Derby County fans need to buckle in for a bumpy ride and accept it could be years before their club is back where they believe it belongs, if it survives the current crisis.
Football club executives who have faced financial meltdown and come out the other side warn that sorting out debts and finding the right buyer is a huge challenge, but assuming it can be done, that is only the beginning of the road to recovery.
Once stable, the club’s culture has to change, too, so everyone from the cleaner to the centre forward gives their all for the cause, and understands the importance of value for money.
Sunderland are back – the Black Cats are in high spirits after suffering financial meltdown
If Rams’ fans think administration will usher in a brave new era overnight, they may be disappointed. There are years of struggle ahead.
‘It takes a long time for everyone to start pushing in the same direction,’ said Charlie Methven, a shareholder and director at Sunderland, who helped pull the Black Cats out of a disastrous financial situation three years ago.
‘It is a long road before enough people have been moved on, other people recruited, everyone knows the plan and there are no lingering politics.
‘When the financial situation stabilises, supporters expect things to be turned around overnight on the pitch, but the right culture has to be created behind the scenes if the club is to get on a roll of success. Once the club is stable and gets that right, that roll can last for a decade.’
Sunderland crashed out of the Premier League in 2017 and landed in League One a year later
Derby County’s financial situation now is similar to Sunderland in 2018 after relegation
Three years after the Black Cats’ faced their financial crisis, the club is in the black and looks better prepared than ever to mount a sustained promotion push back to the Championship.
If Derby achieves that from where it is today, then it will have done well. The Rams are now bottom of the Championship after a 12 point deduction for going into administration.
It’s been reported up to 20 staff have been made redundant.
‘I know it is not a glamorous thing, but it makes me very proud that Sunderland today is debt free, break-even and all of the assets – the stadium, CAT 1 academy, training ground and women’s team – are still 100% in the club’s ownership and in good shape,’ said Methven. ‘The final piece of the jigsaw now is for the first team to drag the club back up the leagues.’
Sunderland went top of League One on Tuesday last week, before slipping back to second after defeat at Portsmouth. With the exception of Saturday, their performances to back up their lofty position. The Black Cats are now looking good on and off the field.
Sunderland directors Juan Sartori (L) and Charlie Methven took over club with Stewart Donald
But, Sunderland’s situation in 2018 bore a strong resemblance to Derby now. The Wearside club had declined on the pitch, bombed out of the Premier League and crashed straight through the Championship into League One, where the Rams look to be headed as a result of points deductions.
Sunderland were losing £20 million a year and were £160 million in debt when they landed in the third tier. Around half of that debt rested with an aggressive lender at nine per cent interest per annum.
Methven believes Derby face years of struggle to recover their financial and league position
The freefall had been overseen by Ellis Short, a wealthy owner who wanted to sell, couldn’t find a buyer and hung on in hope, while the crisis depended, before turning off the spending taps and exiting.
Methven, Juan Sartori and Stewart Donald bought Sunderland off Short in May that year. And they found costs running out of control and a culture that accepted – even inadvertently encouraged – failure and over-spending after years of decline.
‘It seeps into the walls,’ said Methven. ‘When I arrived at Durham railway station on my way to the Stadium of Light, I was met by a liveried chauffeur in a club limousine! They had a fleet of three – and they were in League One.’
It was clear costs would had to be cut dramatically.
Sunderland fans (pictured at the EFL Checkatrade Trophy final against Portsmouth in 2019) rallied to the cause and have swelled gates despite the club playing in League One
‘I was actually relieved when I saw that because my fear was there was no fat to cut. But I thought, ‘if they still have chauffeurs the first round of cost-cutting would be relatively painless’.
‘There were Premier League practices. The team had been travelling by plane to matches with luxury coaches meeting them off the plane and staying in five-star hotels.’
The club was also paying consultants thousands of pounds a year to move plastic pot plants around the club offices every week.
These extreme examples were indicative of deeper problems in which contracts had run out of control, agents were filling their boots and players had lost focus and motivation. In that environment it was impossible to find success on the field.
‘Sunderland started going in the wrong direction from around 2010. In the years after, there had been plenty of able people at the club, but they were not able to turn it around,’ said Methven. ‘The culture change had not happened. And that change is not as easy as people think.’
Sunderland finished rock bottom of the Premier League when they were relegated in 2017
Sunderland were able to avoid administration by the skin of their teeth, which with fierce cost cutting, some remaining parachute payments and an ambitious revenue-raising plan meant they could cling on to their key assets, like the stadium and category one academy (although the club did close the cryotherapy unit because it cost so much too run).
Sunderland galvanised their supporters and attracted gates of more than 30,000 to start the money flowing. Methven and co’s marketing strategy included asking the fans to help refurbish the stadium and signing up for a second series of the acclaimed Netflix documentary ‘Sunderland ‘Til I Die’.
Whilst not having the benefit of parachute payments, in one way Derby have been more fortunate. They have already cut their wage bill and reduced costs, while Sunderland’s decline was so quick that it sank into League One with Premier League contracts worth tens of millions.
Ellis Short, former owner of Sunderland, sold his stake after club was relegated to League One
However, they are weaker because owner Mel Morris was forced to call in the administrators almost two weeks ago after, unlike Short at Sunderland, failing to find a last-gasp buyer. The stadium has already been sold.
The administrators will try to make sense of the debts – estimated to be £60 million plus – and sell the club as a going concern. Somehow that figure will need to be crunched down to make Derby attractive to a prospective owner and the Category One academy risks being sacrificed as too expensive.
More than 60 interested parties went through the books at Sunderland and walked away, before Methven’s group took over and he says it is a similar case at Derby, where two bids have already publicly collapsed.
Derby County’s administrators Quantuma say they have received seven of eight ‘credible’ bids to buy the club in a week. But the fact is a suitable buyer is not easy to find and Derby have now lost control of that process.
At Sunderland, Donald, Sartori and Methven turned down some lucrative offers because they did not think the prospective buyers would be successful.
Derby County fans should brace themselves for a long haul if the financial crisis is averted
‘These club sale processes are very frustrating for fans,’ said Methven. ‘They know the club is up for sale but can’t understand why the deal isn’t easier to do.’
Sportsmail understands there is enough money in the bank to underwrite a ‘cash flow plan’ for 100 days’ at Derby, but three months is not long when buying, or selling, a club.
Billionaire Kyril Louis-Dreyfus eventually became the major share holder at Sunderland in February this year, but initial contact was made in August 2020, around six months earlier.
In September, Methven spent a week holed up in Switzerland with Dreyfus and his advisors going through the books and discussing strategic plans.
The prospective owner may have been in his early twenties, but he was brought up around Olympique Marseille, where his late father, Robert, was the majority shareholder for 13 years and his family still own a five per cent stake.
According to Methven, Dreyfus and his team were well-versed in the opportunities and pitfalls presented by football clubs.
Kyril Louis-Dreyfus (L) bought a controlling stake in Sunderland in February this year
‘To get back into football, the Dreyfus family wanted to be sure it would the right club, at the right time,’ said Methven. ‘As we went through the process, it became clear the personal fit and the values were right were right.’
The Swiss billionaire bought a controlling stake in the club from Donald, who retained a minority holding along with Sartori and Methven.
Dreyfus promptly moved to the north east, has an office at the Academy of Light and attends every game. He was even at Wigan away in the EFL Cup on a Tuesday night (and enjoyed a 2-0 win).
It is notable that despite Dreyfus’, now 24, huge personal wealth he has not thrown money at Sunderland.
Sunderland went top of League One on Tuesday after a 5-0 thrashing of Cheltenham Town
Methven agrees the club’s transfer activity last summer was ‘modest, but interesting’ and points to the fact that the club is following a plan, built around smart recruitment, and not based on an open cheque book.
Redemption in football is rarely built on gambles and fast money, it has to develop steadily. And any sustainable comeback at Pride Park is likely to follow a similar route. That may take some getting used to.
In the summer transfer window the Black Cats’ actual net spend was zero, but it was part of a strategic reshaping of the playing staff.
The 12 players they brought in to the first team squad (including three from the club’s under-23s) had an average age of 22.8 years. They were a mix of hardened pros and Premier League youth signings, many on loan.
The 15 who departed were aged 26.2 years on average.
Dennis Cirkin, 19, is one of the youngsters signed from Premier League U23 sides this season
Money plays a key role of course, and Sunderland’s average weekly wage per player is comfortably higher than the League One average at £4,000, compared to around £3,000 across the division.
The on-pitch transformation started last November, with the appointment of Kristjaan Speakman as the club’s sporting director, bringing him into the master planning and then trusting him to do the job.
Kristjaan Speakman has made a big impact at the Stadium of Light since joining in 2020
‘The decision in summer 2020 to appoint a sporting director was the lightbulb moment,’ said Methven, who worked with a recruitment agency to create a long list of potential candidates, before shortlisting Speakman. ‘You appoint the right people and give them the appropriate budget.’
It was Speakman who advised that Lee Johnson as the right man to manage Sunderland and while not the big name some fans may have wanted, the directors were happy to trust his judgement.
‘As owners, the temptation is to get overly involved,’ said Methven. ‘But that would have been foolish. In football, the biggest surprise was not that we had appointed Lee, but that he had agreed to drop down to League One.
So, Derby and its fans have a long road ahead of them, assuming they come through the administration process, and judging by the experience of Sunderland they need to be prepared for three to five years of hard work.
‘I hope and believe that Derby will live to fight another day,’ said Methven. ‘But I think it will be some time before they are the force the club could be and should be.’
‘GRASP THE NETTLE AND APPOINT A FOOTBALL REGULATOR NOW!’
Football is in urgent need of an independent regulator to stop owners gambling clubs’ futures on short term success, according to Charlie Methven.
The Sunderland co-owner – who together with MP Damian Collins publicly called for a regulator over a year ago – believes the financial crisis that engulfed his club in 2018 and Derby County in recent weeks can be catalysts for change, which should have come sooner.
‘If the Government had heeded Damian and my calls for regulation in May 2020 then Derby would not be where they are right now,’ said Methven. ‘We need a regulator.
Tracey Crouch is undertaking a fan-led review of football governance
‘Football has proved itself incapable of self-regulation. It has not grasped the two crucial, connected nettles.
‘One is the financial gap between the Premier League and Championship, and the other is the overspending in the Championship.
‘What we should be trying to achieve is clubs going up and down the football pyramid in a way that does not risk clubs going bust. Given the money in the sport that should be an achievable concept.
‘I hope this situation with Derby is the final wake-up call. We never want to see another club in the position Sunderland were in three years ago and Derby are in now.’
The prospect of independent regulation has never been closer. The government commissioned a ‘fan-led review of football governance’ earlier this year.
Under the direction of Conservative MP, Tracey Crouch, the former sports minister, an expert panel has been taking evidence from clubs, fans and the sport’s authorities.
The panel’s recommendations are expected at the end of October, but interim findings were reported to the Secretary of State for Culture, Media and Sport this summer. One area they highlighted was the need to reform parachute payments.
Methven agrees parachute payments must be addressed as part of a wider financial settlement between the Premier League and the rest, but that there also needs to be controls imposed on spending on players wages.
‘There is no point in getting rid of parachute payments if you do not simultaneously contain expenditure in the Championship because getting rid of parachute payments alone will not stop owners gambling £50 million to get to the Premier League.
Sunderland co-owner Charlie Methven wants a football regulator
‘Dealing with the revenue drop off between the Premier League and Championship has to come with regulation on wage costs relative to revenue that means that clubs’ books are checked in real time, for example quarterly.’
In Leagues One and Two, there are already limits. In League One, clubs can spend a maximum of 60 per cent of their turnover on wages – in League Two, the limit is 55 per cent. But in the Championship, clubs have rejected similar controls and in 2019, Deloitte reported that tier two teams were spending 107 per cent of revenue on wages.
Methven would like to see a system where spending beyond 60 per cent of revenues is only allowed where a club’s ownership agrees to deposit the total cost of recruiting a player and paying for his entire contract into a dedicated bank account, up front.
So, if a contract was worth £5 million per year for three years, the club deposits £15 million.
In this way, the club itself is protected should the owner’s financial circumstances change or that person decides to sell the club during the life of the players’ contract.