Law firms will always be willing to be players in lucrative soccer deals
It is more than a little unusual for a £300m takeover bid to attract quite as much interest or generate quite so many column inches as this one. But anyone who took in the scenes at the High Court last week will testify to the fact that the battle for control of Liverpool Football Club is no ordinary boardroom barney.
“It’s unique in my experience,” comments one senior litigator close to the matter. “It might not be the biggest amount of money but in terms of the amount of stakeholders, it’s huge.”
Last Wednesday’s judgment from Mr Justice Floyd against the club’s current owners, Tom Hicks and George Gillett, and their attempts to oust the Anfield board should now pave the way for a takeover from another US bidder, New England Sports Ventures (NESV).
But with events moving faster than Fernando Torres in the penalty box, ’should’, at the time of going to press, was very much the operative word.
NESV, which already lists baseball franchise the Boston Red Sox as its most famous asset, has turned to Shearman & Sterling for corporate advice. Corporate partners Creighton Condon and Laurence Levy are leading for the US firm on a deal that, at the time of writing, looked to be the most likely to ultimately result in ink touching paper.
For the sellers, Weil Gotshal & Manges took the mandate, led by London head Mike Francies. Slaughter and May confirmed its position as the go-to firm for any English club with a big corporate matter on its hands after winning the instruction from the Liverpool board under the lead of Nigel Boardman.
But the story, as has been the case with most matters involving the club in recent years, is not that simple. There are two other potential bidders on the table, each with their own counsel in tow.
First into the fray came a Singapore consortium led by billionaire tycoon Peter Lim, advised by Macfarlanes and local firm WongPartnership, which put in a bid reported to be worth around £320m – higher than the NESV offer. This news was swiftly followed by the emergence of a bid from Mill Financial, the hedge fund that bought Gillett’s 50 per cent stake in the club, with Mayer Brown UK corporate head Peter Dickinson and partner Kate Ball-Dodd brought in to advise.
The deals – which Hicks and Gillett claimed were not adequately considered by the club’s board, leading in turn to the attempted coup that then led to last week’s day in court – muddied the waters ahead of the showdown.
And even after the emphatic victory for the club and its English board members, the Americans got themselves an injunction from a Texan court, delaying the takeover once more.
Whether the audacious move by the owners is successful is yet to be made clear. What is not in doubt is that they feel their asset is under-valued by NESV.
“It appears that Hicks and Gillett were just playing for time and trying to create obstacles [to the deal] in order to improve their own position,” comments Berwin Leighton Paisner litigation partner Graham Shear, who lists a number of football clubs among his clients. Another problem is assessing the bids while the deal is run on a necessarily tight timescale.
“Evaluating the strengths of the bids is very difficult given the little information that’s in the public domain,” adds Shear. “It could be that some of the other offers are too heavily provisioned.”
The High Court case brought the owners up against Royal Bank of Scotland (RBS), which is owed £237m, borrowed to finance the original purchase of Liverpool in 2007. The list of firms coming along for the ride, whether on the litigation or M&A side, is epic.
Along with Weil, Slaughters, Macfarlanes and Mayer Brown, Baker & McKenzie’s US litigation team has saddled up to advise the board on the Texas injunction. Freshfields Bruckhaus Deringer M&A litigation partner Patrick Swain, meanwhile, is acting for RBS, along with finance partner Alex Mitchell. Clifford Chance is also understood to have a role acting for Liverpool’s financial adviser Barclays Capital.
But as the saga rumbles on, the question remains as to whether this is the last hurrah for the type of highly leveraged deals that have allowed football clubs to change hands so readily in the past few years – and whether acting for football clients will continue to be attractive for leading firms.
“It’s like any other business,” says a leading City sports M&A partner. “Leveraged deals are difficult [to do] anywhere but if they come back, they should come back in football as well.”
But there are certain elements that render football clubs tricky assets to value, not least the influx of competitors – most notably at Chelsea and Manchester City – waving open chequebooks.
“On any M&A market you’re looking at potential,” says a magic circle partner with experience advising in the sector. “But with football, you’ve got a market with a number of people who are acquiring clubs not for classically M&A reasons.”
Shear is one who expects there now to be a rationalisation of the way football clubs are bought and sold.
“The emphasis on the balance sheet will be to ensure there’s proportionality between spending and revenue,” he explains.
But Shear insists that football will nevertheless continue to be treated as an important part of firms’ corporate practices.
“It provides a much higher profile than other businesses,” he adds. “It allows financiers, lawyers and advertisers to promote themselves in ways that other businesses don’t.”
Protracted, complicated and unstable as it may be, the Liverpool story is unlikely to stop the game being a money-spinner for firms and their clients.