Football is becoming more soap opera than sport and each character in the cast has their own legal team backing them up. As money pours into the game from sponsorship and media deals, the stakes have increased along with the legal complexities.
The story of manager Mark Hughes’s contract negotiations with his new club Manchester City was splashed across the back pages of the nation’s most colourful newspapers.
Behind the scenes, Hammonds corporate partner David Hull was busy thrashing out the details with Teacher Stern sports specialist Graham Shear. Hull acted for the club, developing a close relationship in 2007 with former Thai prime minister Thaksin Shinawatra following his £81.6m takeover of City through his company UK Sports Investments.
Shear bagged his first mandate from former Blackburn Rovers manager Hughes just a few weeks after advising the club’s new executive chairman, Garry Cook, on his contract.
The run of deals shows how football can be a closed club for lawyers. As the negotiations begin to involve more complex employment, IP and tax elements, lawyers with experience in big firms are in more demand.
Shear tells The Lawyer: “It’s a very close fraternity of people in these areas. You come across the same people all the time. We’ve seen Brabners [Chaffe Street] a number of times.
“I’ve got a group of very loyal clients who have referred me around. I’ve been handed around effectively. The more work you do, the more work you get.”
As a result, smaller firms without the big employment and IP departments of the national firms may find themselves edged out of the market.
“You need a reasonably sized firm nowadays,” agrees Shear. “A lot of the deals have big elements of tax, IP and media rights, corporate and employment, so you need a team. It’s really extraordinary, but the days of the tiny firms doing this kind of work are running out.
“Sport is becoming much more like the institutional corporate market,” he adds. “It’s growing up. Years ago you used to find the small local firm acting for their club, and it was all very cosy. But the amounts of money involved have increased and so have the legal complexities.”
The domestic football season has ended and despite England’s absence from the Euro 2008 championships, summer is still the most lucrative time for the lawyers behind the football deals. Sven-Goran Eriksson’s departure from Manchester City and Hughes’s arrival are prime examples.
There are a number of factors that have driven the legal complexity of transfer deals, but two stand out. Regulatory requirements for clubs and players have increased as football’s worldwide governing body Fifa attempts to get a grip on the actions of clubs and players’ agents.
Matthew Bennett, sports partner at Brabners, says: “No deal is straightforward any more. Football is trying to tighten up the rules. Clubs are now finding that they have to carry out mini-due diligence on deals and are instructing outside firms.”
At the same time, the value of media rights for players and clubs has increased, attracting big-money bids from foreign investors. West Ham United, Liverpool and Newcastle United have all been the subject of takeovers in the past few years, meaning that firms with corporate and finance expertise have been able to get a start in the football world. And they tend to be big City firms.
Shear says: “I think for the Premiership clubs, it’s all of them using the big firms. The complexities are significant now. For Championship clubs there are more cost issues and it’s not quite as unusual.” Manchester United launched its first legal panel in April, signing up five firms for a two-year term. Longstanding advisers Brabners was joined by Allen & Overy, Beachcroft, Halliwells, Pinsent Masons and Wiggin.
The formal review came in response to the need for specialist service. As Manchester United general counsel Patrick Stewart said at the time, the club is a “dynamic business involved in many diverse activities, which requires the support of a strong legal function”.
For example, Brabners will do the player transfer and regulatory work while Wiggin will handle media and Beachcroft will advise on employment matters.
And where Manchester United go, other clubs may soon follow. Philip Cheveley, corporate finance partner at Travers Smith and adviser to West Ham United, expects to see more clubs follow Manchester United’s lead.
“As the trend moves towards clubs increasing their legal spend there’ll be more formal tendering processes,” he predicts.
Football may be a soap opera to many outside observers, but the industry is also now starting to resemble the traditional corporate sector.
Big firms will tighten their grip at the top of the advisers’ league and footballers may find that their lawyers take home as much money as they do at the end of the year.