Rugby Australia has little choice but to embrace private equity- Bret Harris

It will come at a cost, but it is a price head office must pay to keep the floundering code financially viable

The Rolling Stones sang you can’t always get what you want, but if you try sometime you find you get what you need. The classic Stones tune could well be Rugby Australia’s theme song in relation to private equity investment in the game.
RA chairman Hamish McLennan has revealed Australia was making “good progress” in discussions, admitting it was not something you would not do in a “perfect world”.
But Australian rugby has not lived in a perfect world for a very long time – if ever – and desperately needs private equity to keep the game financially viable in this country. With traditional sources of income such as broadcasting, sponsorship and gate-takings dwindling, the governing body has no choice but to embrace it.
On Thursday, Rugby Australia announced a financial loss of $27m and a $45.7m drop in revenue, which McLennan described as a “horrible” balance sheet. Sure, Australian rugby, like many other sports, was hit hard by the coronavirus pandemic, but where is the money coming from to get the game out of this black hole?
RA is looking closely at developments across the Tasman with New Zealand Rugby moving closer to securing a deal with US private equity company Silver Lake.
NZR also posted a massive financial loss - $NZ34m ($A31.6m) – last year and its revenue fell more than $NZ55m ($A51.2m). It is now set to move ahead with a plan to sell a 12.5% stake in its commercial rights to Silver Lake for $NZ387.5m ($A361.2m), valuing the rights at NZ$3.1b ($A2.89b) after securing the unanimous support of its 26 provinces.
The Kiwis now only need the support of the New Zealand Rugby Players Association, apparently concerned about the potential commercialisation of symbols, such as the silver fern and the haka, for the deal to proceed.
NZR chief executive Mark Robinson says the Kiwis are “fighting for their survival”. If that is the case, Australian rugby must also be facing an existential crisis.
If New Zealand secures a private equity deal and Australia does not, it will widen the already-yawning gap between the 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 head offshore, further weakening the Wallabies and Super Rugby sides.
If New Zealand’s commercial rights were valued at $A2.89b, what would Australian rugby’s rights be worth? The All Blacks are the most marketable rugby team in the world, but the Wallabies are also a renowned brand – even if the gold jersey is somewhat faded lately.
Aside from talent retention, money must also be spent on the Super Rugby franchises, premier clubs, women’s rugby and the grassroots. A portion should 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 even further behind not just the Kiwis, but the rest of the world. Northern Hemisphere rugby has already embraced the model through CVC Capital Partners.
Opponents might argue the game would be selling its soul. In truth, it already did that 26 years ago when the sport went open. The game used to be about idealism and altruism; now it is all about professionalism.
There are risks, certainly, but no investment is risk-free.
Generally, private equity firms want to make 20-25% return per annum on their investment, equating to double within five or six years.
A lot of money on a loss-making business such as Australian rugby is high-risk. How would they make it work?
Firstly, private equity would most likely be very demanding of the sport, driving content to create more and more high-quality games to generate revenue. This may have implications for the governance of the game and could also be a rude shock to players who are used to a cap on the number of matches played to protect their welfare.
What is the end game if private equity does not work out? Does the private equity firm float its stake on the stock market or sell it to another buyer? Perhaps a business that Australian rugby does not believe is aligned with its values?
Unfortunately, there is no alternative but to limp along until Australia descends into a tin-pot rugby nation, wallowing in the memories of past glories, and reverting to amateurism.
Private equity is the solution to Australian rugby’s financial problems, but it will come at a cost – a price that Australia has to pay.

https://www.theguardian.com/sport/2021/may/01/rugby-australia-has-little-choice-but-to-embrace-private-equity?fbclid=IwAR2ZEymo_r3A5MtBTOFKiTPaK1bHPHKICPb9e4p6oENgAEdwecTeWfOTZIU