Avoiding a sticky wicket

The dust has settled after the auction of The Hundred franchises for the 100-ball cricket tournament launched by the England and Wales Cricket Board (ECB) in 2021.  The covers are coming off and the first ball will be bowled in just over a month.

The ECB sold a 49% interest in each franchise and the counties for each franchise team (including London Spirit, Manchester Originals and Northern Superchargers, with each franchise having both men’s and women’s teams) – could also then choose to sell some (or all) of their 51% interests.  The auctions for the 8 franchises is said to have raised over £520m.

Historically, investment in sports teams and franchises was treated with caution and was typically driven by passion.  In 2017, John Matthews, one of the co-authors of a report by UBS and PwC, told Business Insider that "I would tell my clients the fastest way to become a millionaire is to become a billionaire and then buy a sports team"[1].  That has certainly changed in recent years, with huge investment in football (Chelsea FC, for example) and now cricket. 

The Hundred investment reflects a growing trend of private equity involvement in sports, where firms see potential for growth and profitability.

But not all investors are only looking for a return on their capital.  For many, cricket is a passion first, and the opportunity to be part of the game cannot be missed.  For private individuals acquiring passion projects (especially those investing as a family), it is important to consider the implications in the event of a relationship breakdown.

The English Family Court has the power to transfer assets between spouses and/or order that assets be sold. 

It is likely that one or both of the parties would want to retain an investment, like that in one of The Hundred franchises.  Similarly, the retention of family businesses is often a contentious issue in financial remedy proceedings, and it is particularly problematic if the value of the other assets owned by the parties is insufficient for it to be fair for one person to retain a much-loved and prized asset. 

It is possible to avoid a forced sale if the parties agree, or the Court orders: (a) a division of the interest (if permitted by any agreements in relation to the underlying investment); (b) a division of any proceeds realised in the future; (c) staged payments to ‘buy out’ the other person’s share; or (d) offsetting the value against other assets that are to be retained by or transferred to the other person. 

However it is not always possible to avoid a sale and, with the Court having a wide-discretion when exercising its powers, there is significant uncertainty.

A pre- or post-nuptial agreement could avoid a dispute of this nature by providing that a particular asset shall be retained by one person and excluded from any claims in the event of divorce or dissolution of a civil partnership.  Alternatively, such agreements can provide a mechanism for providing the other person with fair value in a way that takes into account illiquidity and a reasonable timeframe for payment, i.e. one that does not necessitate an immediate ‘fire sale’ of a prized asset (sporting or otherwise). 

[1] Source: https://www.businessinsider.com/billionaires-turning-attention-to-sports-ubs-says-2017- 10#:~:text=%22I%20would%20tell%20my%20clients,sports%20team%2C%22%20he%20said