Analysis

Game-changer! Dwyer’s record move opens a new era of MLS megadeals

Gary Rohman-USA TODAY Sports

MLS' surge in allocation money gives teams incentive to make blockbuster deals.

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The record-setting trade of Dom Dwyer from Sporting Kansas City to Orlando City on Tuesday may set precedent, but it’s not just the amount – $1.6 million, split between $900,000 in guarantees and $700,000 in “incentives” – that matters.

Conversations with multiple front-office officials around the league, including a teleconference with Sporting Kansas City head coach and technical director Peter Vermes, indicate that this trade is structured with payments spread over multiple years, at least two years and probably three.

It’s a trend that started to pop up publicly with the Dax McCarty trade, when the Chicago Fire sent the New York Red Bulls $400,000 in allocation spread over two years. If the Dwyer deal is indeed spread out across three years, it begins to open up a new pathway for teams to afford intra-league trades for almost any other player, depending on other roster restrictions. It also gives selling teams the opportunity to set themselves up for salary cap flexibility for multiple years to come.

"You can imagine the resources for us, and we are looking at this as resources that we can start working with for probably over the next two to three years," Vermes said. "I would say it to you this way, if we got all the $1.6 million today, we would be pretty inefficient in the way we were putting our roster together, if we used it all up now. Instead, we are allocating that over a certain number of years to a certain number of deals to get the best usage of that money."

Said one MLS team executive: “Peter was very, very smart how he structured this deal.”

SKC’s careful accounting opening eyes across MLS

Major League Soccer does not like its teams to use funds it cannot guarantee in trades. Legally, that could cause problems. So let’s look at what we know: Orlando City will receive $200,000 in GAM in January, per the Collective Bargaining Agreement, and at least $1.2 million in Targeted Allocation Money. Those numbers would be supplemented by whatever General Allocation Money and TAM the club already has in its stash, equaling the total Orlando could deal.

Three MLS sources doubted Orlando City has enough to fulfill the full $1.6 million right now. One Eastern Conference team executive said it was most likely the guaranteed money was structured over two years and that some of the incentive-based cash may trickle into a third year of payments.

The league and the teams did not specify how much of the $700,000 in incentive-based money is TAM and how much is GAM, nor in what years the money will be paid – the new transparency extends only so far – but depending on Sporting Kansas City’s preference, the club would be able to specify how much of each is payable on certain dates.

A second Eastern Conference front-office source agreed that Vermes’ structuring of the deal “very, very smart,” pointing to both the longevity of the allocation money and the amount of usable allocation received by keeping the deal inside MLS instead of selling to an outside team. MLS teams can use a maximum of $650,000 from any sale of a player as allocation money. The rest goes to MLS, the owner and other areas of team investment, i.e. the academy, scouting, analytics, training fields, etc.

Essentially, the $1.6 million acquired is more than double what he would have received by selling Dwyer outside MLS for, say, $3 million, which would have been given Sporting a net of $650,000.

Vermes acknowledged that making a trade within MLS was a game-changer for his team. It also helped that Orlando offered well above the previous record of $650,000 for a trade.

Sporting Kansas City would have had to sell multiple players to infuse its cap with that kind of allocation money. There is now, in some cases, way more incentive to move players via trade within the league than to sell abroad, provided the owner is on board and the club’s biggest need is cap flexibility.

“The interesting thing about what all this TAM money has done is it’s created an asset market,” said a Western Conference team executive. “MLS teams can’t give each other cash, but this is a way of doing that. It’s more restricted, but for the first time ever, we know we have enough allocation in the system that these types of things are possible, whereas in the past there was no ability to do that. This is the way we move going forward. …

“It’s year three of TAM and teams are getting more creative with how to use the TAM. Now with more time to work and more time to see the system, we’re seeing teams budget more for their future, and this TAM money helps that. I expect this to increase.”

Vermes also said he was “100 percent convinced” all “incentives” in the deal would be achieved, including some as early as this weekend. So, if you’re asking why Sporting Kansas City made the move, it comes to down to a long-term view. 

Spending $1.6 million on a striker is not a big deal anywhere else in the world. In some ways, it’s not even a huge deal in MLS. There are plenty of players who were purchased for more in the last transfer window alone. But $1.6 million in allocation money is a totally different beast. It’s been described to me as a “magic button,” of sorts, for teams, and Vermes & Co. are rolling around it in like Scrooge McDuck.

If they can find a decent replacement for Dwyer this season – a source indicated to me that Sporting was in talks with the Columbus Crew about the top spot in the allocation order as it worked to bring Krisztian Nemeth back to MLS – then the short-term remains viable as well.

The reward – and huge risk – for Orlando

The implications for Orlando City are more complicated. Dwyer is an elite goal-scorer in MLS, but he has six fewer goals than Cyle Larin since the start of the 2015 season. This move prepares Orlando City for losing Larin in the transfer market, most likely in January, when the club would be eligible then to collect two-thirds of the transfer fee versus 50 percent if he is sold in the current window. However, one source said there are multiple offers for Larin, including a UEFA Champions League-eligible club, that could prompt a move to happen in this summer window.

Already, some believe Orlando could become a selling team in January to recoup most of the allocation money it used to acquire Dwyer.

The sale of Larin might also be used to lessen the hit of the $1.6 million, as $650,000 of allocation money would be infused into Orlando City’s account if the club sells Larin for anything more than $976,000. Orlando City might also look to sell or trade players like Cristian Higuita or Carlos Rivas as it continues to build the roster in head coach Jason Kreis’ image.

More of note, however, is that Dwyer and Orlando City have not yet engaged in contract talks of any sort, per a league source. Dwyer has already turned down a $1.25 million deal from Sporting Kansas City, according to a Goal.com report, so he won’t come cheap. In addition, there is a bit of a deadline. Dwyer is just one year away from being able to sign a pre-contract to leave on a free transfer. Oh, and what’s going on next summer? The World Cup, that little tournament where Dwyer might be able to multiply his value.

Dwyer debuted for the U.S. men’s national team last month after acquiring citizenship, and he looks very much like a candidate for Russia 2018. He also does not need to qualify for a work permit to play in England, since he’s a British citizen. With the World Cup ahead, Orlando City paying out $1.6 million in allocation – nearly 2.5 times more than the previous record – and with the ability to leave for free and sign a pre-contract in one year’s time, all of the leverage rests with Dwyer and his agent.

To make this deal worth it, Orlando City is going to have to make an extremely strong offer to Dwyer and hope he continues to score as he moves into the peak years of his career. If he leaves on a free, this would look like a massive mistake for Orlando.

For everyone else, though, this deal is all about the precedent it sets.

The Dwyer trade shows that everyone has a price, and it proves that there is real value to moving players within the league and generating a more active trade market. If buying teams can spread out those fees and ease the financial burden in the short term, and selling teams can spread out the financial flexibility over multiple years, suddenly it gives MLS general managers a damn good incentive to go make a deal.

In a league where that incentive largely hasn’t existed, it’s an absolute game-changer.

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