Guest article by Wolfgang Holzhäuser, partner at SPORTHEADS, in the kicker Monday edition of 20.04.2020.

The Corona crisis brings it to light: professional soccer - at least some of the clubs - is not crisis-proof. Most recently, kicker reported that 13 of the 36 clubs in the Bundesliga and 2. Liga are at risk of insolvency - and the statements of various club managers also point in this direction. Optimists emphasize that at least two-thirds of the soccer companies are doing well. But pessimists - or rather realists - also know that the majority of the rest often "operate" on the edge of subsistence. The annual licensing - which for legal reasons is based only on liquidity - speaks a different language. As is well known, a crisis always offers an opportunity. And professional soccer clubs should use this opportunity to put their financing on a long-term, and thus more solid and broader basis. The "investor model" is almost ideal for this, because it minimizes dependencies and provides security on a broader basis.

To date, match operations have been financed by the sale of admission fees, advertising revenues, so-called television fees, proceeds from transfers and, to a lesser extent, by the sale of fan merchandise, etc. The revenues are not independent of the sporting results, which makes it difficult to calculate them. Income is not independent of sporting results, which makes it difficult to calculate. For example, relegation from the Bundesliga to the 2nd league normally results in a significant drop in revenues. If, on top of this, the loans taken out to finance match operations are of a short-term nature, this can quickly lead to payment stagnation or even insolvency, which in turn apparently leads many clubs to take out further short-term loans. As examples in the Bundesliga show, even clubs that have played internationally for many years are at risk if qualification is not achieved for several seasons and the cost apparatus continues to run because of the existing contracts with the players. It is also more than a sign of the league's solidarity when the better-off clubs provide funds to help clubs threatened with insolvency. But these are all just the famous drops in the bucket. Deferrals or even waivers of salaries are laudable, but they only help for a short time. Of course, every cost center in the boardrooms of the clubs will also be examined for savings potential.

The current crisis scenario clearly shows how dangerous it is to raise short-term funds alone if supposedly secure financial resources such as TV and sponsorship money are not forthcoming, or are only forthcoming in part. If these are then assigned in advance to banks as security, this very quickly leads to collapse. The current situation should be used to change the core of the financing to a long-term one. Giving up shares in the club to investors or advertising partners is one way of putting the financial structure on a solid footing, provided this complies with the association's regulation that no investor may own more than 49.9 percent (50+1 clause). If one wants to work with one or more investors, clear and reasonable regulations should be agreed upon on the occasion of the negotiations, which guarantee the self-determination of the clubs. For example, a sale to a single investor should not exceed 20 to 30 percent of the shares, otherwise the dependence on that investor would become too great. In addition, a sale of shares to third parties should only be possible with the club's prior consent. A long-term commitment of the funds of at least three, preferably five years would also be a condition, as would a right of first refusal for the club should the investor not extend his commitment at the end of the contract period. Of course, the investor would then have to pay a market rate of interest, which could well be agreed in advance. Giving an investor a position on a supervisory body would certainly also be the right thing to do, but only in proportion to his shares in the club. It should be noted that any kind of participation requires the approval of the general meeting and therefore guarantees that the members' opinions are formed.

Whether the association allows multiple involvement of a club investor within the Bundesliga or the 2nd league would have to be determined separately to prevent the appearance of a possible distortion of competition. The financial involvement of sponsors or the activities of player consulting companies at several clubs could also be discussed. But that's another topic.

It is time to put aside the fear of investors and look for ways to better prepare for the future. The time after Corona should be used to tackle other pressing problems in professional soccer. The ever-widening gap in professional soccer is also a reason for the financial problems of the smaller clubs. And the horrendous increase in salaries and transfer fees, which is no longer comprehensible to anyone, must also be resolved.

The repeatedly mentioned introduction of a salary cap or a system for distributing talent throughout the league (draft system) should be seriously examined for their feasibility - in a European context, of course. The time has come to act.