Private equity in sport

[Kris]

Andrew Chambers raises a very good point when he discusses the Premiership Union move to a private equity owned league in https://www.bradfordbulls.co.uk/article/51744/andrew-chalmers-a-billion-pounds-anyone 

Where would it leave the rest of the game if it happened in RL?

RU has the same issues RL has but on a larger scale, however economies of scale seem to show a larger salary cap gives larger debts 

The RU game benefits from its international exposure in its home markets significantly - clearly the club game has no more ideas than ours does even with greater playing numbers and financial resource to call on, overall it still doesn’t make money

The only relatively new boy on the block that also happens to make money is Exeter, but that’s a welsh style regional team that sucks up everything else down here and RL doesn’t really have this unless you look at Catalans as a possible similar example

In the USA private equity firms effectively own sports and award franchises and therefore large chunks of cash to those areas and club owners that present the best business cases, and are not afraid to move a franchise if it isn’t working - across all sports - and also isn’t afraid to direct large resources into establishing a club that wont pay its debt back virtually ever - so there is no debt it’s owned by the governing body, or as we should call them, the private equity companies that own the sports.

There will be two potential sides now in RU - International (RFU) owned assets and premiership owned assets - they are no longer players

Private equity frankly wont give  stuff about the international game, it will enforce contracts on its assets and if they follow the other equity models in USA sport, the club game will rule and franchising will spread internationally through the club game

Chambers talks about a billion dollars - if, and it is an if, Elstone has been brought in as the link between a private equity firm and SL, and negotiations with the RFL, it will be to buy the RFL, not just the SL assets - which suggests Rimmer will know this and will negotiate accordingly

In the context of the whole sport this may be a good thing, in the context of SL alone its a bad thing because the rest of the sport has no financial support without the RFL - the Premiership and the RFU each have their own pots to fall back on.

I am not sure why Chambers repeatedly infers there is something going on without being openly transparent about what it is - i think the SL break away is a bit of fake news - i think there is a bigger issue here and Chambers may have found it if he doesn’t k now what it is about in full

Bear in mind Davy at the Giants has a private worth over £50 million, same as Moran, Lenagan and Caddick/Heatherington (potential worth as a pair £150 million)

We talk a lot about all kinds of other more immediate things in RL but haven’t really discussed this - the owners of our sport at the elite level are worth hundreds of millions of pounds - net worth.

The RFL is essentially a non-profit organisation so will never ever be a long term benefit to the game other than as an administrator and arbitrator 

So where do we get the money for real meaningful lasting expansion similar to Melbourne or even Catalans - its either a personal individuals wealth - (Guasch  net worth is hard to find but rumoured to be over 20million euros and his companies, and there are several, worth more) - or its from a sponsor - newscorp in the case of Melbourne

The RFL cant do that and a disparate group of very rich club owners cant either

So..a what if... Elstone could have been the FA’s next bigwig, or head of the Premier league - on a lot more cash and with a lot higher profile

Instead he is now in a sport torn with internal strife and suffering like the RU premiership with a lack of investment  and no leadership - a man who spent his time with private equity firms and local and national authority to get a multi million pound stadium built in one of the poorest areas in the UK

Money attracts money - he is employed as a CEO not just because he is a good administrator and a nice bloke who loves the sport - he brings a very active and I would say potentially interested group to the table through his own contacts - i would love to see his employment contract, i bet there is a link to a percentage perpetual amount even if he leaves based on income into the sport and how it grows - incentivises the deal - makes it more attractive

The people who have the money in our sport could bank roll a revolution - but they wouldn’t own it - and there is commercial risk in doing so

The safest model is for central funds = central profits = greater central funds etc - if the company fails the loss is limited to that central body - look at the failed USA RU leagues over the last few years - the governing body folds as a company and reawakens somewhere else and has another go - learns the lessons etc

Putting it all together this may be where we are now headed - its both exciting and worrying - because if you take it to its natural conclusion, RL is a very strong product in the Southern Hemisphere while RU has a stronger northern hemisphere presence - if you want to conquer the world you either do it through conquering the opponent or through merger and acquisition, then you have to integrate and engage with all stakeholders - a hybrid game - the money in that would be huge - the identity of both sports would be lost

And anyone that knows the corporate commercial world knows that mergers and acquisitions are very much the order of the day.

Is this what is really happening now, are we seeing the real commercialisation of sport and is RL on the cusp of going down the road?

Chambers makes some interesting points, but a billion dollars to the clubs? Even if that figure was close, it would be to the private equity firm that owns and runs the sport to allocate full stop - which would then leave the owners of each franchise the liberty to have a sport without a cap and all cash from the sport would effectively run the administration and day to day expense of having a team - including the stadium fees - leaving owners free to hit whatever they wanted to in fees for players

Private equity would be a strategic player - and that means some teams would miss out - who is safe then?

Leeds, Saints, Bradford, Warrington, London, Catalans, Toronto (richest owner in the English game!), Hull as a city, possibly Wigan and Huddersfield as they have the finances to play with the others if they wanted to

Everyione else, and this includes the lower division teams, would merge/become feeder clubs/relocate to strategic positions across the UK/EU/North America

There is then the issue that private equity needs to be interested in a sport because there is money (a return) to be made - clubs with external TV deals in Asia and North America such as Toronto bring a value - what we have currently in a closed market doesn’t so much - so would private equity be interested in RL now without the strategic plan of massive change across the sport? Is this what is actually on the agenda and getting lower league clubs to take a back room position the start of that? It certainly weakens them significantly going forward and a quick change in the RFL constitution would open the way for multiple team ownership.

Maurice Lindsey wanted mergers across the north and expansion into wales and Scotland on the back of it as well as across the EU - are we back there?

The RFL and SL are private companies - i genuinely wish someone would cough what the hell is actually going on and where the sport is going in the future - if its mergers and a move to expand through external investment then just disclose so we can all get used to it and support the game going forward- if not stop chewing on the same old bones and get on with it!

Anyone else a bit fed up with it all now? 

I think loyalty is a 2 way street and as fans we deserve to know what is going on, its the behind closed doors approach that screws up this game - either keep it all quiet and tell us when you have something to talk about or open the bloody door to scrutiny and live with it.

[gogledd]

An excellent and well observed article by Andrew Chambers. Lets hope the Championship and League 1 Clubs stick together and reject the SL/RFL proposal at the EGM

[gogledd]

6 minutes ago, scotchy1 said:

Im not sure where this private equity link has come from, but its been mentioned a bit but has come out of the blue.

The game almost certainly does need private equity, its been dying for investment for a long long time. The billion pound worth is nonsense. SL has no assets bar its brand name. You could go set up 12 clubs, buy all the best players and even more from the NRL and still have about £800m spare.

If private equity came in, they would just want SL. Thats the only thing they can sell (really) and everything else would be a cost rather than any real revenue stream.

If someone came in and offered to spend say £300m on the game for a 51% share of SL and them taking control I think the game would be mad not to take it. There would obviously be some changes they would make and they undoubtedly wouldnt be popular but that singularity of vision and drive would move the game forward.

I highly doubt it is even an issue though. I think Chalmers has simply seen the RU news and infers that SL might be doing something similar simply because it plays well to Bradford fans.

So would you be happy if a PE firm came in bought SuperLeague, kept all the media rights and promoted just 12 clubs? What the future for anyone outside that? The RFL would have sold the intellectual rights to the game and effectively given up on Chapionship and League 1.

 

By the way, I am NOT a Bradford Bulls fan

[paulwalker71]

13 minutes ago, scotchy1 said:

Championship and League 1 would probably benefit in becoming the biggest focus for the RFL. Im not sure why SL going that way would mean giving up on the lower leagues. They would carry on as they were. Just without P+R.

All very good for the 12 lucky clubs - but hard cheese for the rest then?

Ambitious clubs currently in the lower leagues - such as Bradford, Newcastle, Toulouse, Toronto (maybe Widnes in a few weeks), York etc are permanently excluded, so that a shell of a club like Salford can scrape by every year with 2000 supporters, whilst Wakefield and Castleford can go on promising new grounds like they have for the past 20 years.

No thanks

[Toby Chopra]

46 minutes ago, Kris said:

I think loyalty is a 2 way street and as fans we deserve to know what is going on, its the behind closed doors approach that screws up this game - either keep it all quiet and tell us when you have something to talk about or open the bloody door to scrutiny and live with it.

I'm not sure why you're saying there's closed door, cloak-and-dagger stuff going on. Elstone and his employers have been very clear about what they want to do and said so in public. That is, take full commercial and operational control of Superleague in order to focus all attention on it as its the only part of the game that generates significant revenues. 

Whatever you think about the personalities involved or the overall plan, they've been very clear about it, which is why there's been a strong kickback from those who believe its not in their interests. 

All the stuff about private equity is people getting over excited about something that's going on in union and using it to peddle conspiracy theories in League.

[Toby Chopra]

1 minute ago, scotchy1 said:

What?

Why would a private equity firm lock out better clubs? its very reason for being is to make profit.

If they didnt think that adding you to the league would make a more profitable league you should probably take a long hard look at yourself.

Yep. If anyone thinks CVC would come in and be happy with the current line up they're not understanding how such investors work. There's probably only 5 clubs that would be definitely safe. 

But it's pie in the sky. Rugby League has a lot of problems but deciding whether to sell itself for a billion pounds sadly isn't one of them. 

[paulwalker71]

6 minutes ago, scotchy1 said:

What?

Why would a private equity firm lock out better clubs? its very reason for being is to make profit.

If they didnt think that adding you to the league would make a more profitable league you should probably take a long hard look at yourself.

So you advocate that we return to licensing? With the PE firm deciding on the 12 licenses, awarded to those able to generate most profit?

[Angelic Cynic]

36 minutes ago, scotchy1 said:

If a PE firm came in. Which is unlikely. Its the only way they would do it.

If they offered hundreds of millions to do so it would be utterly idiotic to turn it down.

  The other code will turn it down,apparently - https://www.theguardian.com/sport/2018/sep/07/premiership-rugby-reject-cvc-offer

  Robert Elstone listens to fans - http://www.evertonfc.com/news/2017/12/31/robert-elstone

   May suit those elite clubs who seem to lose money.

[headtackle]

If a PE company took over the game would they want the existing big clubs or prefer to start again by forcing a few mergers, granting franchises or holding IPS style auctions for players

PE companies want returns and generally an exit route to realise them 

 

 

[Adeybull]

I tried to discuss precisely this issue earlier in the week, when the story broke about what the other code was doing. On two threads. JD was not happy.

Chalmers has now said pretty well exactly what I said.  And warned pretty well exactly what I warned.  And refers to the same "12 + 1" effective closed shop that I have been warning about. Check out the locked thread on the cross-code forum - and anyway, much of what Chalmers warns would be regardless of any potential and hypothetical sale of the SL competition to private equity, a sale that would bring a windfall for the SL club owners.

So, is it now OK to discuss this subect on here?

 

 

 

 

[Chronicler of Chiswick]

Personally I wouldn't touch private equity firms with a very long pole, but since when did ordinary supporters views count in RL? Given our low media profile and limited footprint at the top level I wouldn't think any PE company would be interested in us anyway.

[sweaty craiq]

I would line to see SL membership backed by a £5m investment in the owning company.