# What is FBM replacement value?

With FBM replacement value we calculate what a club is to be expected to pay minimally to replace one of their players. This calculation is based on the following stats:

1. The FBM players stats. There are four FBM players stats:
1. The probability to be able to contribute to the team overall.
2. The probability to be able to contribute to the finishing of the team.
3. The probability to be able to contribute to the passing game of the team.
4. The probability to be able to contribute to the defense of the team.
2. The historical transfer fees actually paid for the position of the player in the current league.
3. The rank of the team in the table.
4. The player’s age.
5. The player’s length.
6. The player’s international status.

Replacement value calculates the amount of money a club probably needs to spend to get a replacement player coming to the club. That means that replacement value is more about the new player coming to the club then the player leaving the club. So replacement value is not the most likely transfer fee, but can be used to determine a fair transfer fee by the selling or buying club, or both. That is the reason why replacement fees at some clubs are so much lower than expected transfer fees. These are smart clubs that hire new players for low transfer fees and let them go for high transfer fees. So for example Jurrien Timber of Ajax is expected to leave the club for a transfer fee of thirty million euro. Yet, his replacement value is “only” ten million euro. Yet, this is the amount Ajax needs to spend to get a player back who will produce the same stats as Jurrien Timber.

The way the calculation works is that we start with the perfect player. The FBM player stats are created by using Bayesian statistics. The highest possible probability to be able to contribute is 100%. That means that the perfect player has 100% probability to be able to contribute to the team overall, 100% probability to be able to contribute the finishing of the team, 100% probability to be able to contribute to the passing game of the team, 100% probability to be able to contribute to the defense of the team. Furthermore, the perfect player also has the perfect age and perfect length based on the length and age that have historically gotten the highest transfer fees. The perfect player also plays for the #1 ranked team in the league and he plays for the national team.

Such a player has never yet existed. Even Messi, who scores 100% probability to contribute to the team overall, in finishing and in passing game for most of his career, had a low probability of being able to contribute to the defense of the team.

Nevertheless, even though the perfect player has never existed, we take it that if he did exist, a club should have paid the all time highest transfer fee for that particular position in that particular league for him. In other words, the all time transfer fee actually being paid is to be taken to be paid for the perfect player even if in reality it was not. We don’t want to extrapolate based on the highest fee ever paid, because that fee might be a market top.

The next step is to check how long ago this top transfer fee was paid and what has happened to the transfer fees paid for that particular position in that particular league. We do this because the market might have topped and we have to take into account that transfer fees in the future go down. This gives us the top transfer fee for the perfect player in the current season.

Finally we calculate how different the actual player is from the perfect player and this gives us the ratio between the actual player and the perfect player. The replacement value is calculated using this ratio and the top transfer fee for the perfect player for that particular position in that particular league.

## How replacement value works for clubs and agents

Replacement value is not the most likely transfer fee. The transfer fee is whatever clubs and agents can get away with. Replacement value helps clubs and agents in their negotiations though. Because if club A pays club B a transfer fee that is above the replacement value of the player for club A, then club A is being weakened as the overpay and now have less money available for other transfers. The same goes the other way: if club B sells a player for less than the replacement value of the player for club B, club B is being weakened because they got too little money for the player and have less money left to spend on a replacement or for other players.

Fortunately, this means that it is possible that a transfer is a win/win for both clubs. This is due to the fact that replacement values are specific for each and every club. Player valuations like those on TransferMarkt suggest that the player has an intrinsic worth. This is a statistical mistake. The player only has a value to a specific club. If no club wants a certain player, no matter how high that player is valued, his future transfer fee is zero. So player valuation always needs to be made in the light of the club he is currently playing for and the club he is going to play for, including possible differences in leagues and the rank in the league of both clubs. That means that it is possible, even quite common, that the transfer fee is higher than the replacement value of the player for the club selling the player and at the same time lower than the replacement value of the player for the club buying the player. Both clubs are strengthened by the deal and it is a win/win situation.

Of course, in more cases one club profits at the expense of another club. In that case in very real terms (i.e. money) one club is getting stronger and the other club is getting weaker. So it is very important for clubs to keep checking whether their deals are favorable or not, in the light of the replacement value of the player.

To give an example of how this worked out in practice, we advised one of the consultants working for Willem II in regard to the transfer of Fran Sol to Dinamo Kiev. According to TransferMarkt the value of Fran Sol was 6 million euro at the time. Willem II was trying to get this amount from Dinamo Kiev, but Dinamo Kiev was unwilling to pay this amount. In our calculations Fran Sol had a replacement value of only 2 million for Willem II and 4 million for Dinamo Kiev. So any amount between 2 million and 4 million would be a win/win for both clubs. The final deal was for 3.5 million euro.

Given that the player’s age is a factor in the calculation of the replacement value, one can easily calculate the replacement value of a player in the future. This way clubs and agents can see whether a potential transfer has the chance of being profitable if the player leaves his new club after one or two seasons. That is how we were able to predict that Dalmau, who came to Heracles as a free agent, would have a replacement value of 1.75 million euro one season later. Indeed, after one season playing for Heracles he was transferred to FC Utrecht for 700.000 euro plus the transfer of Dessers to Heracles. Dessers at the time was valued at 1 million euro, bringing the value of the complete deal to 1.7 million euro, very close to the replacement value of 1.75 million euro we predicted for Heracles. Dessers left Heracles also after playing there for just one season for a 4 million euro transfer fee.

## Why there, sometimes, is a big gap between FBM replacement value and transfer fees valuations

Take the interesting case of Noussair Mazraoui

His replacement value is 6.5 million euro playing for Ajax in the Eredivisie. Yet, his valuation at TransferMarkt is 20 million euro. Noussair Mazraoui is leaving as a free agent, so we will never know what the transfer fee would have been, but it doesn’t seem that Ajax has gotten a very attractive offer for Noussair Mazraoui.

Nevertheless, there is a big gap between 6.5 million and 20 million. This gap is a great example of why replacement value is not the same as transfer fees. The FBM replacement value is a measure for Ajax to limit their spending on a replacement for Noussair Mazraoui to 6.5 million euro. We might be mistaken, but we think it is highly unlikely that Ajax would spend more than 6.5 million euro. Cases like these validate the replacement value model.

Some superstar players have extremely high valuation on sites like TransferMarkt. Mainly because they play in one of the best leagues for some of the best clubs, often getting very far in the Champions League. These high valuation are more a token of appreciation than a likely transfer fee as most of these superstar players will stay with their current club until (almost) the end of their career. Without the prospect of a transfer, the real value of those players is much closer to zero than the extremely high number quoted everywhere. So once more clubs find more use in the replacement value of those players as at some point they have to replace their retiring superstars with other players.

Even though FBM replacement values are not meant to predict future transfer fees, in 2 out of 3 cases FBM replacement values are closer to the actual transfer fees than the valuation at TransferMarkt.

## Undervalued players

Even though replacement value is really about the next player coming in to replace the current player, if the replacement value is much higher than the actual valuation, then one still can say that they player is undervalued. The reason being that if the club were to sell their current player for the valuation fee and then had to hire a new player for the much higher replacement value, they would lose a lot of money. Hence players whose replacement value is much higher than their public valuation are undervalued. Here is a list of some of the undervalued players we have found.