18 January 2006

United: For Sale

Updated from 10AM below...


Well, in the world of "I should have seen that coming": Steve Goff reports United is back on the market. Thoughts on this later, but I will offer a few things right now.


There are two parties that could have called off this deal: AEG, or Global Development Partners. There are reasons why AEG might have called off the deal, but all of those reasons point to not selling the team in the first place. So the deal was probably called off by Global, with the blessing of AEG. Why? Here's some baseless speculation. Global has been encountering difficulties in Wisconscin and Virginia with its other stadium projects. The failure of those projects may have affected Global's ability to raise capital. DCU was sold for a record price, and a firm short on capital that was in the deal primarily for the stadium considerations may suddenly have decided that they needed that money to go elsewhere. So Global needs to back out. AEG, knowing that as MLS franchises are these days, figures DCU is one of the more reasonable properties to hold onto. So AEG would agree to the same idea.


The other possibilites are more disturbing. One would think that Global had done due diligence in perusing the books of DCU before the purchase, but it is possible they missed something, and alarmed wanted to flee. This would explain why it was so easy for them to get their money back.


I'm more inclined to believe this is a strategic decision, like the first scenario, rather than a panicing decision. That being said, I'm not thrilled with DCU being a ward of AEG again. Not thrilled at all.


More thoughts after sleep.


Update After a Night's Sleep: After talking with some MBA types, I'm told that due diligence would indeed have been done before any sale, so DCU's financials being the cause for the sale are more and more unlikely. Goff's revised article really does make this look like a decision by Global Development Partners, and the "they're cash poor and having difficulty projecting growth to justify increased capitalization" reason seems to resonate with those folks. So that's something positive to take out of this: That the problem may not have been United, but the suitors financial situation.


That's not to say all is rosy. This is now the second time a DCU sale has fallen through, and Kevin Payne's assurances that a deal will be worked out soon are pretty much boilerplate talk for "Yeah, we'd like the sell them team, and I know a guy who knows a guy." Not to say anything against Kevin, whom I think is pretty much as good a potential owner/operator as you are likely to see in the league. The problem is that if DCU is viewed as a sale that's troublesome, for whatever reasons, it may make potential buyers gun-shy based solely on the past difficulties. We could be in a situation where there could be no rational reason NOT to buy the team, but people shy away anyways.


So what? Why not just continue as part of the AEG Zaibatsu? The fact is that most leagues have single-ownership rules for a reason: You want to encourage at least a semblance of capitalistic competition among your teams. Single owner leagues (see: The XFL) don't have the diversity to withstand difficulties to the parent entity, and the individual operators have less of a financial motiviation to go and outwork their competitors in the league. Stable ownership doesn't necessarily lead to success (see: Capitals, Washington) but an unstable ownership rarely creates a good environment. DCU's winning a championship while part of AEG is an aberration, not a rule. If there is a saving grace, it is having someone like Payne, who's been with the organization since the beginning, to serve as a steady hand while the ownership above him is in flux. He can buffer many of the changes from vibrating down the corporate ladder onto the pitch. But it ain't easy. An owner committed to the team is needed. Yes, even if that owner is like Malcolm Glazer.

2 Comments:

At 18 January, 2006 12:51, Blogger Matt W said...

This is bad. I wonder what it says about the long-term viability of MLS that AEG has had such a hard time selling a team in what has to be one of the better soccer markets in the country.

And I'm guessing this means the end for now at least of any talk about Poplar Point. Don't know if that's a good thing or not--I've never been enthusiastic about that particular site, but DCU and fans would benefit enormously from a soccer stadium. I mean, look at the map of Chicago's new stadium (danger danger: pdf) and imagine how much noise a couple thousand vocal supporters could make.

 
At 18 January, 2006 13:13, Anonymous Seattle Matt said...

DC is now like the good looking, intelligent woman that's been dumped twice at the altar.

Even though there's nothing wrong with her...any potential suitor worth a crap is going to wonder what's up.

DC is a class organization and team..it's real baffling why they can't find a buyer. I agree with Matt...this makes the MLS look bad.

 

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