The financial impact of the Matic transfer

Michael Steele

Breaking down the financial impact of bringing Nemanja Matic back to Stamford Bridge.

Now that Nemanja Matic is officially a Chelsea player (again), it's worth taking a look at how this deal will impact Chelsea from a financial perspective.  Chelsea paid Benfica €25m (or £20.8m) for Matic's services and then signed Matic to a 5.5 year deal at an estimated £70k per week.

As we know, Chelsea must comply with UEFA's Financial Fair Play regulations and satisfy the "break-even" requirement.

For the purposes of FFP accounting, when a player is purchased, the transfer fee is amortised over the life of the contract.  Amortisation is the process by which an expenditure is paid off over time.

The amortisation is simply an accounting practise that allows clubs to spread the cost of the transfer fee over the player's career with the club in order to avoid having to record a huge expense on the books. This is a uniform accounting practise for the purposes of FFP reporting, and the transfer fee will be recorded as such, despite the fact that Chelsea has likely already paid Benfica the full £20.8m.

When calculating a player's total cost for the purposes of FFP accounting, we need to factor in the player's wages in addition to the amortised transfer fee (note that agents' fees are also included, but it's easier to combine all the fees and record it as one lump sum, rather than try to figure out which agents were paid what)

According to noted Portuguese football expert Dominic Viera, Matic was likely earning around £20k per week plus bonuses at Benfica.  For the purposes of this exercise, let's assume  that the bonuses equalled 25% of Matic's salary (a high estimate).  That brings Matic's average weekly wage at Benfica to £25k per week.

Let's assume that Matic receives a massive raise to £70k per week.  Given that he signed a 5.5 year deal, he was likely to get a significant raise, but I'm not sure it's as high as £70k per week.  However, when estimating FFP expenditures, it's always better to estimate on the high side just to be safe (similarly, when estimating profits, it's always best to estimate on the lower end).

As mentioned, Chelsea paid €25m (or £20.8m) to Benfica for Matic's services.  Matic signed a 5.5 year deal, and as such, the amortised transfer cost works out to £3.8m annually (£20.8m spread out evenly over the 5.5 years).

Note that if Matic signs an extension, the book value on his transfer fee will be amortised over the life of the new deal, so while these figures are subject to change, we can safely assume that Matic's FFP cost will remain unchanged for at least a few years.

With that, let's take a look at what Matic will cost Chelsea on the FFP books -

2013-14 - £3.7m

2014-15 - £7.4m

2015-16 - £7.4m

2016-17 - £7.4m

2017-18 - £7.4m

2018-19 - £7.4m

When the numbers are broken down like this, it becomes clear that (re)signing Matic was an extraordinarily good piece of business.  While it obviously would have been nice to keep him in the first place, no one (except for Steve) thought Matic would turn out to be this good.  In fact, Benfica owed 25% of Matic's rights to a third party owner as a result of the David Luiz deal.  The third party owner in question, the Benfica Stars Fund, owned 25% of David Luiz' rights, and as such was entitled to 25% of the entire transfer deal (so, 25% of the fee plus 25% of Matic).

Both Benfica and the third party owner concluded that Matic was worth about £1.68m, and the third party owner elected to take the £420,000 instead of the 25% stake in Matic.  Had the third party owner held on to the 25% stake, it would have received a £5.2m cheque today.

Previous dealings aside, Chelsea just picked up a very good midfielder at an excellent price.

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