<b>Assessing Bayern’s transfer window from a financial perspective – boom or bust?</b>
After what to some will have felt like an eternity, the transfer window for signing new players under contract finally closed on Monday. We have thoroughly evaluated Bayern’s performance in the window from a sporting perspective both on our <a href="https://miasanrot.de/transfersommer-2020-fazit/">German</a> and our <a href="https://miasanrot.com/transfer-day-2020/">English</a> page. Can the players fill the most urgent vacancies in the squad? Are they good enough to enable Bayern to continue to perform at the levels we have become so used to over recent months?My colleagues have done an excellent job exploring questions like these from all conceivable angles. In this article, I intend to evaluate Bayern’s transfer window from an economic perspective. Financially speaking, have Bayern taken too much of a risk? Or have they perhaps not taken enough of a risk? Have they acted prudently with respect to the special circumstances of COVID-19? Do the new signings represent good value for money?<a href="#financing-transfers-a-question-of-liquidity-now"></a>Financing transfers: A question of liquidity now…I do not intend to conduct a full-blown, in-depth analysis of FC Bayern’s financial performance in this article. We have done this elsewhere and we will certainly do so again when the 2019/20 financial report comes out. For the purposes of assessing Bayern’s transfer window performance, I will particularly focus on their current liquidity rather than figures like revenues, EBIT or profit, because their current liquidity, ie how flush with cash they are, in my opinion most accurately reflects their ability to invest in new players right now, in this very window. My assessment is based on the very simple premise that all transfers Bayern do are paid for in full and up front or will become due during the ongoing season. Therefore, if Bayern did not have enough cash on hand or were unable to obtain it quickly in the window, they would not have been able to spend it on new transfers.At the end of the financial year 2018/19 on 30 June 2019, the “FC BAYERN MÜNCHEN AG Konzern”, ie the entire company including all its subsidiaries, had cash reserves of €159m and an equity ratio of 68%. Their operating cash flow was €56m, meaning that during the financial year they generated €56m free, available cash to do with as they please from their key operating activities without having to sell players. They also have zero long-term liabilities such as bank loans or bonds (a fact that they are very proud of). On top of that, fast forward to today, Bayern have just won the Champions League, which has given them a fresh cash injection of €130m, an increase of €50m on the year before, where they earned about €80m after crashing out in the round of 16.As these figures indicate, Bayern is a very liquid business. They sit on massive cash reserves, have no long-term debt and because of their high equity ratio they could easily take out a loan in an instant if they felt they needed to to sign new players to bolster their squad. On top of that comes the Champions League windfall of an extra €50m on last year in cash, which they could also invest in new players immediately without compromising their financial baseline.<a href="#and-in-the-future"></a>… And in the futureBut that is the present. Prudent financial management (in fact, prudent management of any description) will always consider and plan based on future expectations. Therefore, when Bayern sign new players in 2020, it is not enough for them to look at their very healthy financial state at present, but they have to take the COVID-19 pandemic and its expected implications for the club’s future financial situation into account as well.Herbert Hainer estimated that Bayern will generate approximately €100m less in revenues this season than last. Based on the assumption that the COVID-19 pandemic will prevent the Bundesliga…