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FEATURE Troubled waters

Troubled waters
2 years ago

Andrew Mehrtens, the former All Blacks No 10 who now works in the finance industry in Sydney, is concerned about the closeness of the relationship between New Zealand Rugby and American private equity firm Silver Lake and has pushed back at what he believes is a deliberate attempt to portray New Zealand’s top players as “greedy”, an assertation he has described as “facile” and “disingenuous”.

NZ Rugby and the NZ Rugby Players’ Association are at loggerheads over the former’s intention to raise much needed capital by linking with Silver Lake and effectively selling a 12.5 per cent stake of future profit in return for $390 million.

New Zealand’s provincial unions and board are unanimous in agreement that the Silver Lake deal is the only option but the NZRPA, who hold the power of veto, disagree and have put forward their own suggestion in the form of a potential public share float worth $190 million with Forsyth Barr.

In a frank interview with The XV, Mehrtens, who scored 967 points in 70 tests for the All Blacks, said he had watched the increasingly bitter proceedings closely from the other side of the Tasman and was worried NZR and its chief executive Mark Robinson may have been “seduced” by Silver Lake’s valuation of NZ Rugby’s potential future earnings along with the company’s promise to leverage its tech expertise.

Sydney-based former All Blacks Andrew Mehrtens played his final test for the New Zealand national side in 2004. (Photo by Photosport)

“I’m no investment expert but in working in this industry over here I’m exposed to a lot of people who are,” he said. “Almost without exception, the ones who I’ve talked to about it and are au fait with what’s going on have expressed some concern around it.

“They question whether the process was fully looked into. I know NZ Rugby say they looked into all the options but I’m not entirely sure they did. I think it was a default setting right from the start that it was going to be private equity [for the purposes of raising capital]. 

“I think somewhere along the line they have been seduced somehow – whether it’s by the numbers or whether it’s by the spruiking of Silver Lake in terms of what they can contribute via a strategic partnership in the United States… somewhere along the line it became the default setting. 

I just think at the end of the day a private equity company’s job is to look after themselves and their investors. It’s all about the return. That’s their full and primary focus.

Andrew Mehrtens on the Silver Lake deal

“The people that I’ve talked to have said ‘Firstly, we’re not sure the valuation was entirely accurate. Secondly, we’re not sure the strategic element was really necessary, to – not get into bed with the devil – but to go down the private equity track because there are other ways to get strategic partners in terms of new markets’.

“I just think at the end of the day a private equity company’s job is to look after themselves and their investors. It’s all about the return. That’s their full and primary focus. Does that mean they’ll do a bad job? No, it doesn’t – it means they’ll work things in a way that are financially very good for them. 

“If you’re on the journey with them and you get some of those financial benefits as well then great, but it’s never a long-term thing. They’re turning companies around and extracting the maximum value in the shortest possible time and getting out.”

While Silver Lake would potentially control only 12.5 per cent of Commercial Co, the company NZ Rugby would set up to own the organisation’s commercial rights, Mehrtens believes the private equity firm would effectively call the shots and that they wouldn’t take the game’s long-term viability into account.

The All Blacks have become one of the most lucrative brands in world sports, playing matches all across the globe – including in Chicago. (Photo by Jonathan Daniel/Getty Images)

Mehrtens, who works for a private banking and wealth management firm and has regular dealings with athletes in Australia, particularly in the NRL, has watched as former All Blacks captain David Kirk, the president of the NZRPA, took the lead in suggesting an alternative proposal with Forsyth Barr but noted that Kirk’s involvement with the investment company – he is chairman – gave NZ Rugby a convenient out. 

“Unfortunately, that gave the union or Silver Lake side a great opportunity to say there’s a conflict here.

“But I suspect if you go to those other big groups in New Zealand who are used to raising capital, particularly for IPOs… I suspect they’re pretty similar in outlook to Forsyth Barr.

“I’ve played with Mark Robinson and have lived with Mark Robinson and I have no doubt that he wants the best for New Zealand rugby. I do think they’ve painted themselves into a corner though. Again, I’m no expert on it… but I think we need to heed those warnings.”

The labelling of the Players’ Association as being greedy disappoints me. They seem to be the ones that are the most concerned with the long-term viability at grassroots level, as well as the professional level, of anyone.

Mehrtens on NZR chairman Brent Impey’s disingenuous comments

Mehrtens was particularly disappointed with the painting of New Zealand’s professional players as being greedy by refusing to sign off on the Silver Lake deal. Outspoken NZ Rugby chairman Brent Impey even suggested the players and players’ association are denying impoverished young club players boots and jerseys by refusing to agree to a deal they were never consulted on until it became a fait accompli.

“The labelling of the Players’ Association as being greedy disappoints me,” Mehrtens said. “They seem to be the ones that are the most concerned with the long-term viability at grassroots level, as well as the professional level, of anyone. 

“Labelling the association and players as greedy is facile and disingenuous. I was part of a Zoom call two or three months back where the Players’ Association wanted to canvas former players and former coaches – a really broad rugby community, people who had been involved in the professional game but who obviously had come through the grassroots and have a real passion for the sport, and I’d put myself in that category. The discussion was all about the best result for the game in New Zealand. There was nothing about player remuneration or anything like that. It has really annoyed me.

NZR chairman Brent Impey and CEO Mark Robinson. (Photo by Fiona Goodall/Getty Images)

“I’ve always got on well with Brent Impey but if he decides he wants to start rolling out this narrative about the players being greedy I think you can roll out a few questions about who else stands to gain – I don’t think it’s necessarily Brent at all – but who stands to gain?

“They’ve engaged investment banks, and they’re there to do their job, but they also do a job to get a result and one with Silver Lake is the most lucrative for them. Consultant fees, placement fees – there are all these considerations. It’s kind of like when you engage an expensive consulting group to look at your business, they’re going to come back with changes because it’s almost what the mandate is. There’s no way they’re going to come back and say the status quo is wonderful, because that’s not going to justify their fees. I do have questions about the different interests involved.”

Mehrtens, who has been based in Sydney for eight years, and has worked with the Waratahs and is now also employed by broadcaster Stan, added: “I’ll always want New Zealand rugby to do well. I do like looking at the broader picture of the sport, though, and I do also want to see Australian rugby to do well both financially and on the field.”

Mehrtens, as well as other high-profile former All Blacks such as Richie McCaw, Conrad Smith and Buck Shelford, who have been outspoken on the issue recently, will continue to monitor what has become a bitter dispute with no end in sight.

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