Everton takeover: key questions answered with crucial days ahead for Dan Friedkin group

Everton are one step closer to having a new owner with Dan Friedkin having signed an exclusivity deal with Farhad Moshiri.

The US billionaire has now entered into the next stage of due diligence - which will be applied to him, by regulators such as the Premier League, and by him, as his team digs deep into Everton’s accounts and data to ensure there are no surprises.

As the ink dries on the agreement that started this process, here is a look at what happens next.

READ MORE: Dan Friedkin takeover of Everton edges closer after Farhad Moshiri agreement

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What is an exclusivity agreement?

The most important thing to stress right now is that the deal to buy Everton has not been completed. It has moved a necessary step forward, however. Moshiri and Friedkin’s talks have entered a period in which they can cut out the noise from the chasing pack of investors who submitted bids in the wake of the collapse of the 777 Partners deal for the club on May 31. The stage is entirely Friedkin’s with Moshiri unable to formally consider alternative proposals until this arrangement expires - most agreements of this nature last 30 or 60 days. During this period, Friedkin will essentially look under the hood of the club and investigate whether there is anything that he believes would pose a risk to his interests. His team will also be thrashing out the finer details of the deal reached with Moshiri. One of the common complaints through the melee of the bidding war was that investors were unsure precisely what he hoped to gain out of any deal - beyond no longer being responsible for the bills at a club that had been on life support provided by external loans for months. Moshiri has £450m of shareholder loans in Everton, on top of the countless other millions he has pumped into the club. He will lose, at the very least, the vast majority of that. There are other obstacles to overcome, but the floor is all Friedkin’s for the time being.

Does this make a deal inevitable?

No - and we know this from experience. This is not uncharted territory for Everton. Moshiri has signed three exclusivity deals in his two year search for a route out of the club. All of them collapsed without resolution - leading to the scramble that Friedkin emerged as favourite from. The second of the exclusivity deals that failed to progress into a completed deal was the one US group MSP Sports Capital signed as they looked for an initial 25% foothold in the club. That was scuppered by the club’s biggest external lender, Rights and Media Funding, which vetoed the deal over concerns about the security of its loans to the club. Meanwhile, 777 Partners went through eight and a half months of trying to get a deal over the line after signing an agreement with Moshiri last September. The near-£200m of loans they provided for club operating costs were not enough to get them over the line. So tread with caution.

What scrutiny will the Friedkin Group face?

Separate to the negotiations with Moshiri, the Friedkin Group will have to undergo external checks by regulatory bodies. These are the same checks that 777 Partners claimed would be completed within 12 weeks. The Miami-based outfit secured the green light from the Financial Conduct Authority, though that was time-limited and had expired by the end of its share purchase agreement. It reportedly gained approval from the Football Association too, though that process is very much secondary to the Premier League’s Owners’ and Directors’ Test. That is the strictest diligence that will be faced and will see the league look into the backgrounds of key players, the finances for the deal and the vision they have for the club.

How long will any checks take?

There is no official timescale for the Premier League’s checks. While a bidder can be rejected on a host of grounds, there is also a grey area in negotiations where a proposal can get trapped in a seemingly endless process if they fail to meet demands but do not do enough for their offer to be thrown out. That was the issue 777 Partners encountered, with the Premier League setting four conditions for the group to meet in order to gain approval. The biggest stumbling block was the repayment of the £158m loan to MSP. The Premier League could set similar conditions or new ones in this process. But one major boost the Freidkin Group will have is a track record in football and a reputable financial background that should be easy to assess. There is confidence the Friedkin Group would pass this process, though it may not be until much later in the summer. The deal often referred to when looking at how quick the checks could take is the Sir Jim Ratcliffe deal for Manchester United, which took about seven weeks. That was, however, for a minority stake of 25% whereas the Freidkin Group is seeking to take control of Everton.

Does this make any difference to Everton’s PSR position?

Everton still face a battle to comply with the league’s Profit and Sustainability Regulations for the first time in three years - and thus avoid a third points deduction. The club has long been expected to need player sales in order to fall beneath the three year, £105m loss limit. There is hope within the club that that is achievable without a major asset departing, particularly if talks with Aston Villa for Lewis Dobbin lead to a deal. Whatever happens, news on the ownership front will make no difference to this year’s calculations, which will run up to the deadline of the football financial year, which ends this month.

Will it make any difference to Everton’s transfer window?

This is a different conundrum to the PSR equation. Hope of a deal for Everton could make a genuine difference to Everton’s summer transfer window even if it is not secured before it ends. That difference would not be in the incomings category, with the Blues’ budget likely to remain tight. It could make a big difference in relation to the club keeping its best players - or at least getting market value for them. Everton spent much of last season reliant on loans to meet operating costs due to cashflow problems. If an end to the ownership saga was not in sight come late August then there was potential for Everton to look to player sales as a way of banking money to pay the bills for the months that followed. If there is confidence the Freidkin Group deal will get over the line then that should prevent the need to sell players for wider business reasons when the deadline looms.