Ever hear the one about the racehorse that kickstarted one of the most consequential LBOs of all time?

The horse, Rock of Gibraltar, was co-owned by Sue Magnier, wife of Irish billionaire John Magnier, and Sir Alex Ferguson, legendary manager of Manchester United Football Club. ‘The Rock’ ran in the red-and-white colors of Manchester United and, in 2002, became the first horse in the Northern Hemisphere to win seven consecutive Group 1 races.

But it wasn’t all trophies and champagne. Turns out the joint ownership agreement was, let’s say … informal. Ferguson thought he owned a share of the horse’s stud operations, estimated at £200 million, but Magnier believed Ferguson only had rights to prize money. 

The disagreement was a problem because John Magnier and his partner, JP McManus, also owned 28.89% of Manchester United, the club’s largest shareholders. Meanwhile, Ferguson was the spiritual owner and irreplaceable face of the club, with the ironclad loyalty of its players and supporters. 

A very public, very ugly, legal battle followed. Magnier and McManus pressured the Manchester United board, even threatening legal action against the club itself. 

The racehorse dispute eventually settled out of court. Terms weren’t disclosed, but Ferguson’s payment is estimated at around £2.5 million.

Fourteen months later, still angry over the lawsuit, Magnier and McManus sold their stake in the club to US real estate magnate Malcolm Glazer. That triggered a full take-private, resulting in Manchester United delisting from the London Stock Exchange. The Glazer family soon owned all of Manchester United at a valuation of £790 million.

At the time, the Glazers’ takeover was seen as the sideshow in a story about a fallout over a racehorse. 

But it soon became the main act, as it began 20+ years (and counting) of control over Manchester United, characterized by underinvestment and the decline of a sporting institution, to fund an unfit capital structure.

How they pulled it off, and what it cost a club that ranks among the most valuable and scarcest assets in the world of sport, is where our story begins. 

The Rock of Gibraltar didn’t debut as a ribbon-winning champion. 

There's a first race, usually unremarkable, long before anyone's talking win streaks or stud rights… and before any of it, the stable work. Unglamorous, invisible, non-negotiable.

Most finance teams are at that point with AI. Starting to do some cool things, but not yet yielding real meaningful benefits. And not really influencing how the business performs.

Summation gets you to the gate. Hand off the work that’s eating your team’s week (reporting, reconciliations, ad hoc pulls nobody wants) and let it run on its own, traced back to source every time.

That's the groundwork. Then their AI Analyst goes to work on the questions that actually move the business.

PS - This week’s analysis of the financials of Manchester United is powered by Summation. You can click on any chart in this post to see the verification in action.

Last week I told you I’m taking a long vacation, and during August will be leaving you in the capable hands of Jason Hershman - my friend and a specialist CFO in the sports business.

He’s going to be taking you through a four-part forensic breakdown of one of the most controversial balance sheets in sports: Manchester United Football Club. I'll be posing the tough questions to Jason, while doing my best to overcome a hopeless emotional bias as a lifelong Manchester United fan.

And this week, Jason will be digging into the complex capital structure of Manchester United, and what CFOs can learn from it … whether you’re a sports fan or not.

So, let’s start with the obvious one.

But, before we kick off…

This is not investment advice. We may have investments in companies that are discussed in this post. And you might too if you own index funds! This post is for information and entertainment purposes only. Any assumptions made are our own.

Jason, the Sports CFO: Because you don’t ‘control’ anything that matters.

Revenue depends on winning, and winning depends on heavy investment, eleven players, and luck. Miss out on qualification for the Champions League and lose tens of millions in broadcast income. And underperform for long enough, and that snowballs into weaker commercial income.

United finished 15th two seasons ago and found out. (SCFO: “yes, a modern f*cking tragedy.”) Sports is the only industry in which a hamstring injury can blow a hole in the forecast.

Costs are worse. No salary cap, no draft, so player wages are an open auction, and some of the rival bidders are Gulf states with bottomless budgets.

And then there are transfer fees paid to buy out players’ contracts. Top clubs spend hundreds of millions on transfer each year, which is an enormous share of revenue (Manchester United spent 35% in 2025).

The margin just never shows up.

Then the customers are the fans. They never leave, which sounds like the perfect business until you realize the club is theirs and you (the legal owner) are just a temporary custodian. Run it for profit and you're a villain. 

And when you want out, a big club is a ten-figure check with maybe two dozen qualified buyers on earth. Sales take years. Sellers anchor to multiples nobody has ever paid. Jim Ratcliffe, one of Britain's richest men, bought a 29% minority stake of United in 2024 and currently sits on a $500 million paper loss.

So revenue is volatile, costs are uncontrollable and spiky, customers resent profit, the asset barely trades… but my goodness, would I love to own a piece of one someday.

Jason: Because it was clean. No debt since 1931, and it was the most profitable club in the world. Malcolm Glazer's “genius” was realizing the club was solvent enough to fund the debt used to buy it. Given his 10 years with the Tampa Bay Buccaneers, the Glazers knew there was significant opportunity to increase the top-half of the P&L.

But like any business, the balance sheet would ultimately catch up. To start, the Glazer’s loaded £564 million of debt onto Manchester United with annual interest running at £74 million. Some of that was the nastiest kind, payment in kind debt that accumulates instead of getting paid. 

Buying a company with debt sets a floor. Interest becomes an annual fixed charge, so income above it is investable, and income below it means sacrificing something to feed the debt.

More than twenty years later, the club is still crippled with debt. And the damage has shown up on the playing field. 

You can see Glazer’s investment thesis play out in these graphs. United reports an adjusted EBITDA number, but this metric excludes the very real cost of player registrations. Account for the cost of fielding a football team, and performance drops below the floor set by the capital structure. 

In an odd way, it looks like the debt is most manageable during the years of United’s worst on-field performance. But let us unpack this a little more. What’s not shown is that the debt really hindered the squad from keeping up with its competitors as they relied on some good fortune and past success to stay “above the line.”

Looking off the pitch, and purely from a financial lens every analyst I know would reach the same conclusion: the company should not have survived.

To understand the impact the debt had on the team, we have to first compare it to what life was like before the LBO.

Start where the glory was. In 1999, Manchester United became the first English Premier League (EPL) team to complete the treble of the three most valuable trophies in one season. (SCFO: “Hell yeah we did… I remember that night like it was yesterday.") And they did it as the rarest of things in football: a genuinely well-financed business. The club was publicly listed, consistently profitable, and debt free. Revenue came in and there was real profit backed by real cash.

Every pound generated went to the squad, stadium, or shareholders, in whatever mix the board chose. (SCFO: “And while the club was still publicly listed then, the shareholders were patient. Many were held by fans who bought at the 1991 IPO - including my Grandfather and Uncle.”) 

The standings showed what that financial freedom bought. Three more titles in the six seasons after the treble, and never a finish below third. The most successful team in England was also the most conservatively financed.

But once you introduce debt into a business, you no longer have such freedom. You have lenders and covenants that you have to service.

It’s not always a bad thing. An LBO can be a perfectly sensible way to buy a boring, predictable business. However, the model rests on one assumption: a reliable floor of consistent and durable cashflows. 

Unfortunately, the cashflows of a football club are just not structurally built that way. Income rises and falls on results, with no safety net like in American sports. 

The Glazers were able to get leverage at a time when the team was consistently winning every year. They failed to realize (SCFO: “or care”) that debt could hurt performance, making it harder to service the debt and stay competitive. The downward cycle began.

The structure of the interest made the whole thing even worse and exponentially more risky. Interest on the kind of debt the Glazers loaded onto the club can be structured one of two ways:

In fact, that accumulated PIK interest got so high the club was no longer able to stay above its debt floor after adjusting for the amortization of player transfer fees. Around this time, the Glazers bought some of the PIK debt themselves, purchasing £23 million through a subsidiary of their ownership vehicle in FY’09. We could speculate whether they were chasing that sweet 14.25% yield or if they were buying an early seat at the table for a restructuring. 

(SCFO: “Either way, buying their own PIK debt was a savvy financial move at that specific point in time, showing they certainly know their stuff as financial engineers. And that’s the only nice thing you’ll hear me say about them.”)

Some may view the financials and suggest this led to one of the most consequential moves in club history, both on and off the field: The 2009 sale of Cristiano Ronaldo (yes, that one) for a world record £80 million fee. 

This fee was 73% of the cumulative cash generated by United from the LBO through FY’09, but alas, selling Cristiano Ronaldo is not a sustainable source of free cash flow. Eventually, the Glazers had to pay off the PIK debt themselves, making an additional £249 million contribution in FY’11 to clear the original £138 million principal plus £111 million in rolled-up PIK interest.  

(SCFO: They sold my boy, just to pay down a PIK note 😭. Sure, he wanted to go to Real Madrid, but he wasn’t properly replaced.)

By 2010, even as net debt ballooned past six times EBITDA, a level where most lenders panic, things still worked… just about.

In 2010, the club refinanced with a £500m high yield bond which helped extend debt duration and reduce interest cost.

In 2012, the club listed its shares in New York. Equity this time, not debt. But the money raised didn’t do anything to relieve the debt. Half of the IPO was a secondary from the Glazers, allowing them to realize $110 million. The IPO fees were borne by United and ~£70m in new capital was brought in from the public. A dual-class share structure meant the Glazers gave up almost no control, with public investors in FY’13 holding 10% of the economics but only 1% of the vote.

And meanwhile, on field performance was still robust. United won the title in Ferguson's final season before retirement, doing it while being dramatically outspent: in his last five title-winning seasons, from FY’08 to FY’13, United invested £93 million in net player registrations while rival Manchester City invested £551 million. A sixth of the budget. 

Put plainly: the interest bill was eating money that should have gone into the squad, and one man's managerial brilliance, and a legendary but aging, playing squad was covering the gap. 

SCFO: “That chart says it all. The LBO was built on presumption of the gravity defying performance of the Ferguson era…”

Jason: Ferguson as manager, meant winning. Winning meant more revenue. More revenue meant more income left over after interest payments. More money means better, more expensive players, which means… more winning. 

The debt was loaded onto that flywheel in 2005 on the assumption that it would spin forever. Remove Ferguson and the whole chain started running backward: less winning, less revenue, less left over after interest, less to spend on players, less winning. But the interest was still due.

The same bill that felt manageable at the top of the standings becomes crushing in mid-table. Scaling squad cost by revenue, we can observe the end of the Ferguson era doing “more with less.”

As the years went on post-Ferguson, United’s lower squad cost as a percentage of revenue caused it to consistently fall below Manchester City, Chelsea, and Arsenal. (SCFO: “And even… some other team from the North West who play in red, I forget their name.”) The debt kept them from being able to match competitors in spending, which hurt on pitch performance.

One thing kept the loop from tightening into a spiral: luck. Had interest rates stayed at 2005 levels through the on-field collapse, this story might have ended in restructuring. But, instead, lower base rates boosted their refinancing for years.

Low interest rates have helped the Glazers repeatedly. United refinanced  in FY’15, and again in FY’21, both in the halcyon days of ZIRP, pushing maturities out and grinding the coupon down… The FY’15 refinancing laid bare the team’s capital allocation priorities. Replacing 8.375% debt with 3.79% debt caused cash interest to drop from -£43 million in FY’15 to -£13 million in FY’16. 

Jason: With the tailwind of lower rates, did United pay down debt, renovate Old Trafford, or strengthen the team? No. The Glazers first priority was to pay a dividend, £16 million of which went directly to the Glazers.

The machine reversed when the free-money decade ended.  As rates normalized, the market repriced United's loans like everyone else's when the club returned to debt markets. The most recent refinancing that closed this June pushes the final bill out to 2031, and per our working notes, it carries meaningfully more annual interest than the paper it replaced. 

In addition to rates coming up over this period, through extended player contract terms and seller financing, transfer fees payable have reached an all-time high relative to the player registration intangible's total value.

Essentially, United is promising to pay more and more tomorrow for access to the player today. Transfer fees payable are around 2x of FY’26 EBITDA on top of the 4.1x of gross debt following the recent refinancing. FY’25’s current £242 million in transfer fees payable is a big liquidity drag on a club which only generated £28 million in FCF before player registration payments for the year.

SCFO: “Wow. This phenomenon of deferring transfer fees has grown quickly. I know some clubs are also borrowing secured against future transfer receivables too. For teams doing both, that really is burning the candle at both ends.”)

In the 2024-25 season, the decline bottomed out at a 15th-place finish, the club's worst of the modern era. (SCFO: “Bro, not just the modern era, worst of my entire lifetime… and I’m not young…”)

That, combined with a new minority owner, triggered a new strategy. More disciplined player wages and shrewd transfers helped drive last season's recovery to 3rd place, creating more on-pitch optimism than the club had seen in a long time…

Whether that recovery is durable is a question for Parts two and three of the series. 

(SCFO: “I was in the crowd for the 3-2 win vs Liverpool (ah yes… that’s their name) in May. In the moment it felt like the future was a little brighter, but a few months on it's clear from the summer transfer activity that money is extremely tight at the club. For now, Manchester United won’t be in the market for the most expensive talent. Maybe not a bad thing for the long term.”)

Jason: Since 2005, roughly £828 million has left the club in interest, with another £128 million paid to the family as dividends. Throw in the fees and the total clears a billion pounds, out of a club that started the era debt-free. 

It works like a private tax on the business, one that rivals like City, Arsenal and Liverpool never had to pay. Every serious rival spent the era with an owner putting money in. United spent it with an owner taking money out. For every £1 spent on players, United spent 63p paying for the Glazers and their ownership structure.

SCFO: “We could have bought Haaland, Bellingham, kept Old Trafford beautiful, kept season tickets affordable, and had plenty of change leftover with that money.”

Secret CFO: Every Manchester United fan knows what a disaster this 20 year+ capital structure has been for the club.

While many rival owners were funding better squads, stadiums, and training facilities, United had the opposite problem: an expensive financial structure that had to be fed before anything else. And eventually, as the debt bit in, there was not enough to go around.

Putting my significant emotional biases to one side, I need to try and find some learnings for CFOs here.

The one that stands out is about matching capital structure to the business model. The volatile cashflows of European football clubs are unfit for such an aggressive LBO structure. It’s a miracle the Glazers didn’t lose control of the club to lenders in those early years. Without selling Cristiano Ronaldo, and the good fortune of ZIRP, they likely would have.

But by surviving through that (for which I guess as a CFO I have to credit them through gritted teeth), this has presumably turned into a glorious investment for them, in terms of the IRR on their equity investment... albeit an illiquid one. Part four will explore this further.

It’s also clear that despite a new, more financially prudent approach, the club is struggling more than ever with the total weight of debt (and deferred transfer fees), especially with higher interest rates.

Which leads to the next question: How exactly does the P&L of a soccer club work, and how closely are financial performance and on-field performance really linked? And what can CFOs learn from it all?

We’ll ask Jason that in next week’s Part two of this series.

And, in the meantime, if I ever see that f-ing horse…

This week’s analysis of all things Manchester United is powered by Summation. You can click on any chart in this post to see the verification in action.

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