TLate last year, consulting firm Deloitte issued a pamphlet to investors outlining the uncertain financial landscape created by Covid-19. “An increasing number of companies and economic sectors are under strong pressure,” he said. “Millions of jobs have been lost and thousands of companies are at risk. This is a classic scenario in which private equity can play a role. “
Just at the right time: in a moment of fear, a hero will come. Often several heroes, with wads of bills and a stern list of conditions. And so here we are: seven words that perhaps encapsulate the dystopian weirdness of 2021. The All Blacks are for sale. Yes, those All Blacks – Not just one of the most successful and famous teams in the world, but a culture and tradition, a heritage and a lineage. A name that, despite its vaguely irritating self-mythologization, resonates far beyond the borders of New Zealand, far beyond the shores of rugby union.
How to package and sell more than 115 years of rugby history like a supermarket item? Turns out quite easily. Last week, after months of flirting, New Zealand Rugby voted to sell a 12.5% stake to US firm Silver Lake. If the deal goes through, it will be the first time the All Blacks have become privately owned. And even if you don’t have a personal affinity for the team itself, it’s probably worth paying attention to. Because whatever your sport of choice, make no mistake: the wandering hands of private equity are almost certainly reaching your side.
First, there is the need. NZR has been in a sorry financial state for a few years and is now enduring catastrophic losses as a result of the pandemic. Last year it laid off a quarter of its staff. And for all the love and appreciation its flagship team enjoys, it has always been forced to operate within the constraints of a relatively small domestic market. On this basis, mortgaging a portion of his future broadcasting and commercial rights for a £ 200 million cash injection – real money for the struggling regions and clubs at the heart of the game – seems to make eminent sense in the short term.
The real question, of course, is what Silver Lake, whose other investments include a 10% stake in Manchester City and a significant stake in the Ultimate Fighting Championship, thinks it’s getting for its money beyond a cut in sales of Tshirts. Private equity has been infiltrating the sport at some level for decades, but only in recent years has the market started to bubble, fueled not just by Covid but by the growing willingness of federations and leagues to bow down.
For a long time, if you wanted to invest in sports, you bought a stake in a club or a team. But clubs have a downside: they are often loss-making or burdened with debt. Inconveniently, they sometimes lose or are relegated. Sometimes, as some Premier League clubs have recently discovered, they have a strong-minded following. Above all, they have little influence over their main sources of income: broadcast rights deals that are overwhelmed by leagues, federations and governing bodies. And so, in recent years, this is where private equity has set its sights. Tired of competing for position and influence in the league? Buy the league. Make your own rules.
In many ways, what changed the rules of the game was CVC’s lucrative management of Formula One between 2006 and 2017, during which the sport gradually became less enjoyable, less accessible, and yet tremendously more profitable. Since then CVC has made significant investments in Premiership Rugby, Pro 14 and Six Nations. Currently, three of the five major soccer leagues in Europe, the Bundesliga, Serie A and La Liga, are in talks with private equity firms about the sale of stakes in different ways.
And as with NZR, sports adoption of private equity is driven by both long-term existential angst and short-term cash flow. It helps here to think of the institutional investor as a kind of fortune teller who promises to sail his ship through the thick mists of the future. Private equity hears its cry. Private equity feels your pain. Private equity shares your concern about the stagnation of traditional media rights and future audiences: these treacherous kids with their Twitch and TikTok and their curious habit of eating detergent pods. But private equity can help. Just sign here, here; here.
If the present feels unsettling enough, then perhaps the real question is what’s next: the next move in a game where it’s already been established that everything is for sale. The FA has already toyed with the Wembley sale to plug its financial black hole. What if a big private equity firm comes in and offers to buy the FA Cup? What if you want the right to choose the England manager, or your seat at Ifab, which sets the laws of football? Could we really be sure that a tired and cash-strapped organization would hold its own? Or that we fans and consumers could do something to prevent it?
In New Zealand, the resistance has been largely led by the players. But whatever happens, the sale of the All Blacks, which will come so soon after the European Super League coup attempt, feels like an elementary moment. It is, at heart, a question of who gets to own the sport. Who becomes the owner of our traditions, our memories, our institutions, our passions. It feels, above all, like a moment to wake up.
George is Digismak’s reported cum editor with 13 years of experience in Journalism