Saracens win the 2023 Premier League final in the fifth year of private equity firm CVC Capital Partners' participation in the competition. Photo: David Rogers/Getty Images
CVC Capital Partners, involved in the Rugby Premier League, Rugby World Cup and Six Nations, is one of the largest but least known influencers in rugby.
Last month marked five years since the private equity firm announced it had acquired a 27 per cent stake in Premiership Rugby for around £200 million. Since then, they have kept public contact to an absolute minimum, allowing themselves to become a blank canvas onto which hopes and fears are projected. Until now.
In his first interview about investing in rugby, Nick Clarry, CVC's Head of Sports, Media and Entertainment, explains the reason for involvement in rugby and his vision for the sport's growth. Telegraph Sport also spoke to several leading executives, including both skeptics and supporters, about the CVC's impact on the sport and what's next. In the first part of a two-part special report, Telegraph Sport reveals:
- Why CVC were attracted to the values of rugby and also saw opportunity in its fragmentation between different leagues and organisations
- Premiership Rugby chairman Martin Phillips admits: “I'm not sure we would still be here” without CVC's investment.
- How the company has dealt with the challenges of the last five years when Saracens were relegated the lower league, the Covid pandemic and three clubs dropping out of the wall
- Former RFU chief executive Francis Baron warns he has sold family silverware to CVC, giving up commercial rights to Six Nations
CVC sees opportunity in 'undervalued' rugby
After CVC agreed to sell its majority stake in Formula 1 to Liberty Media in 2016, it began looking for a new project in the sport. Clarry quickly settled on rugby union. “We believe rugby is one of the greatest sports in terms of teamwork and values,” Clarry said. “It’s an incredible spectacle on the pitch in terms of physicality and also the tactics that Rassie [Erasmus] showed us at the last World Cup. What I also love about rugby is the anticipation of the game, it's a feeling that keeps growing and growing. We believe that rugby is one of the greatest sports games, but it is truly underrated and underrated.”
New Zealand's epic World Cup quarter-final victory over Ireland epitomized the intense drama the sport can produce at its best. Photo: PA/Adam Davy
According to CVC, the product was a disappointment due to a combination of poor management and lack of commercial focus. It was also incredibly divided. In Formula 1, the sport is run by one company and one CEO. In northern hemisphere rugby alone there is an amalgamation of organizations from the Premier Rugby League, United Rugby Championship, National Rugby League, European Professional Rugby, Six Nations, World Rugby, Lions, Barbarians as well as individual unions. Much of their energy has historically been spent fighting each other or defending their fiefdoms.
This fragmentation has meant that rugby as a sport has played a role far less than the sum of its parts, from its public profile to its leverage in negotiations with broadcasters. Someone was needed to pull everyone in the same direction. The purchase of a stake in Premiership Rugby was therefore only the first step in CVC's strategy. A similar package was secured for the United Rugby Championship in 2020 and, most importantly, CVC acquired a one-seventh stake in the Six Nations for approximately £365 million in 2021.
The CVC's entry into rugby was not without controversy. In Formula One, Bob Fearnley, Force India's deputy team principal, accused CVC of “the rape of the sport” and many were suspicious of its intentions in rugby. “CVC is a very, very successful, very large and very hands-on financial institution,” said Baron, a former RFU executive. “They don't invest in anything because they love the sport, they invest because they want to provide above-average returns for their shareholders and sponsors. You have to keep this in mind at all times.”
According to Baron's analysis, the RFU will receive five payments of £19 million for its share of the sale of the Six Nations, while its latest financial statements showed it lost £16 million in annual television and sponsorship income. The RFU, according to Baron, actually sold the family silver.
“All profits remain with the RFU and the clubs”
“CVC was in a worse position initially, but they brought those rights into perpetuity, so by the sixth or seventh year they were already in a big profit, and then they had the right to sell those rights to another third party to make a bigger profit,” Baron said . “CVC does not take any risk in terms of cost. They invest in revenue streams and all profits remain with the RFU and Premier League clubs.”
The RFU strongly disputes this analysis and says CVC's investment will go into a strategic growth fund “to generate income and secure future earnings for the game.” However, negative perceptions of private equity can be difficult to change. Even Phillips, the former CEO of the Welsh Rugby Union and B&Q, held this view before being subjected to something of a Damascus treatment.
“When I worked in the corporate world, I thought private equity was the devil incarnate, an asset snatcher,” Phillips said. “I spent 30 years in the corporate world and I wish I had found private equity sooner. The reason I say this is because if they decide to do something, they resource it properly. Whereas in business, if it costs £1, you'll ask, “What do I get for 50p?” These guys are saying if we're going to do this, let's properly resource it so we have a better chance of success. I like that mentality.
“The only way to succeed is to grow. I think what people miss is that if we grow, they get 27 percent growth and the clubs get 73 percent. We can't be more united because if we don't grow we're all going to be in trouble.”
“Rugby is relatively small in the world”
Phillips also points out that the “asset diversion” stereotype doesn't apply because In the case of Premiership Rugby, “there are no assets to be stolen.” The appeal of partnering with CVC lay not only in their funds, but also in their contacts spanning multiple industries within its multi-billion dollar empire.
“Whether we like it or not, rugby is relatively small,” Phillips said. “For a small sport like rugby to compete globally in a very difficult market is a big challenge. So I'd rather compete on that with someone like CVC, who's also in the tent with us. They watch what some of the best sports venues in the world do and sit in those boardrooms. We get access to some of these ideas and future directions, which is incredibly useful.”
As an example of their reach, six months ago CVC asked Phillips to become vice chairman of World Volleyball, the market leader in volleyball. OTT (over-the-top) broadcasting. “I will sit on the board and bring that knowledge to Premiership Rugby free of charge,” Phillips said.
If playing catch-up with volleyball makes rugby seem small-scale, that's where CVC's appeal lies. “You don’t invest in something that’s already really good because you don’t have a lot of cushion,” Phillips said. “You have to invest in something that has the potential to be much better. Investors want to buy assets that are undervalued, not overvalued. They want to buy something that is either down or on the way up, we call it catching a wave. We are still attractive because we have potential.”
If the appeal of CVC funds to the financially battered Premiership Rugby League and the URC seems obvious, the Six Nations has already firmly established itself as rugby's single most reliable ATM. Why then did he accept CVC's offer? The money is undoubtedly attractive, but one Six Nations executive says collaboration is just as important as the money.
“At a time when the future looks very uncertain and there remains uncertainty about how major sport will be financed in the future, it makes sense to establish relationships with responsible private equity to take advantage of all the opportunities that lie before us, not least cash injections , it’s about much more,” the source said. “It's the ability to think differently about your future.
The Six Nations has always been a reliable source of income for rugby. , but its executives believe the company can grow even more with the help of CVC. Photo: Getty Images/Ian Cook
“We want to create a sense of unity in terms of what we're trying to achieve, which is the growth profile of the game. The result of this will be to unlock the true value of what we have, which we have not done for the past few years. We just didn't do it. There's no denying what we have. In rugby we have played individually too often, which has led to huge difficulties as the rights market is weak and the economy is going through difficult years. We must work together.”
According to Clarry, CVC's scope in all three leagues was focused solely on advertising: “We had a clear plan, which was to eliminate the commercial side of the sport. on the sporting side, leave clubs, unions and World Rugby in charge of the sport, without our influence; and then really focus and redouble our efforts on the game's ambitious commercial vision, with world-class management and day-to-day commercial execution.”
Plans thwarted by unforeseen circumstances
However, after CVC's share of the Premier League was formalized in March 2019, initial plans soon went awry. Just over eight months later, an investigation into Saracens' manipulation of the salary cap was published, and a few weeks later the first Covid cases were recorded. Premiership Rugby in particular has since been in a state of constant crisis, with three clubs – Worcester Warriors, Wasps and London Irish – dropping out of the league.
Saracens' salary cap scandal, which led to the club's relegation from the Premier League in 2020, helped make CVC' My first year of rugby proved to be more challenging than expected. Photo: Getty Images/Dan Mullan
There were mistakes along the way. CVC's original management team of chief executive Darren Childs and chairman Andy Higginson were ill-suited to putting out the fires and infighting common to the Premier League. Given Childs' TV background, many clubs were expecting a big broadcast success, but the latest rights package with BT Sport, now TNT, was renewed at the same cost.
More problematic was how few conditions were attached to how Premier League Clubs spent their windfalls. According to Francois Godard, media analyst at Enders Media, this directly influenced CVC's subsequent promotions to La Liga and Ligue 1 in Spain and France.
“The mistake they made was that they failed to control their expenses,” Godard said. “They invested in these leagues, but they had no contractual obligations as to what the clubs could do with the liquidity. As a result, clubs spend a lot on players rather than investing in their stadium, branding, infrastructure, and digital services. As a result, football clubs in France and Spain are willing to spend about 70 percent of their liquidity on infrastructure.”
Some of these bugs have been fixed. The new management team of Phillips, chief executive Simon Massey-Taylor and Nigel Melville, who acts as the liaison between the clubs and the league, are respected within and outside the Premier League. While broadcast revenues have remained stagnant, they have significantly expanded the league's reach through free-to-air TV deals with ITV, as well as the creation of a Premier League on-demand service. Last year the Premier League attracted record viewership on TNT and ITV, and sponsorship numbers also increased.
According to Phillips, Covid has wiped out at least two years of progress, and this is Clarry's first quiet spell in the Premier League after almost five years of stormy waves.“The job has been more difficult than we expected due to the financial difficulties of Covid, the situation with Worcester and Wasps and the fragmented nature of the game,” Clarry said. “But the Premiership Rugby League sponsorship business is booming, the data business is growing and the media business is now booming following our investment five years ago. We have also moved from broadcasting some games to showing all games on TNT Sports, ITV and Premiership Rugby TV, which is a huge win for fans. Sport is a dynamic business and rugby is on its way, with the prospect of much better results for everyone involved in the game.
This brings us to the question of whether CVC or Premiership Rugby regret their pact. Clarry's answer is a resounding negative. Phillips agrees: “I think if we had our time again, would we do the same thing again? My answer: yes, definitely. I think the CVC probably found it quite a challenge, but I just think it's really hard to bring about change in rugby.” Exeter chairman Tony Rowe is among those who have always opposed CVC's involvement, questioning whether they have delivered on their promises.
However, Phillips, who was still at the WRU when Covid hit, believes without CVC's investment there might not be a Premier League now. “If you look at what's in the public domain, if that £200 million hadn't been in the Premier League economy when Covid hit, I don't think we would have had a club-by-club problem, I'm not sure we would they would do it.” is still here,” Phillips said. “If you look at how difficult it is for him now, even with this level of injection, then either he would not be here, or he would be seriously, seriously injured.”
Part two of our special report in CVC, about our future plans will be published on Tuesday
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