Everton reportedly in talks with insolvency consultants

06 May 2024 Consultancy.uk 5 min. read
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Speculation on the future of Everton Football Club has gone into overdrive, amid reports that it has contacted insolvency advisors. With the club yet to issue a statement on its reported tapping of professionals from Teneo, industry experts have speculated it could be on the brink of administration.

As one of the original members of the top tier of English football, Everton Football Club holds the record of playing most seasons at the highest level of the nation’s club game. Since 1888, the Toffees have only played four seasons outside the first tier, and have played at the top level continuously since 1954. Only Arsenal have a longer unbroken run at this level.

However, recent years have seen the club fall on hard times. Chaotic managerial appointments and a succession of suspect transfer decisions have seen Everton flirt with relegation for three successive years – only pulling clear of the Premier League’s bottom three places in the final weeks of the season. As poor as the team has been on the pitch, however, life at the club has been even more tumultuous behind the scenes.

Everton reportedly in talks with insolvency consultants

Clubs are permitted to lose £105 million over a three-year period in the Premier League, or £35 million per season, as part of the league’s profit and sustainability rules (PSR). Everton – which changed accountants last year – recorded losses of £125 million over three years, however, and were subsequently stung with a 10-point deduction earlier in the season. While that was reduced to six on appeal, the club was then docked a further two points, when an independent commission found the club had breached PSR by £16.6 million for the three-year period to 2022-23.

Deepening woes

While the club still seems to be mathmatically safe from relegation, thanks to the terrible performance of the Premier League’s three promoted sides this season, that financial performance might still have more bad news in store for players and fans. Everton’s owner Farhad Moshiri has long been trying to sell the struggling club – but the much-discussed deal with 777 Partners now reportedly hangs in the balance, leading to reports that the club is running dangerously short on capital.

American private equity firm 777 Partners signed a deal in September to acquire Toffees owner Farhad Moshiri’s controlling stake in the club – but reports from Forbes also suggest the firm is still scrambling to raise the funds needed to complete its takeover, while other sources suggest it is yet to meet a range of conditions for the takeover set by the Premier League. This means that while numerous financial experts in the sector have been discussing the deal as a foregone conclusion for almost the whole season, it could be on the brink of falling through.

Speculation around the deal has risen rapidly, as 777 also appears to be experiencing financial difficulties. In early May, its low-cost airline Bonza entered voluntary administration in Australia. Meanwhile, The Guardian reported that 777 Partners parted company with its UK public relations advisors, having fallen behind on fee payments for their work. Elsewhere in the football world, 777’s wider portfolio of clubs also appear to be struggling to keep up with debt obligations, while underinvestment is causing them to fail on the pitch. Genoa, Red Star, Hertha Berlin and Vasco da Gama have all suffered relegation within the last six seasons. All of this suggests that Everton might still take further financial hits, even if 777 can complete its takeover.

Amid the long wait, the club has been left relying on emergency cash injections – with The Guardian also reporting Everton’s operations were waiting for a further £15 million of loans that 777 had pledged to provide Everton with during April. While a 777 spokesperson confirmed that “the club has been provided with the working capital it needs”, he would not specify how much of the £15 million had been sent.

Teneo

If the deal collapses, and Everton cannot fulfil the club’s immediate financial obligations, it will fall into administration. That carries a potential further nine-point deduction, meaning that if it happened in the 2023/24 season, and results went against them, the club could still see in the next campaign in the Championship. The further financial impact of that loss of broadcast revenues could prove catastrophic in the long-run.

According to reports from The Guardian, there is mounting speculation that this could very much be on the cards. According to the UK paper, Everton has contacted Teneo – an international financial consultancy with a heritage in insolvency work – to advise Everton and its directors. This does not inherrently mean that Everton will go into administration – while Teneo has fulfilled recent administrations including Russian bank VTB and retailer M&Co, it also handles restructuring work for companies like Petrofac, as they seek to avoid such steps.

However, Everton fans hoping for that to be the case might have been left slightly worried by the exchange with Teneo which The Guardian also reported. When its journalists reached out to Teneo’s CEO of financial advisory, Daniel Butters, for comment, he replied, “We don’t comment on any client situations.” That may be a stock reply in the consulting industry, but that the phone line “then went dead” may not bode well for the future.