as he is only loaned to Milan).
2011 Value of Ibra (next summer) = 55m - 20% amortisation = Eur 41m
2011 proceeds from the sale of Ibra to Milan = Eur 24m
Total loss = Eur 17m
Funny, isn't it? The difference between the logical analysis of the cost (67m) and the accounting of the cost (17m) is so huge... Actually its the same, just an accounting way to "justify" stuff by taking the hit over the years via depreciation. But this probably explains why Barca insisted for a loan deal this summer, even though Milan were ready to buy Ibrahimovic... coz if Barca had sold Ibra this season, they would have had shown a bigger loss on their books!! This is how that works:
If Barca sold Ibra for 24m this summer, their loss would be:
55m (2010 value of Ibra)
- 24m (sales proceeds)
Total Loss = Eur 31m
So Barca "saved" Eur 14m by loaning Ibra this summer, rather than selling him outright!! In reality there is no saving here, amortisation is a cost and Barca will take that hit this way or that.. Its all just about avoiding a financial egg on face.... Welcome to the world of football accounting jazz....... ;)