05 July 2009

Protecting your Assets – A Case Study of the 2009 Canadiens

As a relative novice to the business world, I have been exposed in the last couple years to countless words of wisdom and rules to live by—keys to success, or so I’ve been told. Among those, and one that stood out even to my rookie rationale, was what my father told me to be the most important aspect of any business endeavour, period: “Always protect your assets.” Touching far more than strict financials, a company’s assets encompass its entire structure of available resources, from top to bottom. A company is only as good as its assets, my father reminded me, and so they should never be put at risk, no matter the pressures and realities facing the business.

This was a lesson that rang especially true to me while watching this year’s edition of the NHL’s ‘Free Agent Frenzy’ unfold. What’s most attractive about free agents (overpaying aside), of course, is that they cost your organization nothing more than the terms of the contract tendered—not a player, not a prospect, not even a draft pick, just commitment and cash. In other words, acquisition via free agency offers a means of adding assets without subtracting any others.

gainey Generally, teams will use free agency to address specific needs, be it the need for a ‘big-ticket’ talent to push a Cup contender over the top or a couple of role players to fill holes in a club’s roster, including vacancies left by players entering free agency themselves. This year, the Montreal Canadiens have broached free agency in a manner unlike any NHL franchise has before, and offer a potentially valuable case study in asset management at the NHL player level.

Montreal entered the 2008-09 season with 10 UFA’s (not to mention RFA’s) on their roster and with a club policy not to negotiate with free agents during the course of the season. As the season progressed and soured, many were quick to point toward the team’s free agency status as a root cause. More alarming still, however, was the team’s reluctance to hold discussions with any of their UFA’s until the week leading up to July 1st, at which point it was reported that Montreal had begun negotiations with Mike Komisarek, who had been identified as the club’s priority, and that the Canadiens would not be offering contracts to their other UFA’s until after July 1st, if at all.

To date, Komisarek remains the only Canadiens’ UFA to have signed a contract for next season, inking a five-year deal with the Toronto Maple Leafs. By this outcome alone, Bob Gainey can be judged to have erred; by allowing the one player he had identified as a priority to enter free agency and sign elsewhere, he failed to protect one of his most valuable assets—an asset that now belongs to one of their closest competitors, no less.komi

The question reverberates—if Mike Komisarek was Montreal’s #1 priority at the conclusion of a very disappointing season for the blueliner, was he not a priority last summer? and if so, why was a contract extension not secured then? Had they gone the route of Columbus with Rick Nash and negotiated an extension prior to entering the final year of his contract, I am confident that Mike Komisarek would still be a Canadien today.

If the reports are true, Komisarek and Alex Kovalev are the only outgoing UFA’s to have received any type of contract offer from the Canadiens, and it currently appears that none of Montreal’s 10 UFA’s will return with the club next season. Should that prove to be the case, the 2008-09 Canadiens must be deemed an unmitigated disaster in asset management. Regardless of whether or not free agent acquisitions Cammalleri, Gionta, Spacek and Gill can supplant the outgoing members of the Canadiens, the fact remains that Montreal had 10 assets within their organization already (assets in which they had invested heavily) that they have allowed to walk away without anything to show for it.

Montreal’s moves this off-season have been interesting, aggressive and controversial. More than any of these adjectives however, Montreal’s moves have been forced—forced by necessity to overpay to replace a large group of effectively forfeited assets. While teams will always lose players to free agency (be it due to salary cap constrictions, disputes with management or because the player no longer fits into the team’s plans), losing half of your roster all at once should not and, I dare venture, will not happen again at the NHL level. By the example of the Montreal Canadiens (results notwithstanding), structuring a team to conclude their season with so many assets at risk must be deemed reckless and potentially disastrous.

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