Football player valuation: How teams operate in transfer market

Two deals between Premier League clubs have left fans wondering what represents player value in the market these days. Manchester City paid Liverpool £49 million for Raheem Sterling while Liverpool spent £32.5 million of that money on Christian Benteke from Aston Villa. Both selling clubs reached the point at which they could no longer say no. But how they reached to that specific number is shrouded in the mystery.

For any transfer to go through, it needs the agreement of the club’s holy trinity: the chief executive, the sporting director and the coach. Marrying the needs of the playing side with financial concerns is the primary objective, but many other factors come into play. These include:

Position

Goalkeepers remain under-valued in the transfer market. This summer in particular, where the futures of Iker Casillas, David de Gea, Hugo Lloris and Victor Valdes have been discussed, the position is still underrated.

Peter Cech cost Arsenal £9 million from Chelsea and, at the age of 33, could still have another five years playing at an elite level. If he saves 12-15 points per season, as John Terry suggested he could before the deal went through, that surely represents great business for the Arsenal.

Scoring goals remain the biggest and most obvious driver of price-stopping them is still seen as less valuable.

Age

‘Sell-on value’ is a buzz-phrase when any club signs a young player.

“It’s time to take that risk on him because he’ll have sell-on value in a few years,” say the fans. But that’s not always the case. Ask Daniel Levy, the Tottenham Hotspur chairman, how Roberto Soldado’s sell-on value is looking two poor years after he cost £26 million. There is actually not that much difference in players’ value if they are 19 or 25.

Given that peak age is between 24 and 28, it’s only once players reach that upper age that their price starts to depreciate. A 25-year-old in his peak years will fetch just as much as a 20-year-old whose best years are clearly ahead of him. Buying young is more of a risk: of injuries, of potential unfulfilled, of talent wasted, of riches denting ambition.

Manchester City has a team with only one player aged 24 (Eliaquim Mangala), so it’s clear that it is in the market for young players. So that’s why you could add another £5 million to the fee for Sterling, age 20, or £10 million to the asking price for Kevin de Bruyne, age 24.

Nationality

Due to the home grown quota rule, which states that eight of 25 players in every Premier League squad be home grown, there is a premium on signing English players. This is another reason Liverpool could afford to wait for City to increase its price for Sterling.

English players are not the only ones with an additional cost: let’s say Roberto Firmino was from Lithuania who scored 10 goals in 36 games for Hoffenheim last season: would he really have cost £28 million? Compare him to Kevin Kampl, a Slovenian playmaker who scored 11 goals in 31 games for Red Bull Salzburg in 2013-14 and joined Borussia Dortmund for £8.5 million in January.

International recognition, and form, plays less of a role and in some cases, particularly with African players who can miss up to six weeks of the season if on duty at the African Cup of Nations, can push down a price.

Injury record

Any player could suffer a long-term injury in a training-ground challenge at any time, but many players with complicated injury histories represent a different type of risk in the market. When Manchester United bought Robin van Persie, did it consider his injury record? His debut season at Old Trafford, when he won United the league, almost rendered the next two injury-filled seasons moot: he had done what he had been bought to do.

How about Jack Wilshere? He’s a supremely talented midfielder but struggles to get through a season without injury. In fact, he has not started more than 25 league games in a season since 2010. If Manchester City wanted to buy him, would it factor that information into its price? It should.

Length of contract

This only makes a difference if a player is in the final year of his deal, and then there is an opportunity for a buying club to ‘find value’—even more so if it’s the last six months. Smart-thinking clubs always look to tie down their assets to long-term deals to protect their price, as Levy did with Gareth Bale and more recently Harry Kane; on the other hand Arsenal sold Van Persie with one year left on his contract while Bacary Sagna left on a free transfer.

Intangible qualities

These cannot be measured by metrics but are often a mark of the true greats; qualities like leadership, motivation, ambition, team ethic, professionalism, mentoring skills are impossible to quantify but can have a huge impact on a dressing-room.

United is already benefiting from the arrival of Bastian Schweinsteiger in this department (regardless of his patchy injury record, there’s no doubt that his mere presence will help a young squad), while Arsenal has had the same experience with Per Mertesacker.

The flip-side comes from buying a more complicated character who can affect the dressing room in a less positive way. (Mario Balotelli.)

Situation of buying club

This is perhaps the most important factor of all in fixing a price. How desperate is the buying club for this player? Manchester United wanted a marquee player last summer and overspent on Angel Di Maria and Marcos Rojo. The fact it was not in the Champions League made it a harder proposition to convince players to join. Is the team desperate for a centre forward, is the first-choice goalkeeper injured one day before the window closes, or has the best player had a dressing-room bust-up with the coach?

The more desperate the club, the higher the price; which is why prices in January are often higher, because clubs hit the panic button when the season is not panning out as expected

More and more clubs are using data to cut out the variables in the minefield of player recruitment. Cantor Fitzgerald, the American investment bank, now offer Player Valuation reports which compare player’s market value to their intrinsic value.

Using more than 150 in-game data-points, the intrinsic price uses “permutation analysis” to calculate just how much each player contributes to his team’s chances of scoring—a Holy Grail for data junkies. One club that relies heavily on data analysis called this methodology “the best work I’ve heard of this field” while other teams have praised the Player Valuation reports for their objective intelligence in what can be an emotional part of the business.

If the market price far exceeds the intrinsic price, the selling club is encouraged to act; on the buying side, clubs inevitably want players whose intrinsic value is worth more than their market value—and plenty of those exist in the market, if you know where to look.

Some clubs resort to more old-fashioned methods of driving prices up and down—simply making up a figure and letting the media do the rest. Crystal Palace coach Alan Pardew said last season that winger Yannick Bolasie was worth £20 million after one match-winning performance. It was clearly a joke, but it would have made a club think twice if it had fancied Bolasie for £5 million. Maybe nearer £10 million would do the trick?

That’s the thing about value: you can only recognize it years after the deal.

BY

VAMSI KRISHNA K.

PGDM 2014-16 Batch