Newcastle: More Money, More Trophies, No More Problems

For fans of English Premier League clubs outside the traditional big six (Manchester United; Manchester City; Tottenham; Arsenal; Chelsea; and Liverpool), any chance to crack into the top four in the league standings, thus qualifying for the UEFA Champions League, is nothing short of a fairytale come-to-life.[1] While supporters of clubs such as Leicester City, Everton, and West Ham may have felt they were closing in on finally seizing the moment and stealing the spotlight, Newcastle United have just unprecedently threatened to shatter their dreams. After years of the Newcastle United supporters pressuring Mike Ashely into selling the club, he has finally caved in, as a Saudi-Arabian consortium are set to purchase the club for a fee of $408 million.[2] Although financial takeovers are not all too uncommon, because the consortium is valued at approximately $430 billion, the Newcastle United one has a chance to change the landscape of the sport like never before. With seemingly limitless funds to splash around in the transfer market, Newcastle could well be on their way to forming a super team and perhaps even replacing the big six with the “superior one.” But what are the legal implications of a deal like this, and how does it work?

From an investors point of view, the best leagues in which to perform a takeover are England’s Premier League, Spain’s La Liga, and Germany’s Bundesliga, as they are regarded as the current top, and most competitive global leagues; thus granting the greatest opportunity for maximizing return-on-investment (ROI).[3] Next, like Newcastle did in 2018, you approach a lawyer who will then begin conducting an estimate on the overall valuation of the club using the “EBITDA (earnings before interest, taxes, depreciation, and amortization) before player trading” in order to gage the profit margin.[4] The deal itself then mirrors that of normal contract law, but includes the use of an escrow account.[5] An escrow agreement functions when two parties agree to surrender their bargained for property to an escrow agent, and then the agent disperses the agreed to items in the contract once the terms of the deal have been met.[6]

For Newcastle, the timeline of events began in 2017 when previous owner Mike Ashely put the club up for sale.[7] Despite years of stagnant talks, prominent English financer Ashley Staveley, in a consortium with Saudi-Arabian investors, submitted a bid to Mike Ashely that sent shockwaves through both the soccer, and legal worlds.[8] With immense concerns over human rights violations committed by the prospective Saudi purchasers, the deal yet again stalled, which led to fans piling on the pressure via protests.[9] With Mike Ashely determined to get the deal done, he employed the London-based law firm Blackstone Chambers, who represented him in a court case in front of the Competition Appeal Tribunal (CAT), in which the Premier League sought to have the club expelled from the Premier League.[10] However, due to the Saudi consortium issuing a compromise with BeIN Sports, the ban on the deal was lifted, thus making the case moot, and allowing the deal to go through.[11] While the legal battle entailed far more hoops to jump through than a normal team sale would, given the troubling political concerns, Newcastle may have already prevailed victorious in their most challenging battle.

The key question emerges of whether or not this deal essentially guarantees Newcastle the ultimate crown of the UEFA Champions League. Despite the notion that in American sports, where a salary cap is present, the overall management of a team is crucial to its success, not just its finances, the same cannot be said for soccer.[12] Currently, the five richest owners in the NFL (from top to bottom) are David Tepper (Panthers); Jerry Jones (Cowboys); Stan Kroenke (Rams); Shahid Khan (Jaguars); and Stephen Ross (Dolphins).[13] Between those five teams, since the turn of the century, they have a combined one Super Bowl trophy (Rams in 2000), two Super Bowl appearances (Rams in 2000;2019), and a measly total of 21 victories in the playoffs.[14] On the flipside, in soccer, the five richest clubs in the world, excluding newcomer Newcastle, are Barcelona, Real Madrid, Bayern Munich, Manchester United, and Liverpool. Since the turn of the century, these clubs have combined to win a whopping 16 UEFA Champions League titles – club soccer’s greatest crown.[15] Evidently, in soccer, money creates trophies; so perhaps the question we really should be asking is not if or when Newcastle will win a trophy, but rather how many times they will be crowned champions.

Sources: [1] See Ibrahima Mustapha, Premier League Return: ‘Big Six’ Is No More But Manchester City, United, Liverpool and Chelsea Are Pulling Away Fast, Eurosport (Nov. 8, 2021, 11:38AM), https://www.eurosport.com/football/premier-league/2021-2022/opinion-premier-league-big-six-is-no-more-but-manchester-city-united-liverpool-and-chelsea-are-pulli_sto8455308/story.shtml. [2] James Benge, Newcastle United Takeover: What to Know About the Historic Saudi-Arabian Backed Deal for Premier League Club, CBSsports (Oct. 7, 2021), https://www.cbssports.com/soccer/news/newcastle-united-takeover-what-to-know-about-the-historic-saudi-arabian-backed-deal-for-premier-league-club/. [3] Amitai Winehouse, How to Buy a Football Club: Newcastle are on the Cusp of £300m Buyout…and Here’s How the Deal Will be Done, Why Mike Ashely’s Price Dropped by up to 20 Percent and Whether BeIN Sports’ complaint Really Could Scupper the Saudis’ Bid, Daily Mail (May 1, 2020, 5:34 EDT), https://www.dailymail.co.uk/sport/football/article-8250503/An-insiders-guide-football-club-takeovers-Newcastle-deal-done.html; see Dan Weil, So, You Want to Own a Sports Team, WSJ (Oct. 18, 2019, 12:27PM), https://www.wsj.com/articles/so-you-want-to-own-a-sports-team-11571416055. [4] Winehouse, supra note 3. [5] Id. [6] See generally Escrow Accounts, Wells Fargo (2021), https://www.wellsfargo.com/mortgage/manage-account/escrow/ (explaining how different escrow agreements function). [7] James Robinson, Newcastle United Takeover Timeline: Everything That Has Happned as the deal Goes Through, (Oct 7, 2021, 8:01PM), https://www.chroniclelive.co.uk/news/north-east-news/newcastle-united-takeover-premier-league-21785687. [8] Id. [9] Id. [10] Id. [11] See generally Greg Termolle, Futbol Finance: Newcastle United Becomes Richest Club in the World, Conduct Detrimental (Oct. 8, 2021), https://www.conductdetrimental.com/post/futbol-finance-newcastle-united-becomes-richest-club-in-the-world (exploring the complications that arose in the Newcastle deal involving a challenge from BeIN Sports). [12] Weil, supra note 3. [13] John Breech, NFL’s Richest Owners Revealed for 2021: Panthers, Cowboys and Rams Top List of Teams With Wealthiest Owners, CBSsports (Apr. 9, 2021, 1:26PM), https://www.cbssports.com/nfl/news/nfls-richest-owners-revealed-for-2021-panthers-cowboys-and-rams-top-list-of-teams-with-wealthiest-owners/. [14] Since 2000, the New England Patriots Have the Most Wins by a Team in the Playoffs, With 30 Wins, StatMuse (2021), https://www.statmuse.com/nfl/ask/most-playoff-wins-since-2000. [15] Igor Mello et al., Champions League Final: Full List of All UCL and European Cup Winners as Chelsea, Man City Try to Make History, CBSsports (May 27, 2021, 12:39PM), https://www.cbssports.com/soccer/news/champions-league-final-full-list-of-all-ucl-and-european-cup-winners-as-chelsea-man-city-try-to-make-history/.