The Spotlight of Sports Investment: Reputation as Capital

The new face of sports investment

The uptake of investment into sports assets by high-net-worth individuals, celebrities and athletes (Ed Sheeran, Stormzy and Tom Brady serving as recent examples) necessarily requires considering how best to protect this type of investor, whose reputation can act as their greatest asset but also liability.

As a private individual, or member of a smaller investor group, approaching a transaction in the sports sector can be daunting. Not only do you need to consider the financial viability of making an investment into the asset in question; the growth and strategic business plan and any regulatory requirements, but you must also factor in something which is, by nature, utterly unpredictable: public opinion. Acquiring, or investing into, a sports club with a vocal and engaged fan base means that investors are often subject to their scrutiny before the ink has dried on the paperwork.

A double-edged sword?

For many, this level of publicity offers significant advantages in negotiating a deal, enabling you to leverage your personal brand as part of the bid to offer a celebrity “pull factor” for new sponsors, or to evidence that your depth of knowledge and experience in the sector will help the club to secure ongoing financial success and overcome regulatory hurdles. However, any controversy or perceived lack of integrity connected to ownership can rapidly erode trust with fans, regulators, sponsors and the media, potentially resulting in a breakdown of negotiations and/or a risk to personal reputation. Consequently, taking steps to manage and protect your personal reputation throughout any proposed transaction is important and prudent risk management.

Early-stage documentation

We always recommend that parties enter into a robust confidentiality agreement at the earliest stage of discussions. Confidentiality agreements, or non-disclosure agreements, are usually relied on by the business that needs to prevent sensitive financial and commercial information (like details pertaining to player contracts and regulatory correspondence) from being disclosed to the wider public and, importantly, competitors.

However, to reduce the risk of leaks, private investors should also consider keeping the names and details of the investor parties confidential throughout negotiations to reduce the risk of leaks before any firm investment commitment has been made. Whilst confidentiality agreements won’t prevent information from being leaked, particularly with eagle-eyed fans keen to receive updates on their club’s future ownership, they do mitigate the risk of confidentiality breaches and set out clear parameters and expectations between the parties; and reduce the risk of strategic disclosures that could impact public opinion and thereby the investor’s bargaining position.

Investors who are particularly concerned about brand protection can also seek to include a non-disparagement clause in the early documentation, which would seek to restrict each party from making negative, derogatory or harmful public statements about other parties. Although this legal protection would not extend so far as to prevent fans writing or sharing negative statements online, it would prevent any party to that agreement from making or releasing negative public statements or fuelling any adverse public discourse that could follow a breakdown in negotiations.

Safeguarding your personal brand

Investors should also agree how the club or league will be allowed to leverage its personal brand following any successful deal. For example, it should be agreed that any public statement about the acquisition or investment should be agreed between all the parties in advance so that the investor is able to have a degree of control over and approve the images and communications circulated to press and the fans. Where an investor has a strong personal brand (for example, as a celebrity or athlete) it is important to have clarity on expectations around future publicity and announcements. Investors might seek to reach an agreement on whether, for example, the club is permitted to use that person’s likeness on promotional materials, or whether there is an expectation around the number of public events and matches that the investor will attend per season.

Not every investment or acquisition opportunity will be successful. Frequently, on the sale of a high-profile sports club, including football clubs or those with an established fan base, a seller will follow an auction process, which sees numerous candidates make bids to acquire the same club. Sometimes, because of due diligence findings or a breakdown in negotiations, one party decides to walk away from the transaction. When this happens and there is a perceived risk of reputational damage, the immediate priority is to stabilise the narrative, reassure any key stakeholders and to assess the legal position.

Crisis management

As soon as a perceived threat to an individual or company’s reputation has arisen, it is important to convene a small team comprising key decision makers, legal and PR representatives capable of preparing and enacting an agreed response plan, as soon as reasonably practicable, following the incident occurring. Ideally, pre-empting any such situation and having a response team and plan in place is the best preparation, but such planning is not always possible.  The crisis management team will need to carefully consider the legal position, including the terms of any confidentiality provisions or non-disparagement clauses that were agreed and are binding on the parties, as well as whether any of the following steps are appropriate:

Releasing a holding statement

A short, neutral statement acknowledging the position of the club or investor to targeted media outlets, without attributing blame or revealing any confidential information. Ideally, this would be reviewed by lawyers to avoid breaching the terms of any confidentiality agreements or defaming other parties. A clean, legally robust communications strategy will limit public speculation, preserve relationships and keep the possibility of future transactions open.

Engaging stakeholders

For companies and family offices it is important to clearly communicate with key stakeholders before issuing any public statement to ensure that the messaging is coordinated and consistent.

Monitoring press

It is possible to set up real time media and social listening alerts for names and keywords so that you are aware of public statements or news releases as soon as they are released. This allows for rapid correction of factual inaccuracies through right-to-reply requests or targeted clarifications.

Cease and desist letters

These letters aim to prevent the publication of false or misleading statements; and are often an effective method of preventing the release of false or negative statements by threatening robust legal action if ignored.

If you do find yourself in the unfortunate position of having to deal with a reputation management crisis, our specialists are adept at navigating the complexities of defamation law, whether dealing with slanderous statements said or libellous accusations made in writing. If the content has not yet been published, we will seek to prevent or mitigate publication, whilst for content already published we will pursue retractions and seek apologies and/or damages where appropriate. No matter when we are engaged, our strategic approach aims to halt the spread of false information and restore your reputation swiftly.

For a deeper dive into our reputation and brand management services for athletes and individuals in sport, click here. To learn more about the full range of services we offer athletes and investors in the sector, visit our Sports Private page.