The changing face of football finance means lawyers are in the thick of it
15 February 2010 | By Gavriel Hollander
6 December 2013
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24 November 2013
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2 June 2014
A ’premier league’ of advisers has arisen to tackle clubs’ money issues. By Gavriel Hollander
Source: PA Wire/Press Association Images
The financial arrangements at football clubs have come a long way since the days when maverick Derby County manager Brian Clough used to go behind his chairman’s back to sign new players. Back then the sports pages and business sections were different universes, and never the twain shall meet.
How things have changed.
This season alone Portsmouth’s seemingly endless carousel of owners, Crystal Palace’s fall into administration and Manchester United’s £500m bond issue have all brought football financing into the public eye more than ever before and created an ever-increasing supply of highly specialised work for lawyers.
In many ways the work should be no different from the usual round of buyouts, bankruptcies and debt restructurings that are meat and drink to experienced City finance partners. But there is an extra ingredient when it comes to the Beautiful Game.
“There are nuances at football clubs as a business that need specialist skills,” says Satish Khandke, a partner at sports boutique Couchman Harrington. “There are elements that aren’t a factor in other businesses, like relegation or fan loyalty.
“If a supermarket goes bust people go to another super-market. That doesn’t happen with football clubs.”
Mayer Brown corporate partner Rob Hamill agrees that the rules are different for football clubs. “It’s the same and it’s different,” he says. “In many senses they’re normal companies, but they don’t operate on normal principles.”
Hamill is among a small army of lawyers to have been involved in the saga that is the ownership of Portsmouth, having advised Sulaiman Al Fahim on his June 2009 purchase and October 2009 sale of the club. It is a story for which the word ’normal’ is certainly not appropriate.
The club has had four owners already this season and last week narrowly escaped becoming the first Premier League club to be wound up in the High Court (although there is a further hearing scheduled for this week (17 February)). Southend United and Cardiff City also received stays of execution and will return to court next month.
Mayer Brown is one of a clutch of firms to have acted for Portsmouth or for its owners or creditors over the past few months. Others include Berwin Leighton Paisner, Couchman Harrington, Denton Wilde Sapte, property boutique Fuglers, Jones Day and Taylor Wessing.
Portsmouth’s ongoing crisis is mirrored in part at London club Crystal Palace, which went into administration last month amid spiralling debt. Dentons was again involved, with restructuring partners Rachel Anthony and Richard Cook advising Palace owner Simon Jordan. DLA Piper restructuring partner Richard Obank is advising administrators P&A Partnership.
Palace is just the latest in a growing list of clubs to have gone into administration in recent years. Bradford City, Leicester City, Southampton and, most famously of all, Leeds United have all called in the administrators over the past decade.
Even the giants of the game have - albeit to a more manageable degree - hit financial trouble. Man Utd’s unprecedented bond issue was the biggest single financing deal the football world has seen and was used to offset debts incurred as part of Malcolm Glazer’s 2005 takeover. Allen & Overy and Latham & Watkins secured roles advising the issuer and lenders respectively.
HM Revenue & Customs is understood to be coming under increasing pressure from the Government to tighten up its tax collection procedures, while banks are not as easy with their credit as they once were. The result is that clubs that once operated in financial bubbles are having to face the cold, hard facts of free market economics.
Tim Stocks, a corporate partner at Taylor Wessing, is one who disagrees that the business of football should be treated differently.
“It’s an industry going through a big change,” he explains. “It’s a change that’s only just started, so there’s a lot of work out there; but I don’t think the business dynamics in football are any different, or the issues any more complex, than in any regulated industry.”
But it cannot be doubted that football clubs were more susceptible to the lure of easy credit than similarly sized corporations.
“Portsmouth’s a case in point,” says Khandke. “When Premier League money was rolling in, pre-credit crunch, and when lending criteria were less stringent, there was an outlook that said banks wouldn’t take the ultimate step. Now that’s changed.”
For better or worse it seems that, for a long time, football clubs were treated differently. And perhaps not coincidentally, the boom years of the mid-2000s came as the Premier League was turning into a licence for the leading lights to print money. The example of Portsmouth - its High Court reprieve notwithstanding - could be the first sign that the chickens are coming home to roost.
A sports specialist at a West End firm says the writing was on the wall a few years back.
“If a business the size of Liverpool went to RBS to borrow £200m and they weren’t involved in football, they would have had a very hard time,” he says.
The changing attitude might be a timely reality check for the game. As a City partner with experience of advising a top Premier League club puts it: “The size of clubs - even Man Utd - is still relatively small, so we need to keep them in perspective.”
Either way, the pressure for clubs to reduce their debt mountains, and the increased threat from creditors, should keep plenty of firms busy for the foreseeable future.
Clough might be spinning in his grave, but it means the most important signatures this year could be on the heads of agreement, not on players’ contracts.