Assignment task:
Negotiation - Contract
The London Lions are a football club in the English first division. Recently the club was acquired by a wealthy Canadian businessman. After acquiring the club its new owner has gone on a significant spending spree and amassed a player squad significantly larger and more expensive than most other top level clubs in the league. Since the takeover the club has spent £300 million.
The club's financial and legal advisors have informed the board of directors that they could be at risk of being investigated for financial fair play violations. While there is no direct evidence of such investigations being currently conducted or under consideration by the major sporting regulatory authorities, the London Lions board of directors wants to play it safe. They are fearful of another potential transfer ban, especially considering that they are currently in the running for the signing of a promising midfield talent also playing in the English league. They are expecting/ willing to spend upwards of £80million on the signing.
To avoid potential penalties the club has decided to loan out and sell several players at a combined profit of £150million.
One of the players they have decided to loan out is a young England international named Cody Geller. While Geller is currently not the strongest player in their squad the clubs manager believes that he has potential to develop elsewhere if he was able to get more game time.
Only three clubs have expressed interest in Cody Geller. One of the clubs interested in Geller is the London Eagles. They are a mid-table club in the English league and tend to finish between the relegation zone and 10th place. Geller has been on loan to the London Eagles before and was popular with fans. However, the London Eagles would prefer to purchase Geller and are not really interested in a loan deal, as they hope he can contribute to their squad and help them stay above 10th place.
A prominent sporting journalist, Patrizia Romana, has reported that the only other clubs interested in signing Geller on a loan are a club in the German first division and a club currently at the top of the English second division. Due to the financial regulations of those leagues those clubs do not have nearly as many funds as the London Eagles.
Geller's market value is estimated to be between £30 and £50 million.
Trusting Patrizia Romana's report of their weak competition for Geller the London Eagles have submitted a bold bid for £25 million pound to purchase Geller. They are flexible with add ons however if Geller delivers certain performances but would prefer to stay under £35 million.
The London Eagles are disappointed about the offer and are reluctant to let Geller go for that little of an initial fee. They are however aware that selling Geller to the London Eagles could be their best chance of getting the most amount of money out of him.
Both clubs have entered negotiations about Geller as they are both very interested in making the deal happen.
Questions:
1) Negotiate the following terms of the contract on behalf of your client (London Lions):
- Loan Deal or Sale
- If it is a sale: how high is the transfer fee
- If it is a loan: how high is the initial fee paid to the London Lions
- Whether it is a sale or a loan: what add ons are the London Eagles willing to pay and how high are they willing to go: Consider (but not limited to):
- End (finish) above 10th place (estimated 50% chance)
- Win a club trophy (estimated 5% chance)
- Geller wins any individual awards (estimated 40% chance)
- Over 20 goal contributions per season (estimated 80% chance)
- If it is a sale also consider for how many seasons the add ons should last
- If it is a loan: how many seasons is the loan for?
- If it is a loan: is there an option to purchase clause?
- If it is a sale: is there a buy back clause?
2) Decide what are the:
- Best possible outcomes
- Best acceptable outcome
- worst acceptable outcome
- worst possible outcomes
3) Make an Agenda