The South African Rugby Board is about to reject a private equity deal that would see the Springboks hand over 20% of it's commercial rights for $75 million to American based Ackerley Sports Group (ASG).
The problem with this deal is this is forever plus they also demand controlling voting rights on the Rugby board. $75 million may seem like a lot of money once converted into Rand's, but this is peanuts when thinking 10 , 20 or 50 years into the future. I do think the sport needs to move forward with a new style of business management because the sport should be growing. The International Rugby Board having France host 2 rugby world cups so close together is a problem and in my mind highlights underhand back room deals.
ASG would have 3 seats o the board out of a total of 7 and appoint the chairman which would give them a controlling 4 out of 7. Their control would see them manage television rights, sponsorships, events, branding and licensing. They would not however be involved with team selection or management, but at the same time controlling the "events" may not be in the best interest of the team or players.
There are many other rugby playing nations that have already handed over a large percentage of their commercial rights in similar such deals and they are now regretting this. The English club sides agreed a deal back in 2018 with Capital Ventures valued at £230m for a 27% stake. CVC then invested in the 6 Nations to the tune of £365m for a 14.3% stake which is sad and will be seen as a very poor business decision in the years to come.
The New Zealand Rugby Board sold 8.58% NZ$200-million (US$134m) to another American firm called Silver Lakes back in 2022. Just 2 years later as that money has been spent do they realize this was a big mistake.
The English Rugby Premiership believed that the investment company CVC would help them increase their revenue but in reality they are earning far less now than before. The television rights deal has been reduced meaning their slice of the pie has shrunk plus they have 27% less. The bills have not decreased and along with salaries for players and staff that keep rising.
South Africa having won back to back World Cups along with a rugby mad fan base would be considered an ideal candidate for investment. The $75 million is nothing if you are valuing the brand at $375 million. The 100K seated stadiums you can sell multiple times over and the public all own the latest Springbok jersey.
France with their Top 14 League have also rejected outside investors and they like South Africa are becoming more and more financially well off. New Zealand touring South Africa makes more commercial sense for New Zealand as their Union needs the money desperately. South Africa will share some of the profits along with the television rights for that series.
Why anyone would even consider selling their commercial rights in a forever deal must be absolutely stupid to even consider this let alone agree to it. The English Rugby Premiership have already lost 3 clubs to insolvency and have to find a way of growing their revenue by 27% just to remain where they were before they sold out. t is fine t the time when you have the money to spend but as we know this never lasts forever and then what?
The RFU and the ERFU who agreed these deals to sell their commercial rights are not thinking long term and they should have gone down another avenue that would be beneficial to all the clubs. The 6 Nations is a huge tournament that fills the coffers each year funding the Rugby Unions involved. Covid created havoc with the various Unions when games were played in empty stadiums. Unfortunately those running the various country rugby boards are not business people and they need to be replaced with people that can work the numbers.
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