BDO advises on acquisition of Reading FC by Chinese investors

07 July 2017 Consultancy.uk

Renhe Sports Management, a company owned by Chinese brother and sister team Dai Yongge and Dai Xiu Li have purchased 75% of Reading FC’s shares. The deal, advised by consulting firm BDO, sees the pair become the Championship club’s majority shareholders, after lengthy negotiations beginning in November 2016.

Following more than seven months of negotiations, Dai Yongge and Dai Xiu have rested control of Reading FC from their Thai ownership, with the purchase of 75% of the club’s shares. The pair have already set out key goals on the club’s website, promising that a site for the club’s new training facilities and revisiting stadium extension plans will take top priority. Manager Jaap Stam, who had been thought to want away from the club before the deal was finalised, also looks set to receive financial backing during the summer transfer window, with the club already completing the capture of Ajax midfielder Pelle Clement for an undisclosed fee.

The move follows another turbulent season at the Madejski Stadium, in which the team narrowly missed out on Premier League status after losing a penalty shootout to Huddersfield in the Championship play-off final, while off the pitch Reading FC's debt once again rose, reaching £73 million after the club reported another year of losses for the 2015/16 season. With the Premier League boasting the highest broadcasting revenues in Europe of €1.7 billion per season, the new owners will undoubtedly be even more keen to see the team return to the top flight of English football, having been absent since 2013.

The Royals, as they are nicknamed by fans, were previously was owned by a Thai consortium, who purchased 100% of the club from Sir John Madejski in September 2014 amid increasing financial uncertainty. Now as the club continues its debt restructuring, the ownership has once again changed hands, leading some to express concern at the lack of stability behind the scenes. While the English Football League (EFL) had declared as early as April 2017 that it no objections to the takeover, giving conditional permission to the Chinese investors to purchase the club, the Premier League, who also have a say in take-overs of clubs that could win promotion to their league said they were “cautious” regarding the sale.

Chinese investors take majority stake in football club Reading FC

The purchase was not the first time the Dai siblings had expressed an interest in acquiring a British football team. The duo previously failed in an attempt to purchase Hull City, a deal which fell through amid speculation they had failed to meet the Premier League's fit and proper persons requirements.

However, with official jurisdiction of the deal falling outside the Premier League, their reservations were dismissed by the EFL, who recently reaffirmed their backing for the bid. The statement added that the new ownership would not be given free rein to do as they pleased however, "Following a full review of the transaction, the EFL has insisted upon - and the club/new owners have agreed - to a number of additional reporting requirements including enhanced financial monitoring, so as to ensure that their performance is consistent with the application we have considered."

Reading are not the only club outside of the footballing elite to have financial difficulties drawing unwanted attention off the pitch however. Global professional services firm BDO, who advised on the deal, recently published a report warning that beyond the lofty broadcast revenue of the English Premier League many teams in a financially precarious state. The firm’s researchers found that 23% of English Championship clubs and 40% of Scottish Premiership teams believed their finances needed urgent attention, or are a cause for real concern – evoking memories of 2008 FA Cup winners Portsmouth and former Scottish champions Glasgow Rangers’ respective periods of administration in 2012. Following on from this as Reading attempted to avoid such a fate, the firm set about applying their industry knowledge to this particular case as advisors to the buyers.

According to Majid Hasan, Financial Advisor to Renhe Sports Management, BDO provided invaluable understanding of the club and industry. “It was clear throughout the process that the BDO CF and tax teams had extensive experience in the sector, having worked on numerous football deals. This became even more evident as they provided helpful and pragmatic advice on key financial and commercial areas early on in the process, that had a positive impact on our final decision making. We would recommend BDO and also hope to work again with the team in the future.”

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