Spanish Bale-in: a lesson in risk & exporting

In a single transaction Britain’s balance of trade swung £86m in the right direction at the beginning of September when Welsh footballer Gareth Bale was sold to Real Madrid by Tottenham Hotspur.

It was the biggest transfer deal in football history, once again highlighting the international nature of the beautiful game and the fact that, despite economic uncertainty, the biggest clubs are prepared to make significant investments in the quest for silverware, global recognition and financial returns.

It has also prompted questions around value and affordability in Spain (which continues to suffer significant economic challenges) and the football industry (which has not been immune to its own high profile failures).

It is inappropriate to reveal Experian’s analysis of Real’s finances in a public forum such as this, although I would encourage organisations doing business with the club to access it as appropriate.

Real fans and trading partners might be comforted by this blog from Reuters columnist George Hay, which states that – although the acquisition “will put a big dent in Real’s balance sheet” – the Spanish club will probably stay on the right side of UEFA’s “financial fair play” guidelines.

Bloomberg sports writer Jonathan Mahler also agrees that Real can afford Bale. He highlights that revenue at “the world’s most valuable sports franchise” is up 62% over the past three years, in part due to its rising global profile.

And this is the most interesting aspect of the deal. Clubs such as Real are global brands. They are able to sell their product around the world. As such, they enjoy the largest revenues and sustain their success by investing in the best talent.

There is a lesson here for all businesses.

Experian analysis has shown that international activity was a key variable for identifying businesses with the greatest growth potential. Put simply: firms that trade internationally often grow more quickly than those that don’t.

But while potentially hugely rewarding, trading abroad creates additional risk and new challenges:

  • International trading opens up increased risk of fraudulent behaviour, from identity fraud to fake businesses
  • It can be more difficult to assess the ability of buyers to honour full payment for goods or services rendered on a due date
  • The buyer or seller may not have adequate knowledge of the companies they are trading with, which increases the chance of business failure
  • If the buyer or seller fails to carry out their obligations, it may prove expensive to take legal action against them in their country

Accessing local knowledge is the key to overcoming these risks and thriving in the global economy.

Experian has been providing international business information for 22 years, and now holds information on more than 50 million companies in 238 countries.

Our international reports and services enable UK businesses to make sound risk assessments and access important information about current and potential trading partners around the world.