A licence to print money

Under the guidance of chief executive John Smith, the company, which already manages players such as Paul Gascoigne, Nwankwo Kanu and Celestine Babayaro will, from Friday, add stars such as Emmanuel Petit and Patrick Anderson to its management stable following the purchase of Italian agency FIMO, for £15m. A 60 per cent leap in pre-tax profits has also persuaded City figures such as Brian Baldock, the former chairman of M&S, to join the First Artist board.

What football clubs wouldn't do for a 60 per cent increase in profitability.

But agencies can do many things that a football club cannot: buy competitors and diversify. But can it last, or will the agency bubble burst in spectacular dotcom fashion? On evidence, it appears that consolidation is the key to continued success.

Every one of the licensed agencies listed has acquired a competing agency and has diversified into other lucrative areas over the last 12 months. The consolidation has been encouraged by the forthcoming change to the European transfer system, supported by the Premier League, that will restrict player transfers to two specific 'windows', at Christmas and in the summer. For smaller agencies, such a restriction on their flow of income will inevitably result in an alignment with a larger operator.

Those agencies that remain will continue to diversify. The Sports Entertainment and Media agency inherited world heavyweight boxing champion Lennox Lewis following its takeover of Lewis's former agency in August. The move proved to be an excellent piece of business.

The Lewis purse for his fight against Hasim Rahman was $11m (£7.85m) from which SEM collected a fee of nearly £700,000. They can now expect between 5-10 per cent of the $30-40m (£21-28m) figure being discussed for a Lewis-Tyson fight.

CSS Stellar snapped up theatrical agency Peters, Fraser, Dunlop last month for £22m, adding the managementof film stars such as Ewan McGregor and Kate Winslet to its existing stable that includes Real Madrid's Luis Figo and the England football team. To date, the most innovative football agency has been Premier Management, which last Monday reported a 76 per cent jump in pre-tax profits.

Premier has around 150 players on its books, 80 per cent of whom perform outside the Premiership. It differs from other agencies by signing players at an earlier stage of their careers, a riskier strategy, but extremely lucrative if they become future Michael Owens. The agency has recently signed several England Under-16 internationals.

The company also specialises in advancing money to football clubs for a share in a young player's future transfer value. Premier has invested £2.2m in what it hopes will be future stars. The arrangement allows lower-tier clubs to hold on to their young stars for longer than they may have been able.

As the young player has the opportunity for more first-team football at a non-Premiership club, the hope is that his value will increase. When the time comes to sell the player, the club can command a higher transfer fee while Premier gets a return on its investment. The future appears rosy for those sports management companies that have the ability to diversify, to arrange sponsorship, manage and own specific sports events, handle public relations, television production and media rights.

Furthermore, some agencies believe that one effect of the new transfer system will be to reduce players' signing-on fees and to increase salaries, even more of a reason to steer clear of investment in football clubs and, perhaps, take a closer look at agents.