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Sensational new kit deal brings an end to crippling Glazer debts

The recently announced record-breaking kit deal between Manchester United and Adidas looks to be the catalyst that will see the club’s long-standing debt eradicated over the coming years.

Valued at £750million over the next 10 years, the deal with Adidas will see such significant increases in commercial revenue that the debt that has crippled the club since the Glazer takeover in 2005 will soon be a thing of the past.

To put this staggering deal into context, Adidas will be paying three times what the current Nike deal is worth to United, amounting to an increase of 12% in the club’s revenue against the estimated figure for the 2013/14 season. Further to that, Manchester United’s earnings before interest, taxes, depreciation and amortization (EBITDA) will increase by an impressive 39%. In the long-term, the financial repercussions of this latest will be far-reaching and fantastically profitable for the club, but it is also incredibly welcome in the here and now. In all honesty the timing of the deal couldn’t be better. With a Champions League sized hole of between £30 and £40million missing from United’s accounts, the new revenue from Adidas will ease the financial issues that came with last season’s debacle.

The debt is the most interesting part of this though. Most fans, rightly or wrongly, have blamed the Glazer’s takeover for the lack of spending towards the end of the Ferguson era. Sir Alex would often cite the ‘lack of value’ in the transfer market and preferred to sign younger, lesser known players like Javier Hernandez or Chris Smalling as opposed to the big money moves like Robin van Persie that were few and far between if we’re honest. That £600m debt has clearly held back the transfer spending in recent years, and the underinvestment in the playing squad is why we saw such an underwhelming performance last season. Inadequate investment at United against every other top club improving every season meant we were bound to struggle to compete eventually, and the loss of Sir Alex Ferguson as manager

Now though the figures on the debt suggest that the story is now almost over. The interest bill used to soak up 70% of the club profits every single year, a figure so high that it becomes clearly evident just how restricted the spending had become at United. Going forward the figure will be much closer to around 15% with the added revenue from both Adidas and Chevrolet, and the club are able to spend much competitively in the transfer market. The fans have already seen that in action this year with the signings of Juan Mata, Ander Herrera and Luke Shaw, and with further signings rumoured to be imminent, the debt-free United will be a force to be reckoned with.

The new kit deal has had such global ramifications already that Forbes is reporting that Wall Street has revised their valuation of Manchester United, affording the club an enterprise value of $3.6billion. In April Real Madrid were the most valuable club on the planet at $3.3billion, with United lagging behind in second place with a value of $3.17billion. Now though, United are considered to be the market leader, and they will take some shifting. With new sponsorship, a new manager, new players and the prospect of a debt-free club, Manchester United could be embarking on another era of global domination.

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