Hertha BSC and the investors: Why President Bernstein is the biggest problem

Interview

Hertha BSC is teetering on relegation, but even a license for the second division seems anything but certain. Economic expert Hennig Zülch is divided when it comes to the future.

watson: Mr Zülch, would relegation be the best thing that could happen to Hertha BSC in the current financial situation?

Henning Zülch: There is no general answer to that. But what is true is that Hertha would have to greatly reduce personnel costs if they were relegated. This is an opportunity to reposition yourself, to set realistic goals, to get rid of old baggage and to invest in your own strengths: the next generation.

Despite the 375 million euros that Lars Windhorst invested from 2019 to 2022, Hertha could not get a license for the 1st or 2nd Bundesliga. An insider spoke in the “SZ” that it was the worst case that the DFL had ever had. How could this happen?

It’s an open secret that neither Windhorst nor Hertha BSC knew what they were getting themselves into. One searches in vain for a concept for cooperation. How much money do you invest and what goals do you want to achieve? This strategic orientation was not recognizable. There is currently a kind of vacuum.

Business expert Henning Zülch holds the chair for Accounting and Auditing at the HHL Leipzig Graduate School of ManagementPhoto: Michael Bader

Is it an advantage that Hertha’s new investor “777” is more deeply rooted in football?

There are also two parties involved. The presidential election shows us that Hertha took little away from contact with Windhorst. Because you have to invest in professionalism and get away from club thinking if you want to achieve high sporting goals or want to establish yourself in the top German league. We’re not in amateur football anymore. And yes: The experience of “777” could only offer advantages for Hertha in the long term if you want it.

“777” owns shares in six professional clubs and has extensive experience in professional football.

This investor does not do charitable work, of course he is interested in the success of the club. Berlin is extremely attractive as a location. A capital has political and social advantages. In addition, this city still offers so much potential in football that people say: “If we do that with you, we can make the club what it is supposed to be. A figurehead in Europe.” This can be a win-win situation for both parties if done well and the right people are in the right place at the right time.

“777 only in the casino! Against investors in the club”: Hertha fans make it clear what they think of the new donor. Bild: imago images / Jan Huebner

So, despite the licensing problems, Hertha is looking forward to a bright future?

No. On the one hand, Hertha is in an extremely tight financial situation. Even the smallest wrong decision can have devastating consequences. On the other hand, Hertha will not be positively shaped with the current protagonists and structures. What I hope for is that the investor will push for new, professional organizational structures. Hertha has to establish that in order to be successful. At the same time, an intensive dialogue with the fan base is to be carried out in order to make it clear that the new partner “777” wants to work long-term in the interests of the club’s success.

These professional structures do not currently exist under President Kay Bernstein?

On the one hand you have a president who is clearly rumored that he wants the second St. Pauli in the first division – which, by the way, is itself highly commercial. On the other hand, he has to keep an eye on over-indebtedness and financial hardship. The appearance and the statements do not suggest that the path of professionalization should be taken. You want money without changing yourself for it. It will not work. Investors aren’t going to pour money in and end up saying, “It was nice with you guys that we burned everything.” It is important to understand that investors are not harmful to the league if everyone involved develops a concept to achieve sporting success through this “increase in value”.

Is Bernstein the wrong president?

Let me put it this way: every club gets the president it deserves. If you look at the development of Hertha in recent years, this choice was only logical. The positive thing is that it strengthens the basis and creates identification. However, the open question is: Does he have the sense of reality for the economic and sporting necessities and the need for further professionalization. The reader can answer the latter question himself.

Coach Pal Dardai and President Kay BernsteinImage: dpa / Soeren Stache

So it takes a balancing act between being close to the grassroots and financial foresight.

We’re in the entertainment business, and you just have to accept that. The club moves around 100 million euros in sales. It’s a medium-sized company, you can’t run it like a chip shop. I have to have clear visions and strategies and know where the club wants to be in five years. In my opinion, that was and is not recognizable.

Union Berlin’s President Dirk Zingler said in the “Welt am Sonntag” that Hertha BSC is the worst example in front of the door and that an investor only brings harm. Has the example of Lars Windhorst negatively influenced the openness of the Bundesliga club to investors?

Lars Windhorst’s cooperation with Hertha BSC has certainly damaged the Bundesliga because it was done extremely badly. To conclude from this that investors are bad for the Bundesliga is absolute nonsense. It depends on the willingness to cooperate, the concept and the people involved. It just didn’t work out at Hertha.

Investors have always been rejected in German professional football. They are accused of having little heart and an enormous amount of greed for profit. Where does this bad reputation come from?

In many cases, this bad reputation comes from the fact that it has simply been done poorly up to now and the parties have not given any thought to how the money should be used successfully in the substance of the respective club in the long term. The money is usually only used to close gaps. Hertha did that impressively with the millions from Lars Windhorst. They averted the precarious equity situation and over-indebtedness without really investing in the club’s substance.

And if we turn the tables: has the Bundesliga become less interesting for investors?

There are currently other European leagues that are certainly more attractive to financiers or investors. Especially the often very controversial 50+1 rule and the flimsy discussion about a regulation that no longer exists discourages many.

Why?

Anyone who invests money wants transparency and a say in how it is used. You also want your bank to invest your money in the best possible way so that inflation does not burn it up. Risk must be minimized in the discussion between club and investor. To be clear: the 50+1 rule is to be endorsed; however, it clearly needs to be modified to satisfy the interests of all stakeholders – club, fans and investors.

Nevertheless, it ensures that salary costs and transfer expenses do not get out of hand like in the Premier League.

The framework conditions, that transfer income is increasing, that personnel expenses are getting out of hand, are marginal phenomena that the regulator, i.e. the DFL together with Uefa or possibly with Fifa, has to define. But that has nothing to do with the investment. Of course, where there is money, covetousness is aroused. This is to be curbed.

And what about the popularity of the Bundesliga among investors?

The sporting investment landscape in Germany has dried up due to the Lars Windhorst deal and the unrest at Hertha. We’ll see what else will happen in the next few months. Unfortunately, the German Bundesliga is not the heart of global football. The times are over.