Everton takeover: Manchester City legal action could be key for new owners

Manchester City’s record against the Premier League could have an impact when it comes to interested parties in taking over Everton.

After the takeover bid from 777 Partners was finally doomed after the May 31st deadline imposed by Everton owner Farhad Moshiri, the British-Iranian billionaire has now begun talks with other interested parties.

Everton fans Andy Bell and George Downing, already creditors of the football club, are seen as frontrunners to secure a deal, with the bid backed through the family office of multi-billionaire Michael Dell, the world’s 10th richest man.

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Other interested parties have emerged, including a bid backed by London-based lawyer and technology investor Vatch Manoukian and a consortium of US, Saudi Arabian and Australian investors, as well as John Textor, Dan Friedkin and another US interested party led by a former MLS player.

With the important summer window opening at the end of this week and much to deal with financially in terms of managing the debt burden and ensuring the club meets profit and sustainability regulations, interest is expected to build quickly, although Moshiri understands that he will still hold out for a club fee under his original deal with 777, however his shareholder loans to the club of around £450m are expected to be written off.

Whoever comes in will be operating in difficult financial circumstances, with the biggest part of any deal being to reduce debt on the club, which has major creditors such as Rights and Media Funding, MSP Sports Capital, Metro Bank and Bell and Rebate. Ensuring the completion of the stadium at Bramley Moore Dock is also of paramount importance.

The Premier League is currently facing something of a civil war, with champions Manchester City launching legal action against the adoption in February of tougher regulation on associated party transactions (APTs), rules designed to limit how much groups can rely on of property on associates. parties when conducting business transactions, with fair market value for each transaction assessed individually.

Manchester City, who have strong links through their Abu Dhabi holding to the Middle East and major brands such as Etihad, argued that the rule changes, voted by a majority of the required 14, was a “tyranny of the majority” and believed that tougher measures contravene competition law.

If City, who were accused of 115 alleged breaches of financial regulations over a ten-year period last year, which they deny and will appeal to an independent commission in November, are successful in their legal challenge against the APT rules, then it could be impactful for a number of reasons for potential owners.

For the most part, North American investors like having regulations in place. The closed nature of the US major league sports ecosystem, where there are salary caps and no promotion and relegation, allows for greater cost certainty.

Valuations of US sports assets in the NBA, NFL, MLB, NHL, MLS and NWSL have skyrocketed in recent years, and while European soccer, particularly Premier League assets, have grown substantially, they are considered under-monetized by many American investors.

The Premier League needs the competition to be attractive to foreign investors. The ‘local businessman done right’ is no longer as prevalent as at the top level, with the likes of Jack Walker at Blackburn Rovers now from a different time in the game.

It requires investment from wealthy people, often with some local knowledge and knowledge of fandom, but also from family offices, private equity, investment funds, as well as sovereign wealth funds, as happened with Newcastle United.

The upcoming introduction of new financial controls similar to UEFA’s team cost report, as well as adding a salary cap, brings the Premier League closer to an Americanized model, reducing some of the risk and providing another level of cost certainty.

For those currently interested in Everton, the extra financial controls will be seen as a good thing going forward, but the problem whoever comes in will have is how to raise the revenue to enable the club to turn the corner to position itself to be able spend. to a greater extent on the product of the first team.

Fair market value, which the Premier League assesses on a case-by-case basis to determine whether or not to trade at inflated prices to circumvent existing regulations, is weighted in favor of the biggest teams in the so-called “big six” which have the most global exposure as a brand.

According to analysis by sponsorship industry publication The Sponsor, the fair market value of the Everton shirt deal with Stake.com was £13m, with the current deal understood to be around £10m. That’s enough to put them 10th on the Premier League list, but is around £52.3m behind the team with the highest market value, Liverpool.

The thing for Everton is that they have a hugely valuable sponsorship asset coming online soon with naming rights to their new 52,888 seater stadium on the banks of the River Mersey, a venue that will be used 365 days a year and it seems to become a jewel in the crown of the economic regeneration of the docklands, likely to provide a huge financial boost to the club, who will move into their new home for the start of the 2025/26 season.

The stadium itself will already have far greater revenue generating potential than Goodison Park and will be a game changer for the football club for years to come. But in terms of raising revenue, the long-term sale of the stadium’s naming rights could solve some of the club’s financial woes.

But any naming rights deal will be subject to closer scrutiny by the Premier League and Everton will be limited to the type of deal they can make if it is with associated parties.

Manchester City’s legal challenge against the Premier League has potential ramifications for their direct rivals for title honours, who do not have such congenial relationships to capitalize on, and that causes them great concern if it emerges that City can spend big. more freely when it comes to agreeing agreements with related parties. But for Everton the situation is different, they are at a point where they need to have as much leverage as possible to drive the value of the sponsorship rights north, meaning potential owners and investors are likely to look at City. case with intrigue, given that the Toffees are about to sell an opportunity that they have been unable to do before and at a time when they have not needed its boost more.