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A Twitter user has created an incredible thread to spotlight how Arsenal managed to splash out £140m this summer.
Gunners fans were furious after initial reports suggested that the club would only have £40m to spend on new signings.
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But Arsenal smashed their club-record fee to snap up Nicolas Pepe and added the likes of Dani Ceballos, William Saliba, Kieran Tierney and David Luiz to their spending spree.
Twitter user Swiss Ramble has put meticulous research into explaining how Arsenal splashed out over £100m in the summer transfer window.
Earlier this year it was widely reported that Arsenal would only have a £45m transfer budget this summer, after failing to qualify for the Champions League, but the club has actually splashed out well over £100m. This thread explains how this was possible #AFC
- Swiss Ramble (@SwissRamble) 13 August 2019
In fairness to the club, they never agreed with the low budget figure. #AFC managing director Vinai Venkatesham explained, "The number never came from us. We never ever, ever talk about how much money we have to spend, because that's the least helpful thing you can do."
- Swiss Ramble (@SwissRamble) 13 August 2019
First, let's take a look at #AFC player purchases of £143m (including £8m add-ons). This comprises club record acquisition Nicolas Pépé £72m plus William Saliba £27m, Kieran Tierney £25m, David Luiz £8m, Gabriel Martinelli £6m and Dani Ceballos (loan fee) £5m. pic.twitter.com/7E6Xm6y3al
- Swiss Ramble (@SwissRamble) 13 August 2019
Similarly, #AFC had player sales of £64m (including £7m add-ons), mainly Alex Iwobi £34m, Krystian Bielik £10m, Laurent Koscielny £5m and David Ospina £3m. Also picked up useful money for selling some Academy products plus a £4m sell-on for Bennacer's move from Empoli to Milan. pic.twitter.com/K5tMlVNyMy
- Swiss Ramble (@SwissRamble) 13 August 2019
Note: the figures used should only be considered as indicative, because various different numbers have been reported in the press for transfer fees and wages (partly due to exchange rates used), but they should be sufficiently accurate to help illustrate the argument.
- Swiss Ramble (@SwissRamble) 13 August 2019
The question I am most often asked is how much a club can spend, but this is almost impossible to answer, given the numerous different definitions of a "transfer budget". Here, we shall look at 10 (ten) possible definitions for #AFC to show that there is rarely a single figure.
- Swiss Ramble (@SwissRamble) 13 August 2019
Then we have the infamous net spend, i.e. the cost of player purchases less proceeds from player sales. On this basis, #AFC spent £78-79m, depending on whether add-ons are included or excluded. pic.twitter.com/1fJ0c2rusl
- Swiss Ramble (@SwissRamble) 13 August 2019
However, what has become increasingly familiar to supporters this summer is the use of stage payments instead of paying the whole transfer fee upfront. Based on media reports and a few assumptions, we can estimate that #AFC cash outlay this summer was only £46m. pic.twitter.com/oZAtumwcD8
- Swiss Ramble (@SwissRamble) 13 August 2019
On the other hand, #AFC would also not have received the entire £64m due from player sales this summer. Again, we can estimate the cash receipts at £23.5m. pic.twitter.com/IsXQAlunbg
- Swiss Ramble (@SwissRamble) 13 August 2019
So, from a cash payment perspective, #AFC have spent £46m gross and £22.5m net this summer. It will not have gone unnoticed that the gross cash outlay is very much in line with the alleged £45m budget. More importantly, spreading payments allowed the club to buy Pépé. pic.twitter.com/OEr4uNxOyl
- Swiss Ramble (@SwissRamble) 13 August 2019
To be clear, paying transfers in instalments is nothing new at football clubs. Indeed, as at the end of the 2017/18 season, Premier League clubs had around £1.5 bln of transfer debt, including £100m at #AFC (though #MUFC led the way with £258m). pic.twitter.com/FZqVHRW4w2
- Swiss Ramble (@SwissRamble) 13 August 2019
Often the selling club will still get (most of) its cash immediately, as they sell the debt to a third party financing company for an agreed fee. Obviously, this commission then leaves "the game", but the arrangement still works well for all parties.
- Swiss Ramble (@SwissRamble) 13 August 2019
Clearly, a player's cost is not limited to his transfer fee, but also includes his wages, so another way of looking at the budget is to combine these two factors. As Josh Kroenke said, "#AFC have a Champions League wage bill on a Europa League budget."
- Swiss Ramble (@SwissRamble) 13 August 2019
My estimate is that #AFC's player purchases this summer have added around £500k a week to the wage bill, which would work out to £26m a year. Based on reported contracts (all 5 years except 2 years for Luiz and 1 year for Ceballos), the total commitment would be £93m. pic.twitter.com/883QM99SfF
- Swiss Ramble (@SwissRamble) 13 August 2019
However, I reckon that around £700k has also been taken off the weekly wage bill, i.e. £38m a year. Even though no fees were received for Ramsey, Welbeck, Cech and Lichtsteiner, their departures cut wages by around £400k a week, i.e. £21m a year. pic.twitter.com/QQs0uVMlwr
- Swiss Ramble (@SwissRamble) 13 August 2019
So combining transfer fees and wages, #AFC will spend £71.7m in the first year (transfers £46m + wages £25.7m) gross, but only £10.5m net of player sales (£22.5m transfers offset by £12m wage reduction). pic.twitter.com/7hFc21VgFw
- Swiss Ramble (@SwissRamble) 13 August 2019
If we look at transfer fees and wages in terms of total commitment (i.e. over the length of the players' contracts), #AFC will pay a cool £236m (transfers £143m plus £93m wages), though this would be offset by player sales (including wages coming off the payroll). pic.twitter.com/PEC9CxbSh9
- Swiss Ramble (@SwissRamble) 13 August 2019
Just to make things more complicated, the player trading accounting impact is again different. The key point here is that when a player is purchased costs are spread over a few years, but any profit made from selling players is immediately booked to the accounts.
- Swiss Ramble (@SwissRamble) 13 August 2019
Basically, football clubs consider players to be assets, so do not fully expense transfer fees in the year a player is purchased, but instead write-off the cost evenly over the length of the player's contract via player amortisation (note: this is not the same as stage payments).
- Swiss Ramble (@SwissRamble) 13 August 2019
Pépé was purchased for £72m on a 5-year contract, so the annual amortisation in the accounts would be £14.4m, i.e. £72m divided by 5 years. This means that his book value reduces by £14.4m a year, so after three years his value in the accounts will be reduced by £43m to £29m. pic.twitter.com/kJ6QIMLMfT
- Swiss Ramble (@SwissRamble) 13 August 2019
If Pépé were to be sold at this point for £100m, the profit on player sales from an accounting perspective would be a hefty £71m (i.e. sales proceeds of £100m less remaining book value of £29m). pic.twitter.com/p8RYHR7MPm
- Swiss Ramble (@SwissRamble) 13 August 2019
Another way of looking at this is that the cash profit is £28m (sales proceeds of £100m less £72m purchase price), but we then add back £43m of player amortisation already booked to the accounts to give the £71m accounting profit. pic.twitter.com/UNov0r6a06
- Swiss Ramble (@SwissRamble) 13 August 2019
So the net result of #AFC transfer activity this summer in the accounts is a relatively small cost increase of £9m, with player purchases growing the cost base by £54m, largely offset by £45m reduction from sales. This will be more than offset by £57m profit on player sales. pic.twitter.com/MlgeZ2Vtfz
- Swiss Ramble (@SwissRamble) 13 August 2019
That gives us our 10th definition of "transfer budget", namely the impact on the club's accounts. For #AFC player purchases this would be £54m (player amortisation £28m plus wages £26m). pic.twitter.com/6YMtksSeqB
- Swiss Ramble (@SwissRamble) 13 August 2019
So, there we have it, 10 possible definitions of a club's transfer budget (and there are even more). The point here is that they are all valid and relevant in the appropriate circumstances, but this does underline that caution should be expressed whenever a figure is quoted. pic.twitter.com/dGZbVIkdcf
- Swiss Ramble (@SwissRamble) 13 August 2019
Which one is the most meaningful? Well, the one that is closest to #AFC reported £45m transfer budget is the £46m cash payment, though that could be just a coincidence. pic.twitter.com/9aodo8WOsh
- Swiss Ramble (@SwissRamble) 13 August 2019
Josh Kroenke had suggested that fans "be excited" about this transfer window and the club has delivered with some astute signings, effectively making the funds available go a lot further than anticipated.
- Swiss Ramble (@SwissRamble) 13 August 2019
Part of the fancy financial footwork has simply been a willingness from the #AFC board to be bolder with its cash balances. In the past, it looked like the club wanted to hold enough cash to cover all future obligations, but that always looked to be overly prudent.
- Swiss Ramble (@SwissRamble) 13 August 2019
In any case, this has indeed been the most exciting transfer window at #AFC for many years, partly due to the vagaries of player trading accounting. As the late, great Sid Waddell once memorably said: "There's only one word for that: magic darts!"
- Swiss Ramble (@SwissRamble) 13 August 2019
Arsenal's transfer window has handed club boss Unai Emery a major boost in securing a top-four finish in the Premier League next season.
The Gunners kicked off their campaign with a 1-0 win over Newcastle, with Pierre-Emerick Aubameyang scoring the winner in the second half.
The Arsenal manager has admitted that his side will continue to do business in the transfer window, despite being unable to sign any new players.
According to Emery, the Gunners could offload some more players before the transfer window closes for other European clubs.
"In the next 20-25 days, some players will leave. It's the reason, I want to close our squad clearly," he said.
Emery's men will resume their Premier League campaign on Saturday when they host Burnley at the Emirates.
Will Arsenal finish in the top four this season?
Let us know in the comments.
Featured Image Credit: PA
Topics: Football News, gunners, william saliba, Football, david luiz, Kieran Tierney, Premier League, Nicolas Pépé, Arsenal, Twitter