Deadline Day Buying – The changing dynamics of the past 5 years

Deadline Day Buying – The changing dynamics of the past 5 years

Jeremy Smith Blog, Procurement

I wrote a blog about deadline day buying about 5 years ago. This was mostly about how timing plays a key role when it comes to determining the balance of power between buyers and suppliers.  Suppliers will be quick to take advantage of any time related issues facing a buyer. However, by employing effective contingency planning measures and ensuring alternative supplies (players) are available, buyers (clubs) can turn their time constraints into an advantage.

For me, the Premier League has shown that it has learnt over that period and you are now seeing the big clubs like the two Manchester clubs as well as Liverpool and Spurs buying their players well ahead of time for footballing as well as commercial reasons. That said, running down your contract, as Alexis Sanchez has done, also allows suppliers the dominance thanks to the Bosman ruling.

Maintaining a strong position

There are several strategies which a buying party can employ to ensure they do not find themselves in a weak bargaining position. A key element is ensuring the business model is as flexible as possible. When dealing with a selling club an agile strategy should take into effective valuation from both sides, commercial and operational priorities as well as the actual cash flow to make the deal. When it comes to player negotiations clubs can also leverage elements such as contract duration, brand, payment terms and IP to supplement pure financial consideration.

Take Liverpool buying Naby Kieta in the last transfer window. With hindsight, were they more informed than the rest of the market that play prices were going to continue to grow? Did they know that Neymar was going to re-baseline the market before others did and therefore made a fixed price deal for 12 months’ time and what now looks like very good terms? Information asymmetry is key in all strategic sourcing as well as negotiation planning.

United buying Paul Pogba in 2016 for £89m seemed like insanity considering they had let him go for free only a few years ago. What Juventus may not have known was that United had a plan to recoup that outlay almost immediately through a marketing strategy with Adidas around image rights. Again, information asymmetry.

It is essential to carry out contingency planning to avoid delays and compromising options. This includes having alternative suppliers on hand in case of incumbents stalling. This is one of the reasons teams with large financial resources, wary of being exploited in a supplier dominated and regulated (Financial Fair Play) market, are investing in youth development to provide alternative supply options. Spurs are a great example of this having invested in world class training and education facilities, the England national team even use them, which they are now using to attract players such as Lucas Moura, beyond their reputation alone.

Being aware of a supplier’s internal workings will enable a buyer to take advantage of certain situations, including monthly sales targets and production uptime. Key to deliver this is control of information. Those who have the upper hand in terms of knowledge will usually get the better deal. Alexis Sanchez made public his internal contractual workings, used legislation, to his benefit, as he aligned with a club needing his capabilities and able to meet his demands. He used time, of his contract, as a weapon. I think we can all agree he came out of this the winner.

Timing negotiations

The biggest weapon a supplier has, without a burning need for cash, is time. Using time against the other party is always a winning strategy and one the buyer needs to control. We see it in reactive negotiations all the time and deadline day is always a very public window on how not to do buying. If Sky Sports are willing to dedicate a channel to deadline day just to watch the carnage and stress play out in public, imagine what Sky News would do for Financial Year end negotiations! The only winners on deadline day are the players and agents as each club wastes the whole month playing games with each other only to put the time power into the hands of the player and agent who have hours to agree what is usually a higher cost element of the total cost of the contract. Madness. But great to watch!