THE PRIVATE equity backers of Scottish technology business FanDuel have completed their boardroom coup by ensuring that none of the firm’s founders or employees will be able to share in the proceeds of its impending sale to Paddy Power Betfair.

The London-listed bookmaker is close to finalising a takeover of the daily fantasy sports business, in a deal that was expected to deliver a significant cash windfall to the five-strong team that founded the firm in Edinburgh almost a decade ago. Current and former staff members with shares and options in the business were also due to receive a payout.

However, US private equity houses Shamrock Capital Advisers and Kohlberg Kravis Roberts, which in 2014 and 2015 respectively led $70 million and $275m fundraising rounds for FanDuel, have been able to exclude ordinary shareholders from the deal by exercising their majority shareholder drag-along rights.

Drag-along clauses, which form part of companies’ articles of association, are designed to protect majority shareholders by enabling them to force minority shareholders to participate in a sale.

While dragging shareholders are supposed to offer minority shareholders the same terms as any other seller, KKR and Shamrock have told the firm’s founders – who each hold ordinary shares – that there will not be enough cash generated from the transaction for them to be paid.

In a document outlining the terms of the deal, the investors said that the aggregate value being paid for FanDuel “is approximately $465m”.

“As this consideration is not sufficient to satisfy the aggregate preference payable on the A preference shares, no part of the consideration payable in the offer will be payable on FanDuel’s ordinary shares or options to purchase FanDuel’s ordinary shares,” it said.

The move has been made possible because changes made to FanDuel’s articles of association in the past few years have strengthened the hand of dragging shareholders.

In August 2014 a clause was added that said drag-along rights would “prevail over any contrary provisions” in the document. A month later Shamrock completed its investment in the firm.

In June 2017 a clause was inserted to allow “the transfer of shares to the company for nil consideration”, with a further article added two weeks ago noting that no objections could be raised if “no consideration is payable” for shares being transferred as part of a sale of the business.

“It shall be no impediment to registration of shares under this article that no share certificate (or lost share certificate indemnity) has been produced,” the June 20 update added.

The founders’ shareholdings in the business were already watered down last year after a merger-termination clause relating to FanDuel’s ultimately unsuccessful combination with rival DraftKings kicked in.

Shortly afterwards KKR and Shamrock took control of FanDuel’s board, which was slimmed down from 10 to five seats.

As part of that FanDuel co-founders Lesley Eccles, who had been head of marketing at the firm, and Tom Griffiths, who was at that point the company’s chief product officer, resigned from the board. They have both now left the business, as have cofounders Rob Jones and Chris Stafford, who were head of design and head of technology respectively.

After the reshuffle fellow founder Nigel Eccles remained on the board as chief executive but left the firm in November 2017 to be replaced by Matt King, a former KKR executive who had served as FanDuel’s chief financial officer between 2014 and 2016.

Mr King is expected to receive a payment of up to $11.3m as a result of the Paddy Power Betfair deal. The firm’s current chief technology officer Robin Spira is due to make up to $3.5m, its legal officer Christian Genetski stands to make up to $6.2m, and it chief financial officer Andy Giancamilli is due to receive up to $5m.

FanDuel declined to comment.