Inside track on how proposed Sunderland AFC takeover will REALLY happen - and key steps still left to clear

Following weekend reports of fresh interest in the club, and Jim Rodwell’s confirmation that the club remain in exclusivity with a party, hopes have been raised that a deal could be completed in the near future.

But at times, the process of buying a club can seem quite opaque – leaving supporters in the dark over what is happening.

Much of that is to do with the legalities involved, with parties signing non-disclosure agreements prohibiting them from releasing information.

But how does a takeover get done, and what steps are left to be cleared in the proposed deal involving Sunderland?

It’s a process that Rodwell described as not dissimilar to buying a house, albeit on a larger scale and with more moving parts, and we take a look at exactly how a takeover gets done:

INITIAL INTEREST

There are hundreds of people – some genuine, some not so – interested in buying football clubs, and their first steps are to make their interest known to the club.

This can often be done through an agent or intermediary, who contacts the club on behalf of an interested party to express a desire to open talks.

At Sunderland, we know those talks generally take place with Stewart Donald and his trusted right-hand man Neil Fox.

Initial conversations are open-ended and act as a good barometer for both sides on whether a deal could be a possibility.

For the buyer, it’s about assessing whether the valuation is a fair one and absorbing as much information as they can about the club to decide whether they would be a good investment – without access to the data room (we’ll come on to that later).

And for the selling party, it’s about trying to determine whether the buying party is a credible one. Do they have a plan in place and do they have the funds required to not only purchase the club, but to drive it on?

It’s important to note that there will be a host of parties contacting Donald and Fox expressing an interest, but for varying reasons many may see their interest end here.

PROOF OF FUNDS AND SOME KEY DOCUMENTS

Once initial discussions are held, things start to get a bit more technical.

The buying party will draft a Letter of Intent (LOI) which will contain some very basic information, including at what sum they value the football club, who they are, why they are looking to buy the football club and a brief overview of their plan.

This is the document that essentially kick-starts the process, but again is no guarantee that talks will progress to an advanced stage.

Generally accompanying an LOI is proof of funds from the party interested in purchasing. There is no set value that the party must produce, but they are expected to show that they have the finance to purchase the club and run it.

In most cases, this will need to be provided before talks can advance. That has certainly been the case at Sunderland, with Rodwell confirming only one party – that which is currently in the period of exclusivity – have shown the club the colour of their money.

It’s at that point that non-disclosure agreements will be signed, if indeed they have not been signed prior to this. This will mean that neither the club nor the interested party will be able to disclose confidential information relating to the deal or the club’s finances.

HEADS OF TERMS

Once the selling group are satisfied that the funds are in place, a heads of terms agreement can be drawn up.

This is a broad document outlining the initially proposed deal – that X amount will be paid for X per cent of the club.

Both parties will agree to this rough deal, before advancing to the next - and arguably most crucial – step.

INTO THE DATA ROOM

Due Diligence.

This is when the buying party can really get stuck into things.

Up until this point, the buyers tend to have relied upon publicly available information in order to decide whether the club they are looking at is a good investment opportunity.

Once this period of due diligence begins, the buyers will have access to the ‘data room’ and will be able to forensically examine the full state of the club and return to the hierarchy with any questions they may have.

This can be a long process, with the buying party naturally keen to ensure they examine everything thoroughly so that there are no nasty surprises should a deal be completed.

Indeed, in the current environment, some questions over income are even harder for clubs to answer given it remains unclear when fans will return to stadia and what government support – if any – will be coming to clubs.

As Rodwell told the #SAFCUnfiltered podcast: “Matters are progressing as well as they possibly can do, but there are questions we as a football club simply cannot answer in regards to COVID.”

That suggests that the proposed takeover at the Stadium of Light currently stands at this point, with the party believed to be in exclusivity still going through the process of due diligence.

REVISIONS AND A FINALISED DEAL

Once that process is cleared, the heads of terms agreement can be revised.

At this point, a Share Purchase Agreement (SPA) is produced which lays out the full and final terms of the deal. This agreement may go through a number of revisions before a final contract is agreed between both parties – which stipulates how much will be paid and for what percentage of the club.

This document will also lay out any payment plans agreed, any future sums that may be due to the selling party and could tidy-up a number of other details at the club.

It’s important to remember that in the case of Sunderland, the deal will have to be to the satisfaction of not just Donald, but also minority shareholders Juan Sartori and Charlie Methven before if the buying party is keen to purchase the entire allotment of shares in the club.

Recent reports have suggested, though, that the trio may retain a minority stake in the club under the deal which is currently being proposed.

APPROVAL – FROM THE EFL AND CLOSER TO HOME

Once the Share Purchase Agreement is agreed by all parties, some key approval is needed.

The EFL will, of course, have to confirm that the buying party passes their Owners & Directors' Test and is not subject to any disqualifying condition.

Recent reports have suggested that rules could be tweaked to ensure that potential owners pass this test before any takeover is signed-off – which seems a logical step to protect clubs.

And then closer to home, in the case of Sunderland, there is the involvement of FPP Sunderland who currently have a charge registered with Donald’s holding company, Madrox Partners.

It’s understood that the FPP trio – comprising Glenn Fuhrman, John Phelan and Robert Platek – essentially have a veto in the sale process and can have a major say in whether a deal will be given the green light.

FPP hold security over the club and its assets and their approval is required to sanction a deal.

But receive the thumbs up from all relevant parties, and the deal can finally be signed-off and the shares transferred.

It’s a long process, and one which understandably takes time to complete under normal circumstances – let alone in the environment football currently finds itself in.

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