Some knights, a vampire squid, one acronym and a chunk of debt

Hostile takeovers, excessive leverage, boom and bust, board room wrangling and exorbitant pay packets...might sound like just another day in the financial markets but it's also the perilous state of English football at the moment. The business of the 'beautiful game' is now played out right across the front, middle and back pages. Just a few years ago, when things were ostensibly all swell in the market, there used to be a rough order to things – politics and social affairs on the front, business in the middle and sport on the back. Now, things are a little more blurry.

The fate of Portsmouth FC is a cautionary tale in just the same way as Bear Stearns, Lehman Brothers, RBS or the other financial institutions which imploded. They were debt laden, engaged in aggressive M&A activity (read transfer policy), remunerated their stars heavily and crested the wave of cheap credit. They did rather well on that strategy for a time – much like RBS (remember when Sir Fred was the toast of the town) – winning the FA Cup less than two years ago. However, if something seems too good to be true; it often is exactly that. So, sure enough, Portsmouth duly became the first Premiership club to fall into administration on 26 February.

Now, in the red corner, we have Manchester United – the most successful English club of recent years and a footballing powerhouse with a fan base that straddles the globe. Their debt levels have attracted attention ever since the Glazers took over the club in a highly leveraged deal in 2005. However, the various restructurings of late and the effective 'Green-and-Gold' protest movement has galvanised supporter animosity and the Glazers have really been feeling the heat. This has arguably come to a head with the surge of interest which the Red Knights consortium has generated.

In keeping with the front-page theme, The Observer led with a story proclaiming how Alex Ferguson was "backing bid to buy United", according to unnamed City financiers. Whether the Red Knights can really wrest control away from the Glazers is unsure but, like all good takeover struggles, the clash of personalities and ideologies is what we all love to see. The embattled Glazers are certainly the pantomime villains in this production of Twelfth Night...perhaps that should read as Twelfth Knight? On that note, enter stage left those intrepid Knights, led by Goldman Sachs' Jim O'Neill, as he rides proudly across on a giant vampire squid. [As an aside, has anyone's financial career and industry standing been so elevated by the simple use of a four lettered acronym – Bric, really?]

As The Sunday Times highlighted, Mr O'Neill is an unlikely hero – a Goldman Sachs banker and the Old Trafford faithful make unlikely bed fellows. However, the Glazers are public enemy number one and the Red Knights' ideology appears infinitely more palatable to the fans. Indeed, the notion of the supporter-owned club (a la Barcelona, Real Madrid and several German clubs) is gaining credence all around. "In an ideal world all clubs would be controlled and run by their supporters according to democratic principles," Uefa said in Vision Europe, a document setting out the direction and development of football over the next decade. In fact, a Uefa report last month revealed that 18 of the Premier League’s 20 clubs owe more combined than the rest of Europe’s top divisions put together. The debt for the 2008 season stood at £3.4 billion, 56% of the European club total.

All this makes for a compelling financial story. Who knows, perhaps one day football and business will become so closely aligned that the likes of Manchester United are 'too big to fail' and the Ronaldo's and Kaka's of the world are packaged into complex structured products, securitised and traded in tranches with inferior players, eventually leading to the dislocation of the global economy. Perhaps a government bail-out of a club will take place, leading to the creation of a 'good' club and 'bad' club – thereby classifying John Terry and Ashley Cole as 'toxic assets.' Actually, maybe not.

JS