When is the optimal time to sell an asset at Luton Town?
There was insightful content as to how the club conduct themselves in contract negotiations in David Wilkinsons' programme notes in the Luton Town vs Cardiff City matchday programme notes. This was in relation to criticism amongst sections of the Hatters fan base on social media regarding the fee that James Bree was sold to Southampton for, and the looming contract expiries, with Tom Lockyer, Luke Berry, Dan Potts, Gabe Osho and Sonny Bradley thought to be out of contract at the end of the season. With both James Bree and Harry Cornick sold with 6 months remaining on their contracts, the general feeling was that we didn't get full value from either of their departures, which is a fair issue to complain about, and I'm certain the board of directors are also disappointed in the full asset value not being realised, however, from rumoured fees, it can be safely said that the fees brought in were very good business for the club. In this article, I will discuss when is the optimal time to sell an asset at the club for maximum return on investment, if they don't agree to a contract extension and realistically who we could expect to see leaving in the summer.
Below are excerpts from David Wilkinsons' programme notes.
“Firstly, we have one of the lowest budgets in the Championship.
“There are many reasons for this, which include the capacity and inefficiency of Kenilworth Road, our unwillingness to spend money we don’t have and/or borrow to put the future of the club at risk.
“We are, and I suggest always will be, a selling club, which is why we have continued to invest heavily in the academy and more recently development football."
“The inevitable consequence of this is that if players become perceived to be good enough for the Premier League, or even richer Championship clubs benefiting from parachute payments, the financial gulf is so great that we cannot meet it."
“When we sign a player, we are incurring a 100% liability for the length of his contract. So, say for example, we sign a player on a three-year contract at £5,000 a week, if you include add-ons, bonuses, national insurance, etc, the commitment will be well over £1m.
“There was so much uncertainty as to what the future might hold during the pandemic and lockdown that it would have been irresponsible madness to enter into long-term commitments.
“However, we are now getting back to some sort of normality.
“Contracts are negotiated when players join the club with agreement from the player, his agent and the club, and in normal circumstances if all parties agree, an extension will be included on revised terms during its term.
“It goes without saying that if the player or the club do not want an extension it won't happen" “The only way the club can get the player to agree to extend is to meet their demands, which may not be feasible or sensible.
“Our philosophy depends upon scouting and coaching efforts being able to find players with potential and improve them to increase their value, and should we not be able to satisfy their ambitions, to allow them to move on.
“This means that players know that we will not stand in their way should they attract interest from a higher level, so to some extent we are a stepping stone.
“We would rather have the ability to choose who leaves us and who doesn't, but until we have a more sustainable income, we are likely to have to continue in the same vein.
“Our approach has now changed in this regard, but obviously gets more difficult the higher we go.
“If an offer comes from a Premier League club there is virtually no chance of competing, it's just an economic fact of life.”
From these notes, one can assume that as standard we are currently offering 3 year contracts, with certain players agreeing to optional extensions. It's important to realise the importance of the 3 year contracts as discussed by the Chairman, as the financial obligations of longer contracts can constrain the club in the event of an unexpected relegation or another catastrophic world affecting event. In terms of football finances, you can always loosen the belt, but you can't tighten it back up when it's already snug around your waist. I agree with David Wilkinson likening the club to a stepping stone, as in reality it's a short career for footballers, and all clubs are stepping stones, barring those at the very top; Real Madrid, Barcelona, Manchester City, Manchester United and now Arsenal (following on from Caceido's come and get me plea). For the expiry discussions, I will assume there are no optional extensions for the players discussed below. For the purposes of discussing contracts, we should look at them in terms of transfer windows, therefore a player signing a 3 year contract will have 4 windows where they can potentially leave (excluding the window they signed and window of expiry). Having already discussed the contracts expiring this summer above (I hope we keep Lockyer), we can look at which assets we can assume will be expiring in summer of 23/24, which will most likely be those who signed for us before the 21/22 season: Elijah Adebayo was signed in the 20/21 January transfer window from Walsall, one can assume/hope it was a 3.5 year contract as it was a January signing, also because there were no rumblings about him in the winter window, and Nathan Jones would have certainly been after him. He will play in the Premier League. Allan Campbell is a huge asset for the club and simply gets better every game. He is most certainly cut out for the Premier League. Reece Burke on his day is not only the finest Centre back at our club, but one of the finest in the Championship. He was highly thought of at the West Ham academy and transferred to Hull for big money, it's likely that he will be back in the Premier League, with us, or another club. Fred Onyedinma is a rare talent as Rob Edwards said, if he can get over his persistent niggles, there is a fantastic talent there, and therefore an asset to the club that will be of interest to other Championship clubs. Also likely to be expiring are Carlos Mendes Gomes, Admiral Muskwe, Amari'i Bell and Elliot Thorpe. As I said above, some of these players might have extensions, but I wouldn't assume anything. When is the optimal time to sell these assets? Most likely during the Summer (if they don't have extension clauses), when they have 12 months left and 2 transfer windows to protect the value. The Summer window is ideal for doing sensible business, whereas the Winter window is for panic buying and being strong armed by either bigger budget clubs or your own asset, we've seen both this window. For Luton Town to adjust to the Brentford model of buying low, selling high, we are very much on the right path, signing a player of James Brees' quality so early into our journey in the Championship was a bump in the road. However, we now have other juicy assets that are under contract and will surely be on the radar of clubs in the Premier League. In particular, both Carlton Morris and Alfie Doughty are two assets that are well protected by their contracts (likely running till summer 24/25) and should Luton finish amongst the playoffs again this season, like with Brentford (and their three subsequent playoff finishes, the last of which finishing with promotion via the playoffs), our assets will be attracting a lot of attention. After another strong finish (extrapolating how the first 60% of the season has gone), there will many interested parties in the players mentioned above with 12 months remaining on their deals in the summer, and we will realise their full values (even moreso if they have an extension clause - bonus!). Regarding the high performers like Alfie Doughty and Carlton Morris, it will take very big money to move them on this summer, but as long as they are sold prior to 12 months remaining on their contract, we should yield a great return. I know it's easy to get frustrated as a fan, but trust in the board of directors, they know what they are doing, and most importantly they are die hard fans too!