Man United have £450m relegation contingency plan with Adidas as finance expert explains ‘stunning’ deal

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Relegation is something we never thought would be a conversation topic for Manchester United this season.

However, after five losses in December, it is no longer a laughable prospect, instead Manchester United are seven points off the drop zone in January.

Ruben Amorim is in the worst form of his career and has even mentioned that relegation talk is the shock United need.

These struggles have got some beginning to question what if…

What if, Manchester United really got relegated? Well, the Telegraph has raised one interesting point which is the shirt sponsorship situation.

It is revealed that Adidas have the power to terminate their £900m deal with United at a season’s notice if the club are relegated.

Alternatively, Adidas could reduce their payments by 50 per cent for one year, should the impossible happen and United dropdown.

• READ MORE: Who are INEOS? Exploring Man Utd co-owner Sir Jim Ratcliffe’s billion-pound business

Manchester United have a plan to handle Adidas relegation blow

Speaking with finance expert Adam Williams, United in Focus understands that there is a contingency plan in place.

“This situation shows how carefully kit deals are fine-tuned to protect either party if certain events come to pass, especially when they are as stunning in terms of value and length like United’s with Adidas.

“There are, however, a number of misconceptions about the relationship between manufacturer and club in these arrangements. One is that, at the elite end of the spectrum, the club and the manufacturer are reliant on shirt sales for the success of the deal.

“If United were in the Championship, they would still sell over a million shirts. I don’t think Adidas would be hurt too badly from that perspective.

“United themselves also wouldn’t suffer greatly either because they only take a small cut of the proceeds in any case, with the vast majority of the revenue from the deal coming from the base fee, not shirt sale.

“Because United being in the Championship would be such a novelty, there could even be a sort of bounce effect that would see fans almost buying shirts in defiance.

“Adidas would leverage on that from a marketing perspective of course. That would further insulate both parties from taking a major hit in terms of sales.

“So you might therefore ask, why would Adidas slash the fee they pay United if they were relegated? The answer is because of the detrimental effect in terms of brand exposure and association.

“I’ve seen some people suggest that because United in the second tier would be must-see TV, that would mean that the number of eyeballs on Adidas’s Man United-branded products and logo would not suffer because so many people would be tuning for the novelty of it alone.

“That might be true in the short term, but the effect would not sustain itself over the course of the season. There is a reason the Premier League’s TV deal is worth £12.25bn and the EFL’s £935m. Adidas’ brand exposure would be decimated.

“The other main reason Adidas and other huge sportswear firms sign these deals is for brand association, i.e., having their logo next to a brand known for excellence on the pitch and their values as a club. Again, United would not be delivering value to Adidas on this front in the Championship for £90m per year.

“I highly doubt that they would terminate the deal. The optics would be terrible for them and they would likely be promoted very soon after anyway.

“From United’s perspective, losing £45m per calendar year – if Adidas triggered the 50 per cent clause – would be a huge blow, especially if coupled with losing hundreds of millions in PL TV revenue.

“But there’s no doubt they could weather the storm. They would still have revenues that would utterly dwarf any other EFL side.”

• READ MORE: Who is Sir Jim Ratcliffe? Net Worth, Businesses, Man Utd deal

Manchester United should comfortably survive under Ruben Amorim

Relegation could be a knockout blow for Ineos and the Glazers, however, it is an event which remains tremendously unlikely to occur.

This is not just an opinion, but also backed by data with Opta Analyst predicting United will finish 12th in the league this season.

Additionally, the chance of relegation stands at just 0.11% which tells us all we need to know. Performances right now may be bad, but the data behind the results shows United deserve to be doing better.

So, United shouldn’t have to worry about this Adidas situation, but the contingency is there just in case – with Sir Jim Ratcliffe also concerned over PSR issues arising.