buying a football club these days is becoming more and more desirable for the super rich..

Background

The sale of Chelsea Football Club dominated the headlines last summer. A consortium led by American Todd Boehly purchased Chelsea from Russian Oligarch Roman Abramovich for a figure reported to be around £4.25 billion. The sale occurred after sanctions were placed on Mr Abramovich following the Russian invasion of Ukraine, due to his close ties to Vladimir Putin. Chelsea FC became the second Premier League club to be sold in eight months, following Newcastle United Football Club's sale in October 2021.

The motives behind Newcastle United's sale to a Saudi-backed consortium made up partly of the Public Investment Fund of Saudi Arabia were much different, owing much to the perennially unpopular owner Mike Ashley and the supporters' growing resentment towards him. The deal to purchase Newcastle saw the club become the wealthiest football team in the world, with an estimated net worth of $320 billion. Although some have criticised the Premier League's decision to approve the sale due to concerns that the Saudi government are using the club as a means of "sports-washing", the takeover was completed on 7th October 2021. The Premier League stated it had received "legally binding assurances" that the Kingdom of Saudi Arabia would not control Newcastle United, ultimately leading to their approval of the takeover.

Both the sales noted above involved large sums being paid to former owners (though in the case of Mr Abramovich, these funds were immediately frozen as a result of the sanctions imposed upon him), in addition to money being put into each respective club. However, not all sports club sales look quite like this.

In 1982, Chelsea was in tremendous financial trouble, with debts estimated to be around £80 million. With no prospect of repaying these debts, the club was sold by Brian Mears to Ken Bates for a nominal fee of £1, with Mr Bates assuming the club's debts as part of the sale. Bates' decision to inherit this debt kept the club afloat, and 21 years later, he was able to sell the club to Mr Abramovich for £140 million in a sale that would forever change the complexion of football finances. This type of debt inheriting sale has been seen more recently (though to an ostensibly less happy end) with Bury Football Club.

Bury Football Club were expelled from the Football League in 2019 following months of financial trouble. Owner Steve Dale bought Bury for £1 in December 2018 when the club was already in a precarious financial position, with players and staff often being paid late. The club's creditors had approved a Company Voluntary Arrangement (CVA) put forward by Dale, which meant that unsecured creditors would be paid 25% of their money owed. Under the Football League rules, Bury faced a 12-point deduction in the League One table.

The club was eventually expelled from the Football League and put into administration; however, in February 2022, the "Est. 1885" supporters group announced that the club had been purchased back by the fans with funding support from 

"The UK Government, America and a number of local benefactors, none of whom expect any more return from their support than the satisfaction of seeing football return to the ground, and its expanded use for community sports and wellbeing". 

At the time of writing, Bury FC is still in limbo and has been unable to rejoin the Football League.

Takeovers, of course, take place in sports other than football. In 2021, the English Rugby Union club Saracens announced that they were the subject of a £32 million takeover deal from an investment consortium which includes Francois Pienaar, the former South African World Cup-winning captain. Nigel Wray decided to sell the club after 26 years of ownership following a difficult period for its reputation, where it breached the rugby union salary cap rules. This breach resulted in a fine of over £5 million and a 35-point penalty, which relegated the club.

This summer, in the US, the Denver Broncos were sold for a record $4.65 billion to Walmart heir Rob Walton, his daughter and son-in-law. This was the world's largest-ever sale of a sports club. The Broncos are among the most successful teams in the NFL Super Bowl era, with seven Super Bowl trophies. Although a salary cap limits the spending power of teams in the NFL, with a net worth now of over $60 billion, Broncos fans will be hoping for a return to the post-season in the near future, a feat they have not achieved since their Super Bowl triumph in 2015.

Share purchase

There are two ways to sell a company: a share purchase or an asset purchase. In brief, a share purchase involves the buyer acquiring the shares in the company (normally the entire issued share capital) from the company's shareholders. A buyer purchasing the shares of the company acquires everything owned by that company (including the liabilities). The only assets that change hands are the shares.

Chelsea FC's takeover by Todd Boehly was a share purchase, in which £2.5 billion of the total purchase price was applied to the purchase of the shares in the club. The other £1.75 billion will be committed to further investment for the benefit of the club, including the stadium, academy, the women's team, and the club's charity.

Asset purchase

An asset purchase involves the buyer acquiring select assets and rights and sometimes assuming responsibility for certain liabilities relating to the target business. The buyer and seller will negotiate precisely which assets the buyer will acquire from the business upon completion. The assets not agreed to be purchased by the buyer will remain with the seller.

Restrictions on purchasing clubs

Various laws mean that there are certain restrictions on buying a sports club. For example, in Germany, there is a 50+1 rule. This means that, under the Bundesliga rules, a club cannot play in the top division in Germany if commercial investors have more than a 49% stake in the club. This means that the fans of Bundesliga clubs hold a majority of the voting rights. The rationale behind this rule is that private investors cannot take over clubs and prioritise profit over the interests of the club's supporters. Democracy is a vital cornerstone in German football, and reckless owners, as often seen in English football, are safeguarded against by this rule.

German Club RB Leipzig, however, has found a loophole, much to the dismay of many German football fans. The club has 11 members, all of whom are employees of the energy drink company Red Bull. They all paid a start-up fee of €100 and a yearly fee of €800. Moreover, the club can reject a membership request without explanation, which allows them to maintain ownership comprised solely of Red Bull employees.

In May 2005, Malcolm Glazer and his family made a takeover bid for English Football Club Manchester United. A unique UK takeover law means that anyone with a 30% stake in a company is obliged to make an offer for the rest of the company at the price at which they bought their last tranche of shares. Before 2005, the Glazers had purchased a small percentage of shares in Manchester United. By June 2005, the Glazers launched a takeover bid and secured 98% of shares in Manchester United, thereby controlling the club.

Furthermore, to approve a takeover, anybody wishing to acquire a controlling stake in a UK football club must satisfy the "fit and proper persons" test. The following disqualifying events apply to any person who wishes to become a director of a UK football club:

• They have power or influence or influence over another Football League club.
   
• They hold a significant interest in another Football League club.
   
• They become prohibited by law from being a director.
   
• They are filing for bankruptcy.
   
• They have been directors of a club while it has suffered two or more unconnected events of insolvency.
   
• They have been a director of two or more clubs which, while they have been directors, have suffered an event of insolvency.

Cost

When opting for a share purchase, the total cost of purchasing a sports club will be the purchase price plus any debts the club owes. There has been a steady rise in consortiums buying clubs to minimise cost and spread liability between parties. A consortium is a group comprised of two or more individuals, companies or governments that work together to purchase a sports club. The parties pool resources but can be given separate responsibilities and obligations under a consortium agreement. 

Every party under a consortium remains independent regarding their normal business operations and has no say over another party's operations that are not related to the consortium.

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