"My reaction when the deal went through was: ‘That is about £15m more than I expected him to go for’," he said on Sky Sports’ Sunday Supplement show.
"But then my reaction after that was: ‘Yes, he is the one that they need and maybe they could now finish second with him going in there now.' Now if he does that, then it is worth it.
"You have Naby Keita coming next year, you possibly have Thomas Lemar coming next year and they are moving in that direction now.
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Jurgen Klopp has welcomed Virgil van Dijk to Liverpool with Naby Keita to arrive in the summer
Craig Burley says Thomas Lemar a good fit for Liverpool
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"And also with that level of fee, you are now talking about Liverpool in terms of the money Man City have spent, the money Man United spend, they are moving ahead of Arsenal and Tottenham in terms of the sort of fees they are paying now.
"So it moves them to a different sort of level suddenly in terms of their ambition and the way people might perceive them and you start to look at the team slightly differently now."
Liverpool are facing the prospect of potentially losing Philippe Coutinho though, with Barcelona desperate to take the playmaker to Spain.