Closer look at INEOS’ cost cutting measures at Manchester United
In the wake of its recent FA Cup triumph, Manchester United, one of the most storied football clubs in the world, finds itself in a state of uncertainty. The club’s co-owners, INEOS, have initiated a series of cost-cutting measures that have sent shockwaves through the organization. This initiative has put Manchester United in a precarious position. The redundancy offer, in particular, has raised serious questions about the future of the club and its employees. As the dust settles on its FA Cup victory, the Club finds itself confronting the cost of success.
Just four days after the victory over Manchester City, the mood at Old Trafford and Carrington took a nosedive. INEOS, led by Sir Jim Ratcliffe, made a £1.3 billion investment in the club and it is now on an economy drive. Sir Jim has appointed corporate restructuring consultants Interpath to identify potential cost-saving measures across the company.
Odds favour Sir Jim’s triumph at Manchester United
Sir Jim Ratcliffe’s cost-cutting strategies, and mergers and acquisitions expertise have carved out a track record that shows his business prowess. His remarkable journey to becoming one of the wealthiest individuals globally has been a result of his strategic decisions and calculated risks that only few can parallel.
Ratcliffe’s financial acumen and strategic investments have propelled him to the upper echelons of global wealth. His net worth, now estimated to be $16.36 billion has amassed primarily through his successful ventures in the chemical industry, particularly through his company, INEOS.
Ratcliffe’s career took a significant turn when he joined the US private equity firm Advent International after his stint at Courtaulds plc. It was during this period that he began exploring investment opportunities, leading him to co-found Inspec, a chemicals business. Despite the inherent risks, Ratcliffe demonstrated his commitment by investing heavily in the buyout of a chemicals business from BP, a deal he and his business partner, John Hollowood, led. He even mortgaged his house to secure the necessary funds.
With Ratcliffe at the helm, Inspec experienced rapid growth. He employed high-yield debt to finance deals, strategically acquiring unwanted operations from groups such as ICI and BP. His selection criteria for targets were based on their potential to double earnings over a five-year period.
In 1998, Ratcliffe took another bold step by forming INEOS in Hampshire to buy-out Inspec and the freehold of the Antwerp site. Today, INEOS stands as one of the world’s largest chemical companies, boasting an estimated turnover of $80 billion.
His ability to identify valuable investment opportunities and turn around struggling businesses by taking calculated risks and driving growth is truly remarkable. .
Betting on success
The most dramatic of these measures so far at Manchester United is a redundancy offer extended to all non-football staff. Employees were given a week to decide if they wish to voluntarily resign, a move that could see up to a fifth of the 1,100-strong workforce let go. This decision has understandably caused a significant amount of distress among the staff.
Ratcliffe’s approach to cost-cutting remains unflinching. Earlier this month, he ordered anyone still working from home to return to the office immediately or seek alternative employment. He also demanded that Old Trafford and Carrington be kept tidy, describing some areas as ‘a disgrace’.
These measures have not been well-received by the staff. Many were already unhappy after being told they would only receive one ticket each for the Cup Final and that the club would no longer cover their travel and meal expenses. This led to 50 more staff than last year refusing to take a ticket for the Cup Final.
The redundancy offer is not the only source of tension at the club. There is growing opposition among fans to the potential sacking of Erik ten Hag, the club’s manager. The club is currently conducting an end-of-season review into ten Hag’s performance and is reportedly in talks with potential replacements, including Thomas Tuchel, Mauricio Pochettino, and Thomas Frank.
A further challenge that INEOS currently faces is on the European front. The company is currently trying to convince UEFA that both United and Nice, another club it owns, can play in the Europa League next season. If this fails, United may have to drop into the Europa Conference.
INEOS’ stake in United is set to increase above the 30 per cent threshold under UEFA rules, thanks to a further £245 million investment pledged by Ratcliffe. If INEOS cannot convince UEFA that the two clubs are run entirely separately, Sir Jim may consider altering the ownership structure at Nice.
