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Juan Cuadrado to Chelsea: the financial impact of the transfer

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Now that Chelsea has signed Juan Cuadrado for a reported £23.3m (with an additional £3.5m in add-ons), we now turn our attention to how the deal impacts Chelsea from a financial perspective.

Cuadrado signed a four and a half year deal, and for the purposes of FFP accounting (which, for Chelsea, is the only sort of accounting that matters), when a player is purchased, the transfer fee is amortised over the life of the player's contract.

Assuming the add-ons are met, the total transfer fee sits at £26.8m, or £5.96m per year amortised.

Cuadrado's net annual wages at Fiorentina stood at €2.5m, which is the equivalent of £68k per week gross. With no available information about his wages at Chelsea, we're going to assume a sizable 25% raise to £85k per week for the purposes of these calculations.

When we add his estimated £85k per week salary to the amortised transfer fee, we see that he'll cost £10.38m per year (£5.96m amortised transfer fee + £4.42m annual wages).

For perspective, Cuadrado is currently the fifth most expensive player on Chelsea's FFP books for next season -

  • Hazard: £16m
  • Costa: £16m
  • Fabregas: £13.8m
  • Willian: £10.8m
  • Cuadrado: £10.38m
Chelsea's financial commitment to Cuadrado totals an estimated £46.7m over the next four and a half seasons, which is a considerable sum. Tailoring expectations to how much a player costs has its problems, but in this case, I think it's reasonable. Chelsea could have spent this money any number of ways, and there's a clear opportunity cost here with financial fair play imposing a limit on how much Chelsea can spend. While I expect Chelsea will make a splash in the summer transfer market, Cuadrado will remain one of the more costly players on the roster, and as such, expectations should be fairly high with regards to Cuadrado helping the club win matches.

As I don't watch Serie A very often, my only personal knowledge of Cuadrado is limited to what I saw of him at the World Cup this summer with Colombia. Given that I only have a tiny sample size to draw from, I'm not going to weigh in on the merits of this deal, as my opinion would be close to worthless. That said, people who do watch Serie A appear to be very high on him, and Dave Pasztor wrote a very engaging profile on him, so I'm looking forward to seeing what he can do.

Comparing Cuadrado and Schurrle deals

With the natural inclination to compare the Cuadrado and Schurrle deals, here's how the finances shape up -

  • Cuadrado will cost around £5.2m this season and around £10.4m in each of the next four seasons.
  • Schurrle would have cost £8m this season and £8m in each of the next three seasons.

Now, with the £8.42m profit from selling Schurrle and wiping out his £8m "FFP hit," the spot that Schurrle occupied and Cuadrado fills sees Chelsea earn £3.42m instead of costing £8m, an £11.42m swing on the 2014/15 books.

In each of the next three seasons, however, Cuadrado will cost £2.4m more than Schurrle would have on an annual basis (£7.2m total). I'll spare you the read about how the rolling FFP monitoring periods affect things, but in a vacuum, selling Schurrle and buying Cuadrado saves Chelsea about £4.2m.

That said, I much prefer viewing each deal on its own merits and and then looking at the overall financial picture for context. I caution against looking at transfers in a vacuum, as it distorts the big picture, but given the natural tendency to compare the two, it seemed worth it to crunch the numbers.

For more on the finances involved in the Schurrle deal, we broke it down on Monday.

A note on Mohamed Salah's loan

Mohamed Salah was sent to Fiorentina on loan, and while the Salah loan and the Cuadrado purchase are naturally intertwined, it's important to view these as separate deals for financial purposes.

David Amoyal, who I trust for all things Serie A, reports that Chelsea will pay Salah's wages for the rest of the season, so his £3.56m FFP hit remains unchanged. While I think it's generally bad policy to loan a player and then not require the loaning club to cover the player's wages (Vitesse excepted, but that's a unique situation), in this case I don't mind, as it obviously helped get the Cuadrado deal done.

Further, Salah wasn't getting the playing time he needs to grow, and if he thrives at Fiorentina, that will only increase his value for a future sale down the road. According to Amoyal, Fiorentina has an option to extend the loan to 2015/16 for a £750,000 loan fee, and I would assume Fiorentina would then also be on the hook for Salah's wages.