It is the news Newcastle fans have been dreaming about for years – a big-money takeover and the possible departure of Mike Ashley.
Most supporters hope a new regime might come in one day to take their club to another level. In the case of the Saudi Arabia-backed £300million takeover of Newcastle, that should be the case. A sovereign wealth fund worth around £320billion should be able to lift the fog on the Tyne.
But how does a deal actually happen? How does someone, a company or even a country go from an idea of owning a football club to actually running one? After all, even the deepest pockets need a guiding hand.
Sportsmail spoke to Andrew Umbers of Oakwell Sports Advisory, who has previously advised on the sales or purchases of Manchester City, Leeds, West Ham, Tottenham, Aston Villa, Derby and Cardiff, about how the process works and what the situation will have been recently at St James' Park.
Amanda Staveley (left) is brokering the £300million Saudi-backed takeover of Newcastle
Someone sits down one day and decides they want to buy a football club – what are the first steps?
You would go to an advisor such as Oakwell if you wanted to buy a football club and you would ask for a research paper to look at where the best opportunities are in the market you have chosen or if you wanted to improve your brand.
Take Sheikh Mansour at Manchester City – what that has done for his country – you would want a brand that can be globalised so he went straight to the biggest league. It would be perceived now as an undervalued purchase. He would have gone to a firm like ours and asked for a report to be written as to the best opportunities in the Premier League, similar to the Bundesliga, LaLiga and Serie A.
That would include broadcasting over the next two cycles, sponsorship, playing squad values, the competence of the squad, finances from Companies House, and then you would make an informal approach to the owner having decided to buy the club.
Sheikh Mansour has boosted Manchester City into a global brand following his takeover
In the case of Newcastle, they went to their firm of lawyers who were putting together packages for interested buyers back in 2018. That was when Amanda Staveley started talking to Newcastle United.
You have a conversation, a courtship, you put an indicative offer in a letter of intent, stipulating what value you are attributing to the club, why you are looking to buy, who you are and outlining the next steps.
How does that valuation come up? Would it be different for a football club to the average business?
You can look at historical multiples of transactions in the Premier League or Football League. You look at the medium, high and low values for sales. You look at the multiples of revenue that has historically been paid. We like to look at the underlying EBITDA (earnings before interest, taxes, depreciation, and amortisation) before player trading.
If you look at that, the cashflow before player trading, which can be negative or positive, you can actually drive at the underlying profitability of what a club is. In the Premier League, because of the very high broadcasting rights in that league compared to the EFL, it’s easy to apply what you think is a realistic multiple – eight to 12 times – for buying a football club. It’s not just on the multiple though.
With something like Newcastle, you have to remember their sponsorship strategy has been centred around Sports Direct. There will be very low levels of income from sponsorship in the Newcastle accounts.
Merchandise is driven through Sports Direct. So you have an immediate uplift in sponsorship and merchandising because of that.
Changing sponsor could give Newcastle an immediate revenue boost after takeover
What clauses can you find in deals beyond the headline figures?
Within there, you will have some payments that are deferred based on performance. In the case of a club that is