Total Value vs. Present Value?

I interrupt your excitedly waiting for transfer news for some mundane talk regarding transfer kitty’s and related financial jargon.

Potential NUFC Budgets have been tossed around in the media this transfer season of anywhere from £75m to £150m. Setting aside that actual budgets are not likely shared—it’d just be bad business—in a sense, both ends of this spectrum could be correct. It just depends on what was being referenced: current-year spending or total-committed spending.

As you may (or may not) remember from stories over the years, deals can be structured between the buying and selling clubs in any number of methods. If a club is ‘cash poor’ and the selling club agrees, the first payment on a transfer may end up being months into the future, say after the next season’s first English Premier League payment comes into the account. This is probably relatively common for newly promoted clubs.

Future payments could even be spread over several years. As I recall, this is how Newcastle transferred Sissoko years ago as they were receiving multiple, small payments of the overall much larger total for up to, as I recall, something like five years.

So the actual, total sum of transfer values as quoted in upcoming ‘bombshell’ articles could equal a gigantic sum (the reported high-end £150m) but the share of transfer fees paid out as reported at Companies House on the 2023-24 ledger may end up being only the low-end £75m net for receipts and expenditures.

A significant negotiation strength is being able to negotiate deals that are structured with more cash delivered sooner to the selling club; that is just common sense.

We’d all take 20 quid in our hands now versus 20 quid next week. But would you rather have £20 today or £30 next week? If hungry today, you take the £20 now. If you have £20 in your pocket, you may decide to wait and collect £30 a week later.

Also, pushing payments into future years limits the amount of spend possible in the future. So there ends up being a delicate balance of betting on the future and club revenue growth versus not assuming too large of an amount of undue risk if revenues were to drop.

I believe this is the game Chelsea played in their “£600m” January window and that reportedly has Everton dangling financially. I suspect Everton agreed to a ‘cash-forward’ deal for Anthony Gordon to add a modicum of liquidity and maneuverability to the balance sheet and cash flow statement. It would not be difficult to convince me that the Magpies sold Chris Wood to Nottingham Forrest for a deal that included future payments and not a majority of funds upfront, even after the loan aspect was complete. It was a way to entice the buyer to agree to the deal.

If anyone has corrections, clarifications, or things to add, please put them in the comments. And now, I send you back to resume your previously scheduled transfer rumors and news programming.