Some insight on the Trevor Birch rumours,
 from Paul Holmes 

 DON'T FEAR THE REAPER

It is interesting to note just how low key to the future of Everton FC the potential appointment of Trevor Birch has been over the weekend.  If it is confirmed, then it represents perhaps the best signing the Everton Board of Directors could have concluded during the season break.  It does not quite have the glamour factor most fans would wish for but, for those aching for decisive action to attempt to reverse the current financial malaise, it is a good-news story of massive proportions.  As a highly respected insolvency practitioner, he has a formidable reputation.

However, perhaps therein lies the reason why EFC have been so surprisingly coy.  Earlier in the week, embarrassingly offering £8M for Alan Smith, whilst timing the supposed bid in order to be comfortable in the knowledge that his agent had already confirmed hell would have to freeze over for him to choose us over Man Utd, given that it was a done deal.  To then rejoice at the appointment of a corporate rescue team, so soon after, would stretch credibility even by Everton standards.  The word insolvency can be difficult to spin — particularly for a PR department as historically clumsy as Everton's.

By Appointing Trevor Birch, it is not necessarily an announcement that Everton is the new Leeds; the Board have for once identified the problem, moved themselves out of denial, and acted as responsible directors before the situation — and moreover, the majority of their positions become untenable.  However, the positive news is that the Board are finally beginning to recognise that the company is, to all intents, only months away from being considered insolvent, and they are preparing for it in the best way possible.  Moreover, they are addressing the issue in good time.

It is highly unlikely that Trevor Birch can produce an investor for Everton of Roman proportions; there are only so many Oligarchs wishing to escape “calling in” by the state.  Despite Chelsea's debt, they were highly targeted due to being in one of the most expensive real estate areas on the planet and the impressive mixed use of their stadium and complex highlighted their investment worth.  Everton are between £60M and £70M “gross” in debt.  To turn EFC around and effectively start with a clean sheet, providing a moderate fund to a manager, and building an academy would require in the region of £100M. 

There are positives: arguably, for the first time since True Blue Holdings took control of Everton FC Co Ltd, their overall valuation of £30M then is possibly a realistic valuation now.  However, that still requires a potential investor to provide up to £40M to acquire TBH's shares and provide a reasonable transfer fund.  With ~40,000 gates and a sleeping giant of an exploitable brand, that's not outside the realms of possibility... IF a new investor could be assured that the current working overdraft was acceptable and was convinced that the long term debt was manageable.

Before prematurely rejoicing at the removal of Mr Dunford, it should be noted that Trevor Birch is not some imaginative “Saatchi educated” Adam Crozier-style marketeer.  When you appoint an insolvency practitioner as CEO, his principal activity is to attempt to stave off administration.  It's important that this is recognised and as fans we don’t expect too much imagination:

• No increased sales of EFC products in China to a population that on average would have to give their weekly wage to buy a shirt. 
• No overly complicated sponsorship deals. 
• A flat refusal to allow directors to personally gain from any housing developments at Bellefield. 

He has a reputation to protect and is without a doubt the most professional executive EFC will have had at boardroom level in living memory.  He may sign off on the smarter marketing deals but he will not be the one actively chasing them.  If he brings any influence to bear on that side of the business, he may encourage the club to “raise the bar” and not waste time chasing insignificant and irrelevant revenue streams.

His contracts are traditionally short term, very well paid: he is in a win-win situation.  Stave off administration for weeks/months? — Job well done!  But, if it doesn't turn it around?  Well, what could you expect?  Sentiment is not his game.  Courting favour with the fans and selling false hope and new dawns is secondary and not the purpose for the recruitment of his services.  We should all be the happier for that fact.  For once, someone will address and put in place the monetary control and disciplines that have been so evidently lacking for years.

In order to turn the company around, what would be his key objectives?  Firstly an attempt to reschedule the major debt payment to the bondholders.  Whether he can repeat the discount terms he obtained at Leeds remains to be seen; they really did have the gun at the head of the majority of their creditors — EFC are not quite there yet.  It is very unlikely that he would recommend increased borrowing, — that would fly in the face of his principles. 

In order to stabilise the company, he will more than likely recommend asset sales; the fact that we have only one to sell at value that could repair a financial hole is evident.  This could also represent an ideal opportunity for the current directors to avoid blame and suggest that they are fully confident in Birch's abilities and have placed the future direction of the club in his capable hands.  If that requires him having to make unpalatable decisions then, we should all wearily begin to accept the inevitable. 

Birch Out: he sold our Wayne!  Not necessarily, he's turned around more difficult situations...

Paul Holmes
24 May 2004
 

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