Measuring the monetary risk involved when spending in the transfer market.

With the January transfer window entering full swing, it seems the ideal time for our review of the business conducted by clubs in the recent summer transfer window. Within this review, we will analyse the results of our model across the top four European leagues, before considering the most and least efficient clubs and finally the player who commanded the largest fee relative to their value.

For the figures noted below, only transfers commanding a fee above £2m were considered. This was in order to avoid the results from being skewed by free transfers and players being released as well as to minimise outliers where player's do not meet the model's criteria in order to produce a value. All transfer fees were taken from www.transfermarkt.co.uk.

Leagues

According to UEFA, the current top four European leagues are as follows:

  1. La Liga
  2. Premier League
  3. Serie A
  4. Bundesliga

In the 18/19 summer transfer windows, La Liga clubs completed transfers totalling £1,417.96m and produced a variance of £26.03m. Over the same period, Premier League clubs completed transfers worth £1,590.04m. Our model revealed a variance of -£568.45m for these transfers. Serie A clubs completed transfers of the largest cumulative value, totalling £1,612.29m. These transfers returned a variance of -£170.34m. Bundesliga club completed £846.51m worth of transfers, the smallest amount of business in terms of value. We calculated a variance of £13.73m for this sample.

Therefore, La Liga and the Bundesliga were the only leagues that were efficient during the recent summer transfer window. The Premier League was by far the most inefficient league over this period. This factor may go some way to explaing why, despite having a more lucrative TV deal in England, Bundesliga and La Liga sides have had more success in European competition over recent years. In terms of transfer efficiency, these leagues would rank:

  1. La Liga
  2. Bundesliga
  3. Serie A
  4. Premier League

Clubs

Most efficient: Athletic Bilbao

The Basque club completed three transfer over the summer transfer window, the purchases of Ander Capa and Yuri Berchiche and the sale of Kepa Arrizabalaga. These transfers returned a total variance of £62.94m, however, £67.00m of this was contributed by the sale of Kepa. So why may this be?

Simply put, Arrizabalaga doesn't have enough experience at the top level. At the time of his transfer, he had played just once, in a friendly against Costa Rica, for the Spanish national team. In the 17/18 season, Kepa made 31 appearances for Athletic Bilbao. This was just his second season of first team football at the San Mames.

Whilst Kepa's value is sure to increase during his time at Chelsea by featuring in the Champions League and potentially breaking into the Spanish national team, it is unlikely that his valuation will ever match the fee the Blues paid to acquire him. Therefore, we expect Kepa to spend the majority of his career in London.

Least efficient: Juventus

Over the 2018/19 summer transfer window, Juventus completed 12 transfers with a total variance of -£133.52m. The most notable of these transfers were the purchases of Cristiano Ronaldo, Joao Cancelo and Douglas Costa. The purchase of Cristiano Ronaldo will be discussed later in this review and so this section will consider Costa and Cancelo.

Both Costa and Cancelo were purchased for fees of approximately £36m each. Our model valued Douglas Costa at £16.7m and Cancelo at £11.3m. So what makes these values so low in relation to their transfer fees? Neither player has managed to break into their national side. 

At the time of transfer, Cancelo was 24 years old and had made 7 appearances for Portugal. For comparison, his national compatriot Joao Mario had made 40 appearances for Portugal on the same date. Joao Mario is just one year older.

Similarly, Costa was 27 years old when he joined Juventus permanently. By this time, he had made 24 appearances for the Brazillian national team. On this same date, Neymar had made 88 appearances for Brazil, despite being two years younger.

Player

Largest overspend: Cristiano Ronaldo

The player who's transfer fee exceeded their value the most significantly was Cristiano Ronaldo. The first major consideration behind this is that our model does not account for a player's marketability.

Secondly, Ronaldo's market value is drastically reduced due to being 33 years old at the time he joined Juventus. For most players, they would now be some way past their peak. However, Ronaldo is not most players. Lionel Messi and Cristiano Ronaldo have changed what we believe possible for footballers to accomplish and age doesn't appear to be slowing either one of them down.

While Cristiano may be past his best, his performances show he could continue at the very highest level for the next 5 years. If Ronaldo is considered to be in his peak years, he would be valued at £112.50m. When considering Ronaldo's marketability on top of this, the £105.30m paid by Juventus begins to look like a bargain. 

Whilst the purchase of Cristiano Ronaldo contributes the largest overspend that we calculated, it may have also been the best deal of the window when considering these factors.


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