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On Buyback Clauses And Oriol Romeu

The Oriol Romeu acquisition has now been confirmed by Chelsea, and more or less everyone is praising it as a good bit of business. The only downside, as far as the Blues are concerned, is the fact that Barcelona can buy him back twice in the next two years if he excels, and for fairly low prices, at that. In some quarters, this is being painted as an insult of some kind - that the European Champions are sending off a midfielder to Stamford Bridge to develop as though Chelsea are merely a finishing school for the Catalan club.

Obviously, I should point out that it's not really an insult to be considered to have a worse midfield than Barcelona, which is a team so well-stocked in the centre that if Cesc Fabregas moved to the Camp Nou he'd join Javier Mascherano as squad depth. In terms of a head to head matchup, only Michael Essien at his very best can be compared to any of Xavi, Andres Iniesta and Sergio Busquets, and Essien hasn't been at his best since somewhere around the late Kimmeridgian. Barcelona, in other words, are on a different planet, and have every right to treat Chelsea as a place where their midfielders can get valuable experience*.

*Fabregas on a buyback wouldn't go amiss either.

But that's not really the point of the buyback clause. If Barcelona wanted Romeu to go out on loan, he would have gone out on loan. It would have been cheaper for them, and even if Chelsea wouldn't have accepted a straight-up loan deal, another team probably would have. Treating the buyback clauses as though they're some sort of super-loan is therefore at least slightly nonsensical. Instead, Romeu's £9M and £13M buybacks (in summer 2012 and 2013 respectively) are a vehicle for Barcelona to properly balance risk and reward on the transfer.

Think of it like this. A promising prospect wants to move away to find a place elsewhere. You're inclined to let him - he doesn't look like breaking into the first team anytime soon. So, you sell him. Your reward is a nice stack of cash, and your risk is that the value he provides his new team is worth more than that money. Since potential is not guaranteed, it's entirely possible that even a token amount of money is more valuable than that player's top-level career, but if said player does pan out, losing him for not much money looks a little silly.

That balance drives the high price of young players, and is why, for example, Manchester United paid £20M for Phil Jones and Chelsea paid €9M for Thibaut Courtois. By and large, a club's hoped-for selling price when dealing with young players is their estimate of the surplus value (plus subsequent transfer fees) they might bring the team if they stayed.

That situation changes with the introduction of the buyback clauses. These essentially cap Barcelona's risk incurred from selling Romeu. If he develops into a star within the next two seasons, they can either retrieve him from Stamford Bridge or force Chelsea to pay significantly more than the relatively paltry figure for which he was signed. If he's mediocre, they don't have to worry about him. Essentially, the 'high risk' element of the transfer is completely gone for the seller.

Of course, that means that the 'high reward' aspect for Chelsea is also more or less gone. They might get a superb player in Romeu for the long run, but they absolutely won't get a steal. Even if Barcelona don't need him, should Romeu step up and fulfill his potential, they can simply activate the buyback clause and either have Chelsea pay the amount (as yet unknown) specified in the no-take-backsies* clause or flip him to someone else for a significant profit.

*This is a highly technical contract term that I just made up.

From the Chelsea perspective, that's kind of annoying. Having a prospect hit his ceiling and that not being an obviously good thing makes it rather hard to get that excited about him. Many people, therefore, aren't. However, what the insertion of the buyback clauses has done is significantly lower the transfer fee itself. Instead of the ~£20M Chelsea might have been expected to pay for Romeu, they got him for £5M - quite clearly a manifestation of the lower risk from Barcelona's standpoint.

And that means that Chelsea have a lower risk in the transfer too, because they're paying significantly less. Depending on what you think they ought to be doing right now, that's a very good thing: Any significant expenditure on Romeu will come seasons down the line and only if he's good enough to be kept around. Going down this route with Romeu benefits Chelsea by letting them spend more this year, even if they don't get a huge reward should the 19-year-old develop into some kind of superstar.

So, if you're thinking to yourself, 'I like this move at the price, but I don't like the buyout clauses,' it's probably best to remember that the price Chelsea acquired Romeu for is because the clauses are inserted into the deal. Make of that what you will, but for me it's nice to have some fairly safe bets hanging around, even if the upside isn't as high as it could be. Yeah, it does temper my excitement about seeing Romeu grow, but that doesn't make this a bad business decision for Ron Gourlay and company.

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