Jeffinho transfer fee

Jeffinho is the first high profile intra group transfer between Eagle Holding companies. I am going to look into the transfer fee options using a bit of business theory

On January 31st, 2023 Lyon brought Jeffinho from Botafogo and all hell broke loose. There was a lot of confusion about the signing. At first, it was thought to be a loan (as reported by the official website) and then a small transfer fee. The fallout led to Textor getting death threats and him deleting Twitter. In the end, it was a full transfer with a rumoured fee of €10m.

Business Model

Let's start with the group goals. To create wealth from player trading. Having clubs in areas that have a high number of good prospects. With two clubs in elite European leagues. No feeder clubs within the group as they are all feeder clubs to the big spendings Champions League teams.

Issues might be coming only from EPL, Barcelona, Bayern Munich, and Real Madrid spending. There were 18 transfers last year for over €50m. All of them went to those locations. With Premier League having 77% of those transfers.

Jeffinho

Had a really good season at Botafogo. After signing on loan to play for the B Team. He earned a spot in the first team in June and started 18 games. Only got two goals and five assists. But had 2nd highest number of successful dribbles per 90 and the highest number of shots created via dribbles in the league. He scored a hat trick against Charlton in a friendly in December. At the same time, it was rumoured that West Ham and Newcastle were considering bidding for him in January.

Here is the link: Goals from Charlton Game

Maximising Transfer Fee

Back to those 18 transfers over €50m. Over 70% of them were 24 or under. With 6 of them being 22. To get the big fee you need to be a player that will be on the big team for a long time. If you spend €80m on the center back. It’s easier to justify if they are 22 and so it’s €10m a season if they stay till they are 30. Jeffinho turned 23 in December. It's a shame for Botafogo as they would have loved to watch him play for another season. If he going to get the high fee then he needs to play at a higher level quickly.

Need for an early win.

It was reported that Textor was considering a SPAC listing to get new investors. If they can get a player sold for a high fee from Lyon which was higher than what Newcastle and West Ham might have offered Botafogo then it's proof of concept. That would be a key selling point to investors. Before interviews, Textor would talk about the low fee Monoco paid for Bernardo Silva and then the large fee that Monoco got from Man City. But more recently the big teams have noticed Benfica and cutting out the middle person and buying direct. For example, Enzo Fernández went to Chelsea for €121m. If the big teams go direct then isn’t a way for Eagle Football to make money from player trading.

Transfer pricing issues

This is a common issue within business. So much so that I had to study methods of how to deal with internal transfers. In my first job there were a lot of arguments about the cost of the securities between departments. From the company's point of view, it was such a waste of time. The argument was dysfunctional. But managers get commissions based on the contributions from their department after costs like securities. For them, it was massively important.

Fall out

This is a key issue for Eagle football. For this model to work they need to keep Luís Castro (Botafogo manager) and scouting staff happy. It can be very frustrating finding a player like Jeffinho to fill a hole in the team and half a season he's gone. This can then be devastating if goes for a small amount to another club within the group without funds to replace him. These haven't been a like-for-like replacement but funds have been used to find some high potential. Messaging @GloriousBotaYT (on Twitter) is well worth a follow for the latest at Botafogo. He thinks that Botafogo has made some smart recent signings. Matias Segovia looks like a very good footballer.

Lyon

At the end of the window, Lyon were 10th in the league. They were 11 points from 5th and the European football spots. While Jeffinho is an exciting young player. He is signing that needs time to bend in coming from another continent. The fans could have wanted a short-term signing to help get up the league. As European football is a requirement for such a big club.

Business strategy for setting the price

Cost based

This is the old-fashioned business way and I hope that no one currently uses it. Basically, it’s your cost plus margin percentage. The massive issue you get rewarded for having no cost control. Jeffinho signed for Botafogo for €300k. If it were cost x2 then it would only be a transfer fee of €600k. If this were the standard in the future it would reward Botafogo for signing players for large amounts rather than finding bargains for very small amounts. It’s not even worth considering.

Market-based

The price is set the same as the market price. Although it can in normal business create dysfunctional behavior. As companies might buy products externally as they undercut the internal department. This would mean the group would lose money. Which could technically happen here. It would be the same as if they were dealing with any over team. Football regulations aren’t openly traded commodities. It’s hard to know the market price. If you look at Transfermarkt. It’s a fun website that should be taken too seriously. It’s just some people on the internet guessing values. They had Jeffinho’s market price at €1.5m when he signed for Lyon. They have his current price at €6m.

Negotiated Price

The two sides negotiate a price. Try and make it fair for both teams. This is commonly used when market prices are volatile and change occurs constantly. Which does fit this scenario.

But the issue can be that these are a little forced. If Lyon has been told they must sign the player or Botafogo has been told they must sell. The power of the deal can be very one-sided. This can lead to resentment and make it harder for future deals. If their autonomy is threatened and they feel like they cannot sell/buy from a club outside the group. That would lead to behavior that may not help the group.

Profit based

Based on projections they would work out how much Jeffinho would be worth in two years. This season they sold Lucas Paquetá for around €43m but he was 25. Let's say reckon he would be sold for €40m. Then the transfer fee would be €20m. So Lyon and Botafogo would have shared the profit. But this is wildly optimistic. Last season 8 players left Lyon only three had fees and Jeffinho isn't a sure thing.

Personally, I think sell-on clauses are the way forward but there is a long delay in getting money back to Botafogo. The delay could be a real issue. As they will want funds quickly to reinvest. At the same time, Eagle Holding could hit the jackpot with one of these players. If they find the next Enzo Fernández. River Plate sold Enzo for €12m and a 25% sell-on fee. The sell-on fee got them €30m. That’s almost 3 times the original fee. But still has risks if Jeffinho is like Houssem Aouar. At one point on Transfermarkt he was €55m and is now set to leave on a free transfer this summer.