Yesterday, The Times(£) revealed that private equity firm CVC is looking to buy a 51% stake in Premiership Rugby, which they value at £550m. The 13 shareholders (the 12 current clubs and London Irish) will consider the Premiership Rugby takeover bid this week and vote on Tuesday. But who are CVC, what might they change, and is it a good idea? Last Word on Rugby gives you the lowdown on the Premiership Rugby takeover bid.
Premiership Rugby takeover bid: the lowdown
The bid would mean £275m between the clubs, almost all of whom are in debt and bankrolled by owners. The agreement will allow owners to recoup their debts but the remaining money would have to be invested back. Worcester Warriors and Leicester Tigers have long planned to build hotels. Harlequins and Saracens want to build new stands. Both options would allow the respective clubs to generate money in a more sustainable way.
Moreover, the salary cap would not rise. Previous boosts to revenue have been consumed by wage inflation but this Premiership Rugby takeover bid aims to avoid that. So far, so good. But CVC will have a 51% stake and aren’t investing purely for the good of the game. So what happens next?
Who are they and how do they work?
CVC are a private equity firm with an existing interest in sports. They previously owned Formula 1 and have more than once looked into Premier League football. They also tried to bid for the commercial rights of the 2015 Rugby World Cup. So their interest in sports isn’t a new thing. But is their track record good or bad?
The answer to that depends on your priorities, obviously. Private equity firms tend to invest in companies and organisations they believe are undervalued or mismanaged. They then change operations and often the business model to cut costs and boost revenue, before selling it on. On the surface, that’s not a bad thing. Certainly, there’s an argument that rugby hasn’t fully emerged from the amateur era. Maybe the business model could do with updating.
Peter Kenyon, who has extensive experience in football with Manchester United and Chelsea, now works in rugby for Esportif International. He believes that rugby could do much better in branding itself and selling itself to sponsors. More success in those areas would mean even more money for the clubs. More money might allow for bigger squads, reducing some of the burden on top players.
To do all that well, you need expertise that doesn’t seem to exist in rugby currently. CVC could provide that expertise, leveraging existing assets and negotiating better deals to generate more income. That’s what they did with Formula 1. When they finally sold it, they made around £8 billion. It’s hard to imagine that kind of money in rugby.
So far so good. But what do Formula 1 fans and commentators think about it? And what are the downsides?
The possible cons
CVC’s ownership of Formula 1 was controversial, to say the least. Allegations of bribery and corruption dogged it, as well as accusations of limiting the sporting potential. Critics claimed CVC prioritised making money over investing in the sport. And we don’t have to look far to see where else investment has turned into a nightmare.
“It’s not football” is a phrase often uttered by rugby fans and pundits. It’s meant as a values judgement but there’s no arguing that the two sports are completely different in terms of financial power. The Premier League generates billions from its TV deals every season. Rugby can only dream of that.
But it comes at a cost, as all football fans know. Conflicts between club and country over top players are standard, with many players withdrawing from friendly internationals. Major tournaments are still attract enormous interest, as we saw this summer at the FIFA World Cup. But international games outside those tournaments have long been devalued.
Football fans are now wearyingly familiar with the outcome of outside investment. They start out dreaming of the Champions League. Too often, they end up free-falling through the divisions, selling their best players and other assets, and entering administration.
Nobody wants this. But can it be avoided while still making the profits rugby needs to survive? One of the chief concerns expressed about this deal is how it will affect the England players. TV and sponsorship companies will want to see players like Owen Farrell, Maro Itoje, Jonny May, and Elliot Daly as much as possible. Concerns about player welfare are already high. The conflict between club and country is problematic in England. This Premiership Rugby takeover bid seems likely to exacerbate it.
Bruce Craig – an unlikely hero?
Craig is the billionaire owner of Bath, the wealthiest club owner in the Gallagher Premiership. He’s a man who is very familiar with the conflict between club and country. Only last season, he got into a war of words with Eddie Jones over injuries to Bath’s England internationals.
— Sky Sports Rugby (@SkySportsRugby) June 3, 2018
And he seems pretty opposed to CVC’s planned Premiership Rugby takeover bid. He believes the bid undervalues the league and reportedly doesn’t trust private equity firms to have the sport’s best interests at heart. He might backing another bid, although there are no details about that yet.
It is possible that Chris Booy, chairman of Bath’s newly promoted rivals, Bristol Bears, will join him in opposition. Booy, leading the third wealthiest club in the league, is concerned about ceding so much control to an outside party. Agreement has to be unanimous so Craig could stand alone. It would likely make him unpopular but his spat with Jones suggested that doesn’t concern him.
La belle France
Of course, rugby doesn’t need to look at football as an example. Just across the Channel is a league dripping with cash. Player welfare concerns are regularly raised. The conflict between club and country has contributed to the French national team’s malaise over the past decade. Could that be the future?
Moreover, could it prove a wrecking ball to the chances of this deal working out? It’s all very well saying the salary cap won’t rise in England. But the lure of French money and French lifestyles isn’t going anywhere. What if the Top 14 raises its salary cap once more? England will struggle to keep its assets if they can earn double elsewhere, just as the Southern Hemisphere teams have struggled.
Nigel Wray, the Saracens owner and another wealthy backer, believes the deal is good. Investment is badly needed, he says, and the naysayers are premature. CVC have the necessary experience and expertise. Moreover, he believes the deal is for 50% rather than 51%. If he is right, CVC would not have the controlling stake (although they would surely demand control over commercial decisions).
Saracens’ remarkable success under his tenure, latterly based on their academy strength, suggests Wray is a man worth listening to. He is right that the league needs more investment – collectively the clubs lose £25-30 million a year. But the lessons from other sports also urge caution when considering this Premiership Rugby takeover bid.
One final thought – even if CVC prove to be the heroes the Gallagher Premiership needs, what happens when they sell? After all, that is their intention. Will the club owners be able to exert any control over the sale? What if they can’t and the next owners prove less worthy partners?
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