The developing story moves today [September 12th 2010] to the High Court for a partial answer. The putative owners, Tom Hicks and George Gillett, [H&G as we will designate them in this post] are in dispute with their own legally instituted board.
American sports entrepreneurs H& G bought the club in March 2007, in a deal which results in debts to the Royal Bank of Scotland of £240m. H&G are blocking the proposed sale of the club to New England Sports Ventures (NESV) for some £300m. A Board of Directors has responsibility to its shareholders, which usually means in practice that the will of the shareholding owners prevails. Which makes this a very interesting business case.
So what’s the problem?
Well, the usual principles become more complicated if the club is massively in debt. Liverpool is massively in debt to its bankers. Repayments of its loan are due this week. The club will have trouble repaying the loan. So it does not take too great a leap of imagination to suggest that in one sense the bank ‘owns’ the club. Not ‘owns’ legally, but at very least owns the right to exert influence. With or without any major shareholding.
The bank’s influence
The influence of the bank was shown in the terms of its financial dealing last year when it demanded (and got) the appointment of a ‘neutral’ chairman and a board structure which removed absolute power from the owners The need for such financing illustrated the weakness of the H&G position (comparable in principle the arrangements surrounding the Glazer takeover of Liverpool’s deadly rivals in debt, Manchester United.
Opportunities for a sale
The circumstances were ripe for a takeover. But the ripeness also permitted opportunities for further entrepreneurial actions, timed to take advantage of the uncertainties. The board indicated willingness to accept one of the offers, by New England Sports Ventures (NESV). The owners attempted a few weeks ago [September 2010) to sack the members of its ‘own’ board. consisting of the ‘neutral’ clairman Broughton, managing director Christian Purslow and commercial director Ian Ayre who had gone against the wishes of their American owners.
On the brink of the court hearing, and the deadline for repaying the bank loan, confusion reigns. The possibility the FA deducting points from Liverpool’s league tally has appeared to be a possible deal-breaker for NESV. There is even a second would-be buyer, Peter Lim, claiming he had been unfairly discounted by the board.
What has become clear is that the question “…but who actually owns Liverpool Football Club?” is not a straightforward one to answer. Also clear is that the Football Association’s ‘Fit and Proper Person’ criterion for club ownership will have another urgent test of its credibility in the months ahead.
A more interesting question for students of leadership: what advice would you offer the Football Association through lessons learned from the case of the board which rebelled against the owners of the organization?
And stop press
Sporting Intelligence reports high court ruling in favour of RBS and Liverpool