THINK ACT

RUBRIK ACT: TURN-AROUND HIER BVB
Michael Blatz, partner, Roland Berger; Hans-Joachim Watzke, chief executive,
Borussia Dortmund; Pat Lynch, managing director, Morgan Stanley; Rainer
Balensiefer, principal, Roland Berger; Oliver Kehren, executive director, Morgan
Stanley; Thomas Treß, finance director, Borussia Dortmund
tal again. It could only survive as long as it won matches,
and when it lost its additional income from the Champions
League (and in 2005, the Europa League) the prospect of
collapse loomed large.
Enter Reinhard Rauball, a lawyer who had already been
the club‘s president once during the 1980s, and Hans-
Joachim Watzke, an entrepreneur. The chances of saving
Borussia were slim, but they thought there was no harm in
trying, and a window of opportunity opened when Watzke
came into contact with Oliver Kehren of the investment
bank Morgan Stanley.
Kehren had already helped several medium-sized companies
stave off disaster, and felt that Borussia was no different.
However, there was one key exception: „You can be
pretty confident about your annual income, because things
like price fluctuations and collapsing sales don‘t happen
to football clubs. Your income from tickets, sponsorship,
TV and merchandising are largely set in stone, and so are
your expenses, particularly players‘ salaries. If you‘ve got
all of these reasonably in balance, there‘s not much that
can go wrong.“
Watzke told him all about the club‘s venerable traditions,
its coal-mining roots and dramatic past successes, but Kehren
was not particularly interested in any of this. However,
one thing did catch his attention: despite the club‘s financial
collapse and waning fortunes on the field, gate receipts were
actually increasing.
Fast and furious football
That was all Kehren needed to hear. He summoned Roland
Berger Strategy Consultants and a team of lawyers and auditors
who drew up a recovery and refinancing plan. The club‘s
creditors and other liabilities would be restructured and its
capital increased – the consultants pointed out that its most
important assets were its four million German fans. It also
had a huge stadium, described by the Times of London as
the world‘s best football arena, and was doing some excellent
work with young players.
Buying back the shares in the stadium
that the club had sold off to an investment
fund, and to start nurturing in-house talent
became the priorities, with one reinforcing
the other. Dortmund fans love young local
players, and the enthusiasm in the stands
resonates through to the team. The club also
developed a match strategy based entirely on
an attacking style of play.
In the summer of 2006, Dortmund refinanced
€ 125 m of liabilities in cooperation
with Morgan Stanley. It bought back the
stadium, freeing up resources to invest in
the team, since the consultants had decided
that these were the minimum preconditions for a lucrative
international business.
„Of course you can‘t plan league placing, but you can predict
probabilities over time,“ says Roland Berger principal
Rainer Balensiefer. The investment in the team would be
moderate but continuous, and most importantly the club‘s
finances – liquidity in particular – would not be dependent
on the countless imponderables of football, like referees‘ decisions,
injuries, and fluke goals.
Much of the investment was spent to buy back the stake
in the stadium, but it put Borussia back in charge of its own
destiny. Watzke and the club‘s new finance director, Thomas
Tress, began cutting costs. The stadium name was sold, and
the team started going to all away games by bus.
The two began skillfully implementing a series of complex
rescue measures, gradually regaining investors‘ confidence.
„The way they achieved that was brilliant,“ Kehren says. In
February 2007, Watzke announced an operating profit of € 10
m, and by 2010 the club had reduced its debts by € 125 m.
From a sporting viewpoint, the club got off to a shaky start.
In 2008, it was forced to fight relegation, and the young and
talented team needed a coach who was also a mentor – one
of the guys, someone who understood their lives, but was
also an authority figure, an expert on strategy, and a human
being. The man they needed was Jürgen Klopp.
Klopp‘s arrival from Mainz caused a huge buzz. At his first
press conference, he promised that from then on, Dortmund
games would be fast and furious, and he kept his word. Fans
were electrified by his playing strategy, which was all about
the determination to give everything for the team.
The fans spurred the young players on to a string of successes;
precisely as the bank and management consultants
had planned, and it showed in the club‘s league placing.
In 2009, Borussia barely missed European qualification
because of a referee‘s decision. In 2010 it made the Europa
League, and in 2011 the Champions League, which alone
guarantees an additional income of around EUR 20 m.
The club increased its staffing budget by only EUR 5 m;
56 THINK ACT SEPTEMBER 2011