CVC cash must go towards sustainability, not players' wages - Andy Goode
The cash injection from the proposed sale of a minority stake in Premiership Rugby to private equity firm CVC must go towards making clubs sustainable and not into players’ pockets.
As exclusively revealed by RugbyPass this week that Premiership clubs are likely to agree a deal to sell around a 25 per cent stake to private equity firm CVC for somewhere in the region of £240m and they are expected to be considering the offer at the next board meeting of owners, which takes place on 11 December.
It was only a couple of months ago that they were being offered a similar sum (around £275m) for 51%, so a good deal has been negotiated in a relatively short space of time and Mark McCafferty and co would appear to have done a good job.
The original offer never made any sense because at no point should the Premiership ever be subservient to a majority shareholder from the outside but to relinquish half the amount of equity for a similarly significant amount of money would seem to represent good business on the face of it.
The success of any deal hinges on how the money is spent for me though. Some of it will undoubtedly go on clearing debts because 11 of the 12 Premiership clubs posted a loss in their latest financial accounts, with Exeter the only exception, but where the rest goes is key.
It should be used to improve the infrastructure of the clubs and be put towards planning for the long term. If it goes into the pockets of the players, then we’ll be back at this point with everyone losing money again before you know it.
As an ex-player, I can tell you that players and agents will be looking at this news and thinking they should be getting paid more as a result and I’m all for players getting paid as much as possible but if all this money goes towards that, it will just bankrupt the game in the end.
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Players’ wages have gone through the roof over the last five years but they’ve reached the point now where if they go up much more, we are likely to see clubs go bust.
The danger is that it’s very similar to when the game turned professional in the late 1990’s and clubs spent beyond their means. The money ran out and clubs like Richmond and London Scottish ended up going into administration.
I’m not saying that is going to happen with this injection of cash but it could do if financial mismanagement is allowed to occur and the warning is there from the not too distant past.
There are already rumours of Kieran Read now coming to the Premiership instead of the Top 14 on a salary of £1 million. I don’t think he’s worth that anyway but it’s the kind of short-sighted move that would represent a bad use of the money in my opinion.
If a club makes that investment in someone like Read, they won’t get that much of an increase in the number of fans coming through the gates of their stadium or watching them.
Some clubs will look at splashing the cash on a marquee player or two in order to hopefully boost their chances of achieving short-term success in the Premiership or Europe but that isn’t a legitimate business plan for the long term.
Clearly, all the clubs are going to get a windfall if this deal is ratified but for me there should be some sort of strategic plan behind how that money gets used.
I’m a big believer that you’ve got to balance the books and make clubs viable businesses in order for the product to grow and that just isn’t happening at the moment.
If you’re losing £5 million or £6 million per year as some clubs are, then you’re up the creek without a paddle if your benefactor decides they’re no longer interested so working towards a greater level of sustainability has to be the number one goal.
The whole reason for bringing CVC on board is to grow the product. Premiership Rugby claims it has experienced 80 per cent growth in the past five years and has stated that it wants to accelerate that growth even more.
There’s no way that growth has been in the form of bums on seats but it has grown commercially and television revenue has increased dramatically. That’s obviously an area CVC will be looking at closely with the BT Sport deal due to run until 2021.
They’ll also be able to have an impact on the sponsorship side of things because both Premiership Rugby and the Six Nations didn’t find it particularly easy when it came to securing a new title sponsor in the past year or so.
Businesses don’t just want to have their name associated with a competition any more, they want to see the value that’s coming back to them and that’s where CVC will come into its own.
I’m very surprised that the RFU haven’t tried to get involved in these negotiations because if they were ever going to wrestle back control of the English game, this would have been the time.
If this deal goes ahead, they can have no complaints about access to players but a £40 million overspend on the East Stand at Twickenham and an overall operating loss of £31 million for 2017-18 probably didn’t put them in the ideal position to make a move.
If a private equity firm gets involved in something, it’s doing so to increase the value of it for itself. They will be looking to take money out but they’ll have a plan and leave no stone unturned in their quest to make the business more valuable. That can only be a good thing for Premiership Rugby.
If they’re paying somewhere in the region of £240 million for a quarter of Premiership Rugby, that means the business is being valued at almost a billion pounds already and I’m sure they’ll want to see that double at least while they’re involved.
Right now, clubs are making losses and if we carry on doing what we’re doing in English rugby, there has to be a question mark over whether these 12 Premiership clubs will still be around in 10 years’ time. A £240m investment will certainly help but the devil will be in the detail and certain strings need to be attached to ensure the deal is a success.
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Comments on RugbyPass
“But with an exceptional pass accuracy rating “ Which apart from Roigard is not a feature of any of the other 9s in NZ. Kind of basic for a Black 9 dont.you. think? Yet we keep seeing FC and TJ being rated ahead of him? Weird if it’s seen as vital to get our backline beating in your face defences.
1 Go to commentsThanks BeeMc! Looks like many teams need extra time to settle from the quadrennial northern migration. I think generally the quality of the Rugby has held up. Fiji has been fantastic and fun to watch
13 Go to commentsLets compare apples with apples. Lyon sent weak team the week before, but nobody raised an eyebrow. Give the South African teams a few years to build their depth, then you will be moaning that the teams are too strong.
41 Go to commentsDid footballs agents also perform the scout role at some time? I’m surprised more high profile players haven’t taken up the occupation, great way to remain in the game and use all that experience without really requiring a lot of specific expertise?
1 Go to commentsSuper rugby is struggling but that has little to do with sabbaticals. 1. Too many teams from Aust and NZ - should be 3 and 4 respectively, add in 2 from Japan, 1 possibly 2 from Argentina. 2. Inconsistent and poor refereeing, admittedly not restricted to Super rugby. Only one team was reffed at the breakdown in Reds v H’Landers match. Scrum penalty awarded in Canes v Drua when No 8 had the ball in the open with little defence nearby - ideal opportunity to play advantage. Coming back to Reds match - same scrum situation but ref played advantage - Landers made 10 yards and were penalised at the breakdown when the ref should have returned to scrum penalty. 3. Marketing is weak and losing ground to AFL and NRL. Playing 2 days compared with 4. 4. Scheduling is unattractive to family attendance. Have any franchises heard of Sundays 2pm?
11 Go to commentsAbsolutely..all they need is a chance in yhe playoffs and I bet all the other teams will be nervous…THEY KNOW HOW TO WIN IM THE PLAYOFFS..
2 Go to commentsI really hope he comes back and helps out with some coaching.
1 Go to commentsI think we are all just hoping that the Olympic 7s doesn’t suffer the same sad fate as the last RWC with the officials ruining the spectacle.
1 Go to commentsPersonally, I’ve lost the will to even be bothered about the RFU, the structure, the participants. It’s all a sham. I now simply enjoy getting a group of friends together to go and watch a few games a year in different locations (including Europe, the championship, etc). I feel extremely sorry for the real fans of these clubs who are constantly ignored by the RFU and other administrators. I feel especially sorry for the fans of clubs in the Championship who have had considerable central funding stripped away and are then expected to just take whatever the RFU put to them. Its all a sham, especially if the failed clubs are allowed to return.
10 Go to commentsI’m guessing Carl Hayman would have preferred to have stayed in NZ with benefit of hindsight. Up north there is the expectation to play twice as many games with far less ‘player management’ protocols that Paul is now criticising. Less playing through concussions means longer, healthier, careers. Carter used as the eg here by Paul, his sabbatical allowed him to play until age 37. OK its not an exact science but there is far more expectations on players who sign for Top 14 or Engl Prem clubs to get value for the huge salaries. NZR get alot wrong but keeping their best players in NZ rugby is not one of them. SA clubs are virtually devoid of their top players now, no thanks. They cant threaten the big teams in the Champions Cup, the squads have little depth. Cant see Canes/Chiefs struggling. Super has been great this year, fantastic high skill matches. Drua a fantastic addition and Jaguares will add another quality team eventually. Aus teams performing strongly and no doubt will benefit with the incentive of a Lions tour and a home RWC. Let Jordie enjoy his time with Leinster, it will allow the opportunity for another player to emerge at Canes in his absence.
11 Go to commentsLove that man, his way to despise angry little men is so funny ! 😂
4 Go to comments“South African franchises would be powerhouses if we had all our overseas based players back in situ. We would have the same unbeatable aura the Toulouses, Leinsters or Saracens of this world have had over the last decade or so.” Proof that Jake white does not understand the economics of the game in SA. Players earning abroad are not going to simply come back and represent the bulls. But they might if they have a springbok contract.
24 Go to commentsA lot of fans just joined in for the fun of it! We all admire O'Gara and what he has done for La Rochelle
4 Go to commentsThe RFU will find a way to mess this up as usual. My bet is there will be no promotion into the the Premiership, only relegation into National League One. Hopefully they won’t parachute failed clubs into the league at the expense of clubs who have battled for promotion.
10 Go to commentsWell that’s the contracts for RG and Jordie bought and paid for. Now, what are the chances we can persuade Antoine to hop over with all the extra dosh we’ll have from living at the Aviva & Croke next season…??? 🤑🤑🤑
35 Go to commentsWow, that’s incredible. Great for rugby.
35 Go to commentsYou probably read that parling is going to coach the wallaby lineout but if not before now you have.
17 Go to commentsIf someone like Leo Cullen was in O’Gara’s place I don’t hear Boo-ing. It’s not just that La Rochelle has hurt Leinster and O’Gara is their Irish boss. It’s the needle that he brings and the pantomime activity before the game around pretending that Munster were supporting LaRochelle just because O’Gara is from Cork. That’s dividing Irish provinces just to get an advantage for his French Team. He can F*ck right off with that. BOOOOO! (but not while someone is lying injured)
4 Go to commentsDid the highlanders party too hard before the game? They were the pits.
1 Go to commentsWhat a player! Not long until he’s in the England side, surely?
5 Go to comments