The Premier League continues to attract foreign investors in need of expert legal advice.
When US tycoon Malcolm Glazer launched his bid to buy Manchester United in 2005, it quickly became clear to lawyers on both sides that this was no ordinary takeover deal.
Allen & Overy (A&O), the firm acting for the Glazers, was bombarded with hostile emails from fans. Then, in a bizarre gastronomic protest, door staff at the firm’s London headquarters were reportedly forced to turn away hundreds of pizzas ordered by irate supporters.
The campaign was ultimately futile and Glazer took the club private shortly afterwards. At the time of delisting from the London Stock Exchange, Manchester United were valued at around £800m.
But the reaction of the Manchester United fans is an example of the extraordinary emotions surrounding the beautiful game – something that corporate lawyers rarely encounter in their everyday working lives.
“Football supporters are the most passionate customers you could come across. It’s certainly a factor for the buyers and sellers,” says Freshfields Bruckhaus Deringer corporate partner Chris Mort, who spent a year working for Mike Ashley as chairman of Newcastle United.
The Manchester United takeover was also one of the first examples of the flood of foreign cash now pouring into the Premier League. The richest clubs, Chelsea and Manchester City, are owned by billionaire private investors for whom football is an expensive hobby. This influx of money has aroused the interest of some of the UK’s largest law firms (see below).
This summer has already seen the attempted takeover of two more top-flight clubs, with both set to fall into the hands of foreign investors.
The controversial ongoing acquisition of Portsmouth FC by a Middle Eastern billionaire has attracted the most column inches, but the identity of the legal advisers was for a long time shrouded in secrecy. Even those close to the club seemed to have no idea which firm had been instructed.
Only this week did the story emerge (see lead story, opposite). Hammonds had initially won the call from prospective owner Sulaiman Al Fahim, only to be unceremoniously booted off the deal and replaced by Mayer Brown.
Sources close to the situation claim that Mayer Brown, which has acted for Al Fahim’s businesses in the past, undercut Hammonds on price. Others say that, as with many of the biggest football deals, it came down to the personal contacts of the bidder.
“I wouldn’t pay too much attention to comments about fees. It often comes down to personal connections,” says one partner connected to the deal.
Regardless, it is a blow for Hammonds, but not a fatal one. The firm has a top-tier sports practice, led by corporate partner David Hull, who acted on the £200m sale of Manchester City on behalf of former owner Thaksin Shinawatra in September last year.
At the same time, the Portsmouth deal will certainly put Mayer Brown on the map, as the firm had previously been best-known for representing the Football Association. Corporate partner Rob Hamill, who is still advising on the lengthy due diligence process, argues that potential investors are now turning to larger firms.
“Overseas owners are keen to use high-end firms for those deals. They see it as an M&A deal with some added complications,”
The law firms acting on the last takeover of Portsmouth FC seem to illustrate this point. The buyer, Franco-Russian investor Alexandre Gaydamak, used niche firm Stock Fraser Cukier for the deal in 2006, while the seller, Serbian Milan Mandaric, called on Thomas Eggar. The choice of three-partner Stock Fraser Cukier in particular is a surprising one given the size of the deal.
The other club already transferred into new ownership this summer is West Ham United. Again, the legal advisers remained a mystery until this week. The Lawyer now understands that Freshfields, led by Chris Mort, is acting for the new owners CH Holdings, fronted by the club’s largest creditor Straumur.
As for the other legal advisers, it seems likely that there were none. The deal has been reported as a takeover in the national press, but according to lawyers close to the matter it appears that the former owners simply handed over the keys to the debt-ridden club.
“This isn’t a transaction. This is a repossession,” says one corporate partner.
One firm, however, is notable by its absence. Travers Smith had acted for former owner Eggert Magnússon when he bought the club in 2007, and on a dispute with relegated club Sheffield United over the controversial signing of Argentinian striker Carlos Tévez.
However, when the club lost the Tévez case, it handed the appeal mandate to Brabners Chaffe Street. It remains to be seen whether Travers can rebuild the relationship and, indeed, what happens to West Ham given that Straumur, of which Magnússon is vice-president, had to be taken over by the Icelandic government to prevent its collapse.
The West Ham United mandate is unlikely to be the last for Freshfields, which has emerged as a leading force in football’s corporate deals. The firm acted for Manchester United during the Glazer takeover and represented Dubai Investment Capital when it considered a bid for Liverpool in 2006.
And Newcastle owner Ashley is known to be desperate to sell the newly relegated club. It would be astonishing if he turned to anyone other than Mort, who helped him buy the club and who he appointed as chairman between June 2007 and June 2008.
A&O is also set for a busy summer. The firm is understood to be advising key client Liverpool, which has until 24 July to refinance £350m of debt. Corporate partner Andrew Ballheimer advised US sports tycoons George Gillett and Tom Hicks when they bought the club in 2007, although the firm declined to comment on its current role.
Tantalisingly, Mort hints that he is also working on a number of high-profile football transactions that are not yet public.
“There’s a number of clubs where the owner would like to sell. We expect there to be a lot of activity over the summer,” he reveals.
For sports lawyers, as well as football fans, it is going to be an exciting summer.
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