Rugby Australia has no choice but to embrace private equity | Rugby Australia
THe sang the Rolling Stones, you can’t always get what you want but if you try sometimes you find you get what you need. The classic Stones tune may well be Rugby Australia’s theme song in relation to the private equity investment in the game.
RA Chairman Hamish McLennan revealed Australia was making “good progress” in the talks, admitting it wasn’t something you wouldn’t do in a “perfect world”.
But Australian rugby hasn’t lived in a perfect world for a very long time – if ever – and is in desperate need of private equity to keep the game financially viable in this country. With traditional sources of revenue such as broadcasting, sponsorship and takeovers dwindling, the governing body has no choice but to embrace it.
Rugby Australia on Thursday reported a financial loss of $ 27 million and a $ 45.7 million drop in revenue, which McLennan called a “horrible” record. Of course, Australian rugby, like many other sports, has been hit hard by the coronavirus pandemic, but where is the money coming from to get the game out of this black hole?
RA is closely studying developments across Tasmania, with New Zealand Rugby closing in on a deal with US private equity firm Silver Lake.
NZR also suffered a massive financial loss – NZ $ 34 million (AU $ 31.6 million) – last year and its revenue fell by over NZ $ 55 million (AU $ 51.2 million). . It is now ready to move forward with a plan to sell a 12.5% stake in its commercial rights to Silver Lake for NZ $ 387.5 million ($ 361.2 million), valuing the duties at NZ $ 3.1 billion ($ A2.89 billion) after securing unanimous support from its 26 provinces.
The Kiwis now need only the support of the New Zealand Rugby Players Association, apparently concerned about the potential commercialization of symbols, such as the silver fern and the haka, for the deal to continue.
NZR chief executive Mark Robinson said the Kiwis “are fighting for their survival”. If so, Australian rugby must also face an existential crisis.
If New Zealand gets a private equity deal and Australia doesn’t, it will widen the already gaping gap between trans-Tasman rivals.
The deal will help New Zealand develop, retain and bring back talented players from overseas. If Australia does not receive a similar cash injection, the country’s players will continue to move offshore, further weakening the Wallabies and Super Rugby teams.
If New Zealand’s trade rights were valued at $ A2.89 billion, what would Australian rugby rights be worth? The All Blacks are the most marketable rugby team in the world, but the Wallabies are a household name too – although the gold jersey has been a bit faded lately.
Besides talent retention, the money must also be spent on Super Rugby franchises, top clubs, women’s rugby and grassroots. Part is expected to be invested to create a future fund to protect the game against unforeseen events such as Covid-19.
Without private equity, Australia runs the risk of falling further behind not only the Kiwis, but the rest of the world. Northern hemisphere rugby has already adopted the model through CVC Capital Partners.
Opponents could argue that the game would sell its soul. In truth, he already did it 26 years ago when the sport was opened. The game used to be about idealism and altruism; now it’s all about professionalism.
There are risks, of course, but no investment is without risk.
Typically, private equity firms want to achieve a 20-25% return per year on their investment, which is equivalent to doubling in five or six years.
Lots of money on a loss making business like Australian rugby is high risk. How would they make it work?
First, private equity would most likely be very demanding on the sport, pushing content to create more and more high-quality games to generate income. This may have implications for the governance of the game, and could also come as a gross shock to players accustomed to limiting the number of matches played to protect their well-being.
What’s the end of the game if private equity doesn’t work? Does the private equity firm float its stake on the stock market or sell it to another buyer? Maybe a company that Australian rugby does not believe aligned with its values?
Sadly, there is no alternative but to limp until Australia becomes a tin rugby nation, wallowing in memories of past glories and reverting to amateurism.
Private equity is the solution to Australian rugby’s financial woes, but it will come at a cost – a price Australia has to pay.