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Month: April 2024

Pitch perfect: A guide to purchasing a football club

Posted on by fluroltd

English football has seen a significant rise in the number of football clubs being purchased over the last 5 years, and, with the recent success of clubs following a takeover, such as Newcastle United there seems to be no slowing down of this trend. The recent White Paper has accelerated reform to club football governance, which has revamped the purchase processes. But what sets acquiring a football club apart from regular corporate transactions?

This article delves into some of the aspects of corporate transactions that needs to be considered throughout various stages of the deal.

Identifying a prospective club
To the average fan this may be considered the easiest step of all; simply select a club in England and contact the shareholders with your offer. Contrary to this belief, there is significant amount of work required to even get to this stage. Despite operating like any other business—clubs face unique scrutiny from fans, media, and governing bodies. Football clubs are more than just businesses; they are embodiments of community identity and heritage. Consequently, any change in ownership can evoke strong sentiments and rightly requires careful management of fan engagement.

To add to the complexities, the position of the club within the English football pyramid determines several factors such as the club’s infrastructure, revenues, liabilities, and the regulations it must adhere to. As a rule the closer the club is to the Premier League, the more revenue, but not necessarily profit it will generate and the higher the regulatory and financial standards that will apply to it. However, with the possibility of promotion and relegation, that position can easily change without the right plan in place.

Furthermore, fan ownership groups and community organisations and who owns the ground can often play a major part and must be given proper consideration when selecting a club. A handful of clubs across the UK are owned by fan-ownership groups, including AFC Wimbledon, Exeter City, and Bury AFC.

The offer
This stage includes the first of many traditional M&A processes. There are two types of purchase: the purchase of shares or the purchase of assets. To achieve either purchase, there are two routes that can be taken:

  1. A conventional sale between a buyer and a seller; or
  2. An auction-style sale where multiple buyers submit their bid.

The auction style sale, most recently used by Manchester United and Chelsea, can often generate a higher sale price through competitive tension provided the market demand is significant. This process can be highly publicised, which can have its advantages and disadvantages, however, this option may not be desirable.

A non-auction sale normally provides for a period of exclusivity between the respective buyer and the seller where the negotiation can take place with added comfort of no competitive bids afforded to the buyer.

Regardless of which option is taken, the sale process can take up to six to twelve months.

The offer will be subject to further due diligence, as mentioned below, and the offer price can fluctuate or become the main obstacle to concluding a deal following the due diligence process.

Due diligence
Part of the process of identifying the chosen football club will arise from some public due diligence analysis considering aspects such as the club’s league position, its supporters, the geographic location, its sporting capabilities, the potential for expansion and development of the ground/stadium before entering the formal due diligence phase. Just like with any other business, the due diligence process will require a deeper dive into the inner workings of the football club together with the football specific enquiries.

These include preliminary assessments which are crucial in forming the basis of the Heads of Terms. The formal due diligence process will require expert advisors to scrutinise various aspects such as financials, tax, employees, commercial contracts, governance structures and football specific matters. Due diligence ensures an informed decision-making process.

Corporate transactions in football demand a nuanced approach, navigating fan sentiments, the regulatory landscapes, and unique revenue models. As the game evolves, so must the strategies driving football club acquisitions, balancing tradition with modernity for sustained success.

Regulatory scrutiny and governance
The football industry operates within a tightly regulated framework governed by a quasi-legal system that is formed through international and national governing bodies, including FIFA, UEFA, the FA, and through individual league organisers such as the Premier League and the English Football League.

Depending on the league of the club, and whether they are involved in European competitions, prospective owners must navigate complex ownership eligibility criteria, financial fair play regulations, and club governance standards from the outset of the proposed transaction and beyond.

Compliance with these regulations is essential for obtaining league approval and ensuring the club’s continued participation in competitions. Additionally, the regulatory scrutiny extends to matters such as player contracts, youth development, and stadium safety, adding layers of complexity to the acquisition process especially when having to consider these throughout the due diligence phase.

Financial considerations and revenue streams
Unlike many traditional businesses, football clubs derive revenue from a diverse array of sources, each intricately linked to on-field performance and fan engagement. These revenue streams include broadcasting rights, match day ticket sales, merchandise, sponsorship deals, and player transfers.

Consequently, the financial viability of a football club is closely tied to its sporting success and ability to attract and retain players and fans. Prospective buyers must conduct extensive due diligence to assess revenue potential, financial sustainability, and the club’s competitive position within the footballing ecosystem before committing the purchase of the club.

Other considerations include:

  • Prospective buyers should investigate the club’s position regarding incoming and outgoing transfer fees, including any significant outstanding instalment payments on historic transfers.
  • Commercial operations must be considered including a review of sponsorship and partnership agreements; is the club committed to any unprofitable or unlimited liability  agreements both with regard to rights and length of term.
  • Match day operations – how does the operation for match day hospitality effect the financial position of the club? Is there a third-party supplier agreement to run the match operation?
  • Ticketing and club shop operations – are these owned and ran by the club?
  • Verifying stadium and training facility ownership is crucial during due diligence, considering factors such as land ownership, terms of use, obstacles for redevelopment, and the potential use of ownership interests for debt financing.
  • Is there an academy in place?
  • Has the club entered any agreements with Agents relating to the services provided that binds the club to future payments?
  • Does the club have adequate insurance policies in place?

There is a considerable amount of work that is required just to get to this stage, many a prospective deal will collapse because of what is discovered in the due diligence phase. The buyer seeking comfort in understanding what exactly it is purchasing, whereas the seller can use this as an opportunity to provide transparency on any issues which many prevent future issues arising once the deal has completed.

Blaser Mills can assist with this process and provide analysis on what is market standard vs any unexpected obstacles that may arise during the Due Diligence phase. Please feel free to reach out to see how we can assist you.

Keep an eye out for part two of this series where we delve into the intricacies of the sale documentation, the owners and directors test, and the impact of the new independent football regulator.

Economic Crime and Corporate Transparency Act: The latest changes

Posted on by fluroltd

The Economic Crime and Corporate Transparency Act 2023 (ECCTA) came into law in  October 2023, commencing what is set to be one of the biggest shake-ups of UK company law in recent times.

While the majority of ECCTA is yet to come into force – with the roll out of the most significant changes subject to further legislation and the development of new government systems – some important reforms have already been introduced, most recently on 4 March 2024. We look at the key developments below.

What are the aims of ECCTA?

ECCTA introduces a raft of measures with the combined aims of tackling crime, preventing fraud and boosting enterprise. With regards to UK companies, it seeks to achieve those aims by:

  • Expanding the role and powers of Companies House;
  • Improving the accuracy of information on the Companies House register;
  • Enhancing the transparency of UK corporate entities; and
  • Preventing the abuse of personal information.

What are the key changes from  4 March 2024?

On 4 March 2024, the government published a set of regulations implementing ECCTA, known as “Regulation 2”. The regulations introduce five key changes which companies should be aware of

1. Enhanced powers for Companies House

Reflecting ECCTA’s goal of transforming its role from a “passive administrator” of company information to an “active gatekeeper”, Regulation 2 grants the following new powers to Companies House:

  • To query and or reject company filings (and to request supporting evidence, where appropriate);
  • To amend or remove inaccurate information from the register; and
  • To share data with other government departments and law enforcement agencies.

These reforms are underpinned by changes that strengthen the “false statement offences” under the Companies Act 2006, which are designed to prevent the delivery of misleading, false or deceptive information to Companies House.

The combined effect is that all company officers (i.e. directors and company secretaries) will need to take even greater care when making filings at Companies House.

2. Stronger checks on company names

Broadly, Regulation 2 enables Companies House to perform stricter checks on Company names to ensure that they do not facilitate the commission offences involving dishonesty or deception.

Specifically, names which may now be prohibited include those suggestive of a connection with a foreign government or inter-state organisation (for example, the UN), names that provide a misleading indication of a company’s activities, and names containing computer code.

3. Statements of lawful purpose

From 4 March 2024, all subscribers (i.e. the initial shareholders or members of a limited company) will, at incorporation, need to confirm that they wish to form the company for “lawful purposes”. All companies will also be required to confirm every year, as part of its annual confirmation statement, that its intended future activities will be lawful.

4. New rules for registered office addresses

All registered office addresses appearing on the Companies House register, whether for new or existing companies, must now be “appropriate addresses”. An address will an appropriate one if a document addressed to the company and delivered to the address would be expected to come to the attention of a person acting on behalf of the company and the delivery of documents is capable of being recorded. The practical effect of this change is that PO Box addresses will no longer be valid.

Failure to comply will result in significant consequences. Where the company Registrar believes a registered office address is not appropriate, they now have the power to change it to a “default address” held at Companies House. Unless a compliant address is provided within 28 days, the company will be at risk of being struck off.

5. A new requirement for a registered email address

All companies are also now required to provide a “registered email address” through which they can be contacted by Companies House. The address will not be available for public inspection.

As with the new rules for registered office addresses, the registered email address must be “appropriate”, meaning that an email sent to that address would be expected to come to the attention of a person acting on behalf of the company. From 5 March 2024, all companies will be asked to provide a registered email address when filing their confirmation statement.

Further change ahead

As ECCTA is rolled out over the coming months, we will continue to provide commentary on the key changes and what they mean for you – including coverage of what are likely to be the most thorny reforms surrounding identify verification, statutory registers and corporate directors.

Should you require specific and or tailored advice in order to stay ahead of the curve, please contact enquiries@blasermills.co.uk to speak to one of our lawyers.

This article is not intended to constitute legal advice and you should not take, or refrain from taking, any action based on the information which it contains. Always seek the services of a professional legal adviser.

Navigating construction procurement methods

Posted on by fluroltd

Procuring a construction project involves several methods and strategies. The key differences usually lay between the use of standard form contracts (often heavily amended) or bespoke contracts.

Clients may choose to retain full control over the professional team and design process, appointing an independent contractor (known as the traditional route), or opt for the design and build approach, wherein the client hands over a design to the contractor for completion and novates the architect and other professional team members.

Additionally, clients can explore construction management, where they directly employ individual subcontractors, or contract management, where they hire a contractor who then manages subcontractors. The choice of procurement method ultimately depends on the unique circumstances of the project, with no one-size-fits-all solution.

If the project is highly technical and very prototypical (e.g. a power station), or the client is a repeat client who wants to contract on the same basis for each project (e.g. a high street restaurant chain) then they may insist upon a bespoke contract and either one which is specifically designed for the project or one which they use on a regular basis.

The alternative is to use a standard form of contract, of which the most popular is the JCT suite of contracts. Alternative contracts include the NEC and specialist contracts such as those produced by the Institute of Civil Engineers (ICE), the Institute of Chemical Engineers (IChemE) and even FIDIC which tend to be used for large scale industrial projects, more often in Europe than in the UK.

The vast majority of commercial construction contracts in the UK are either the traditional route JCT or Design and Build JCT.

The traditional route offers clients greater project control but requires a higher level of design input. In contrast, Design & Build is favoured when the client doesn’t provide a full design, often to expedite project commencement or when certain design aspects are less critical.

The method of procurement and the nature of contract is very much dependent on the individual circumstances of the project. We are able to assist in this respect and guide clients to the most appropriate form of contract. For further information please contact Lewis Cohen on LNC@blasermills.co.uk or call 07956 964466.