Football Finance: Foreign Ownership – for better or worse?

IN the third part of our series on Football Finance, TheBusinessDesk.com, in association with leading law firm Hammonds, looks at the issue of foreign ownership.

THE days of football clubs being the sole domain of the local businessman made-good, are numbered.

The likes of Louis Edwards, a Cheshire butcher, or the Moores family, who made a fortune from the football pools business, have been replaced at Manchester United and Liverpool, by overseas owners more interested in asset values and maximising global brand potential than being feted on the terraces by grateful fans.

While entrepreneurs like Dave Whelan at Wigan Athletic, Patrick Cryne at Barnsley, Dean Hoyle at Huddersfield Town and Kevin McCabe at Sheffield United may be local men ploughing the fruits of their business success into their local clubs, today’s football club owner is more likely to be based in Florida,  the Gulf or on a yacht on the Cote d’Azure , than Harrogate or Alderley Edge.

Indeed a team of advisers representing Bahrain-based Indian businessman Ahsan Ali Syed is in the midst of a £300m takeover bid for Blackburn Rovers, while the sale process of Liverpool FC has sparked interest from the Far East, The Gulf and America.

The launch of the FA Premier League in 1992 and the ensuing broadcast rights deals deal with Sky Television, have much to do with the now global profile of the English top flight.
 
It is now the world’s most watched league and also the richest with combined club revenues of £1.981bn in 2008-9, according to research.

Football Finance: Read more about this hot topic here

Since then there have been a series of high profile takeovers, most notably at Chelsea by Russian tycoon Roman Abramovich, and more recently by Abu Dhabi’s Sheikh Mansour at Manchester City.

More controversially though has been the acquisition of two of the country’s most famous footballing institutions by American owners – the Glazer family’s £800m leveraged buyout of Manchester United in 2005 and Tom Hicks and George Gillett’s swoop for Liverpool FC in 2007.

The Glazer deal was so controversial for some fans that it led to creation of a break-away football club, FC United, while in Liverpool disaffected fans have formed The Spirit of Shankly pressure group, and have proposed a fan-led takeover.

This year a band of influential Manchester United fans took this debate a step further by forming as the Red Knights, and made an attempt to persuade the Glazers to sell the debt-laden club.

After the disastrous events at Portsmouth FC last season, which was bought and sold several times by overseas investors, before sliding into administration,  it is clearly incumbent on the selling shareholders and their advisers to do correct due diligence.

Post Portsmouth, and in the wake of the brief ownership of Manchester City by the now fugitive Thai politician Thaksin Shinawatra, many observers believe there should be better transparency and more rigorous checks on potential owners by those running the game.

Indeed, even today, the ownership structure of Leeds United Football Club is not fully known.

Despite such reservations, the popularity of English football means it will continue to attract interest from all over the world.

Professor Tudor Rickards of Manchester Business School, a keen follower of the football industry said: “Successful international investors by their very nature are drawn to the highest profile sports and it is unquestionable that English football is that.

“Part of their personality is to demonstrate their success and a Premier League football club is obviously a glittering prize.”

Prof Rickards says international investors and entrepreneurs may not always  have the best interests of the club and their fans at heart.

“If you look at Manchester United prior to the Glazers, the two Irish businessmen, McManus and Magnier, saw it as an investment. They came in from a purely financial position and made a good profit, as was their right. For the fans, who have seen ticket prices rise since the takeover, I’m not sure the outcome has been as positive.”

John Ryan, chairman of Doncaster Rovers, said: “We have all these foreign owners in the Premier League but look at what has happened to Liverpool, to Manchester United which was the richest club in  the world and is now the poorest. These people have not got the heritage of football and I think a lot of them are just in it to make money but what happens when they leave?

“Southampton are in League One and they have had a foreign owner but I think generally speaking it will only be the big clubs with the chance of attracting foreign investment.

“I think it is always going to be down to people like myself who will invest in football – but they are thin on the ground – and making it more of a community project because the football team is often the heartbeat of small provincial towns.”

Npower League Two side Bradford City’s joint chairman, Mark Lawn, said: “Myself and joint chairman Julian Rhodes got involved because we love the club. So we are fully aware that we’ve got a fiscal plan that we don’t overspend.”

Mr Lawn believes that the billionaire foreign owners of Barclays Premier League clubs have no such qualms but he is worried about their long-term plans for their clubs and is worried their business models aren’t sustainable.

He said: “What happens when these people get fed up? We’ve got to look at the over-inflated prices of players that these owners are prepared to pay.

“I’ve got no problems that these players get top money, good luck to them, but if these foreign owners take their bats and balls home then that’s not going to be good for the English game.”

For Allan Duckworth, chief executive of Bolton Wanderers, the lure of the Premier League is plain to see: “It is literally the most popular league in the world and football is the most popular sport. Put the two together and it is going to attract a lot of interest.” 

Hammonds corporate partner David Hull said: “Whilst Premiership football clubs are still viewed as trophy assets, they will continue to attract investment from wealthy businessmen from around the world.

“This is good news for the number of clubs still looking for external investment. Given the lack of alternative investment sources currently available to clubs, an increase in foreign investment seems inevitable and adds colour to a sport that is already a rich cosmopolitan tapestry.”

Mr Hull added: “Due diligence is a key component of foreign investment. Legal, accounting, commercial, property and tax due diligence are key components of any investment and in particular investment in a football club.

“A buyer needs to understand the risks and challenges involved in the acquisition of a football club and agreement of the scope of work is an essential element of this.”

What do you think about the issues raised? Please leave your comments below.

Tomorrow: Football and the Tax Man.