Netting wins
Common Grounds on the Path of Streamlined Finance Management
Over time, football as a sport grew into its own huge industry, and as an industry, has been growing and advancing at an exponential rate. Football clubs thrived and developed into multi-million Euro enterprises and now have the departmental and hierarchical properties akin to any large corporation. Revenue streams from numerous facets of the sport nourish and establish the business models of these clubs. In its annual “Football Money League” reports, Deloitte categorizes revenue streams into 3 main categories: matchday revenue from ticket sales, commercial revenue from the club brand (events, jersey sales, memorabilia…), and broadcasting revenue from selling broadcasting rights to various media. Notably, these organizations are always making trades among each other as well. Obviously, player trading forms the bulk of these activities, while other assets are occasionally the subjects of trades as well. While the interrelated nature of the football industry surely provides opportunities for growth and great success, it also requires the constant movement of capital from one organization to the next. It quickly becomes evident that clubs will resort to financial management tools to facilitate the processing of such transactions.
Troc Circle detected the opportunity of replacing conventional services on the market today with the help of its innovative netting platform. Despite the Covid pandemic dealing a hefty blow to football clubs and the industry as a whole, the recent years have witnessed the movement of cash flows surpassing billions of Euros back and forth. Troc Circle’s nimble netting platform allows for swift conclusion of trades by offsetting payables with receivables on the fly, very efficiently lowering the amount of moved capital in between clubs. The netting platform utilizes 2 schemes for netting:
Circular netting
Circular cash flows are identified between merchants and the common amounts are netted
Chain netting
Algorithm works on finding payment chains in between merchants that do not complete a circular cash flow. Then the payment chain is incentivized through a discount to the first merchant, thus triggering the
Troc Circle’s platform is also able to integrate into most globally used accounting systems and is working on further increasing its reach by establishing an open API where global accounting systems can log onto and net their transactions.
Troc Circle ran simulations covering 555 player trading transactions occurring in the 2019 transfer market in between more than 100 clubs, totaling a little over € 5.8 billion, and numerous netting opportunities were found. The total of netting opportunities amounted to € 168.3 million using circular netting between 2 clubs i.e. 2 nodes, and € 1.9 billion with chain netting among 3 clubs i.e. 3 nodes.
Through publicly available data focusing on player transfers between FC Bayern Munich and numerous clubs, Troc Circle studied transactions totaling € 209,350,000. Netting opportunities found within these trades using a 30 day netting time frame amounted to € 47,000,000 worth of freed up working capital reserved solely for use in the transfer market
Removing financial complexity
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Removing financial complexity
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Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.
Ut enim ad minima veniam, quis nostrum exercitationem ullam corporis suscipit laboriosam, nisi ut aliquid ex ea commodi consequatur? Quis autem vel eum iure reprehenderit qui in ea voluptate velit esse quam nihil molestiae consequatur, vel illum qui dolorem eum fugiat quo voluptas nulla pariatur.
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum.
Removing financial complexity
Lorem ipsum dolor sit amet, consectetur adipisicing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Sed ut perspiciatis unde omnis iste natus error sit voluptatem accusantium doloremque laudantium, totam rem aperiam, eaque ipsa quae ab illo inventore veritatis et quasi architecto beatae vitae dicta sunt explicabo. Nemo enim ipsam voluptatem quia voluptas sit aspernatur aut odit aut fugit, sed quia consequuntur magni dolores eos qui ratione voluptatem sequi nesciunt. Neque porro quisquam est, qui dolorem ipsum quia dolor sit amet, consectetur, adipisci velit, sed quia non numquam eius modi tempora incidunt ut labore et dolore magnam aliquam quaerat voluptatem.
At vero eos et accusamus et iusto odio dignissimos ducimus qui blanditiis praesentium voluptatum deleniti atque corrupti quos dolores et quas molestias excepturi sint occaecati cupiditate non provident, similique sunt in culpa qui officia deserunt mollitia animi, id est laborum et dolorum fuga. Et harum quidem rerum facilis est et expedita distinctio. Nam libero tempore, cum soluta nobis est eligendi optio cumque nihil impedit quo minus id quod maxime placeat facere possimus, omnis voluptas assumenda est, omnis dolor repellendus. Temporibus autem quibusdam et aut officiis debitis aut rerum necessitatibus saepe eveniet ut et voluptates repudiandae sint et molestiae non recusandae. Itaque earum rerum hic tenetur a sapiente delectus, ut aut reiciendis voluptatibus maiores alias consequatur aut perferendis doloribus asperiores repellat.
Netted Amount
Results showed great promise regarding the ability of Troc Circle’s netting platform to streamline inter-club transfers, not to mention any other purchasing/selling activities between FC Bayern and their business partners (suppliers, banks, sponsors, broadcasting...). Keep in mind that the simulated netting of 47 million euros focused solely on transfer market activities. The bigger the scope that netting activities cover, the more advantages come into view for FC Bayern, not only as a football club but as a business organization as well. The commercial aspect of the club would significantly benefit from instant processing of receivables and payables, fewer money transfers, and reduced foreign exchange fees.
Such an improvement and optimization of FC Bayern’s working capital leaves room to seek out new activities and investment opportunities that would be advantageous to the club and the business:
- Club would be able to buy more players in the transfer market
- Ability to enhance the FC Bayern brand with new investments
- Focusing on football academies can be increased
- Higher focus on academies raises odds of producing and nurturing more star players.
- Higher focus on academies raises odds of producing and nurturing more star players.
- Higher focus on academies raises odds of producing and nurturing more star players.
- Enhancing social responsibility (ex: Covid relief, various initiatives and awareness campaigns)
An important notion which is also worth mentioning is that the netting of trading transactions could help alter the perception of players as assets. Since less money would be tied to the movement of players from one club to the other, player transfers would be less like business transactions, and more like true off-pitch football tactics focusing on players’ well-being and overall club performance. In any business, endless possibilities arise as more funds are secured. Troc Circle’s highly adaptable netting platform is the right tool for quickly eliminating unnecessary transactions and improving the operational efficiency of a business’s working capital. Troc Circle’s “winning-goal” is to make growth more imaginable for businesses and make success more attainable for all.
Disclaimer: The mentioned simulations were performed using publically obtained data from www.transfermarkt.com and the FC Bayern München Annual Report.