‘They saved the Premiership’: Behind CVC’s five years in rugby

Saracens win the Premiership final in 2023 in the fifth year of private equity firm CVC Capital Partners’ stakeholding in the competition – David Rogers/Getty Images

With stakes in Premiership Rugby, the United Rugby Championship and the Six Nations, CVC Capital Partners is one of the biggest, yet least known, power brokers in rugby.

Last month marked five years since the private equity firm announced it had taken a 27 per cent holding in Premiership Rugby for around £200 million. Since that time, they have kept public communications to an absolute minimum, allowing themselves to become a blank canvas on to which hopes and fears are projected. Until now.

In his first interview about its rugby investments, Nick Clarry, CVC’s head of sport, media and entertainment, explains its rationale for getting involved in rugby and its vision for taking the sport forward. Telegraph Sport has also spoken to several leading executives, including both sceptics and supporters, about CVC’s impact on the sport and what comes next. In the first of a two-part special report, Telegraph Sport reveals:

• Why CVC was attracted by rugby’s values as well as seeing opportunity in its fragmentation across different leagues and bodies
• Premiership Rugby chair Martyn Phillips admits “I am not sure we would still be here” without CVC’s investment
• How it navigated the challenges of the last five years with Saracens’ relegation, the Covid pandemic and three clubs going to wall
• Former RFU chief executive Francis Baron’s warning that it sold the family silver to CVC by giving up commercial rights to the Six Nations

CVC spots opportunity in ‘underappreciated’ rugby

After CVC agreed to sell its controlling interest in Formula One to Liberty Media in 2016, it was on the lookout for a new project in sport. Clarry quickly alighted upon rugby union. “We think rugby is one of the great sports in terms of teamwork and values,” Clarry said. “It is an incredible spectacle on the field in terms of physicality – but also tactics as Rassie [Erasmus] showed us in the last World Cup. What I also love about rugby is the anticipation of an event in the game, that feeling that builds and builds. We think rugby is one of the great games of sport and really underappreciated and undervalued.”

New Zealand’s epic World Cup quarter-final win over Ireland epitomised the intense drama the sport can deliver at its best – PA/Adam Davy

The product, in CVC’s view, was being let down by a combination of poor management and too little commercial focus. It was also incredibly divided. In Formula One, the sport is run by one company and one CEO. In northern hemisphere rugby alone, there are a conflation of organisations from Premiership Rugby, the United Rugby Championship, Ligue Nationale de Rugby, European Professional Rugby, Six Nations, World Rugby, Lions, Barbarians plus the individual unions. Much of their energy has historically been spent on fighting each other or protecting their own fiefdoms.

That fragmentation has meant that rugby as a sport has acted as far less than the sum of its parts from its public profile to its leverage in negotiations with broadcasters. What it needed was for someone to pull everyone in the same direction. Hence, the purchase of the stake in Premiership Rugby was only the first step in CVC’s strategy. A similar holding was taken in the United Rugby Championship in 2020 and most significantly CVC acquired a one-seventh share in the Six Nations for an estimated £365 million in 2021.

CVC’s entry into rugby was not without controversy. In F1, Bob Fernley, the deputy team principal of Force India, accused CVC of “raping the sport” and plenty were suspicious of its intentions within rugby. “CVC are a very, very successful, very large and very hard-nosed financial organisation,” Baron, the former RFU chief executive, said. “They don’t invest in anything because they love a sport, they invest because they want to deliver an above average return for their shareholders and funders. You have to have that in the back of your mind the whole time.”

According to Baron’s analysis, the RFU will receive five instalments of £19 million for its share of the Six Nations sale while its last set of financial accounts showed it lost £16 million in annual television and sponsorship revenues. The RFU, in Baron’s view, effectively sold the family silver.

‘All the bottom line exposure remains with the RFU and clubs’

“Initially CVC are worse off, but they brought those rights in perpetuity so by year six or seven they are heavily in the black and then they have the right to sell on those rights to another third party to make a big capital gain,” Baron said. “CVC are taking no risk on the cost side. They are buying into revenue streams and all the bottom line exposure remains with the RFU and the Premiership clubs.”

The RFU strongly disputes this analysis and says that the CVC investment will be put into a strategic growth fund “to generate income and deliver future revenues for the game”. Still, the negative perception of private equity can be hard to shift. Even Phillips, a former CEO at the Welsh Rugby Union and B&Q, held that view before undergoing somewhat of a Damascene conversion

“When I was in corporate land, I thought private equity was the devil incarnate, asset strippers,” Phillips said. “I worked 30 years in corporate and I just wish I had found private equity sooner. The reason I say that is if they decide to do something they resource it properly. Whereas in business, if it costs £1 you will say: ‘What do I get for 50p?’ These guys say if we are going to do it, let’s resource it properly so we have the best chance to succeed. I like that mentality.

“The only way they can succeed is to grow. What I think people miss is that if we grow they get 27 per cent of the growth and the clubs get 73 per cent. We could not be more aligned because if we are not growing then we are all in trouble.”

‘German handball is bigger than rugby globally’

Phillips also points out the ‘asset-stripping’ stereotype does not apply because in Premiership Rugby’s case “there are no assets to strip”. The attraction of partnering with CVC was not just for their funds but their contacts ranging across multiple industries within its multi-billion pound empire.

“Whether we like it or not, rugby is relatively small,” Phillips said. “German handball is bigger than rugby globally, we are quite far down the list. For a little sport like rugby to compete globally in a market that is very challenging is a big ask. Therefore I would much rather be trying to compete in it with someone like CVC also in the tent with us. They are looking at what some of the best sporting properties in the world are doing and they are sat in those boardrooms. We get access to some of that thinking and future direction which is incredibly useful.”

As an example of their reach, six months ago CVC asked Phillips to become vice chair of World Volleyball, who are market leaders in OTT (over-the-top) broadcasting. “I get to sit on the board and bring those learnings back to Premiership Rugby for free,” Phillips said.

If playing catch-up to volleyball makes rugby sound small scale then that is precisely the attraction to CVC. “You don’t invest in something that’s already really good because there’s little headroom,” Phillips said. “You have to invest in something that has the potential to be a whole lot better. Investors want to buy assets that are undervalued, not overvalued. They want to buy something that is either at the bottom or on the way up, we call it catching the wave. We are still attractive because we have potential.”

If the appeal of CVC’s funds to the financially stricken Premiership Rugby and the URC seems obvious then the Six Nations was already well established as rugby’s single most reliable cash dispenser. Why then did it accept CVC’s offer? The money is undeniably attractive but a senior Six Nations executive says that collaboration was just as important as cash.

“At a time when the future looks quite uncertain and remains uncertain in how major sport is funded going forward it makes sense to have a relationship with responsible private equity to take advantage of all the opportunities that brings forward, not least the cash injection, but it is 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 feel it can grow much more with the help of CVC – Getty Images/Ian Cook

“We want to build a sense of togetherness in terms of what we are trying to achieve, which is a growth profile for the game. The output to that will be unlocking the true value of what we have, which we have not been doing for the last few years. We just have not been doing it. It is undeniable to suggest that we have. We have been operating as individual silos too often in rugby, which has led to massive difficulties where the rights market is soft and the economy is going through difficult years. We have to work together.”

CVC’s remit, across all three leagues, was focused purely on the commercial, according to Clarry: “We had a clear plan which was around pulling the commercial side of the sport out from the sporting side – leaving the clubs, the unions and World Rugby in charge of the sport, with no influence from us; and then really focusing on and doubling down on an ambitious commercial vision for the game, with world-class management, and the day to day grind of commercial execution.”

Unforeseen circumstances hinder plans

However after CVC’s stake in the Premiership was formalised in March 2019, initial plans soon went awry. Little more than eight months later, the investigation into Saracens’ manipulation of the salary cap was published and a few weeks after that the first cases of Covid were reported. Premiership Rugby, in particular, has been in a state of perma-crisis ever since with three clubs in Worcester Warriors, Wasps and London Irish falling out of the league.

The Saracens salary cap scandal – which led to the club’s demotion from the Premiership in 2020 – helped make CVC’s first year in rugby more challenging than expected – Getty Images/Dan Mullan

There were missteps along the way. CVC’s initial management team of CEO Darren Childs and chair Andy Higginson were not suited to the firefighting and infighting common within the Premiership. With Childs’ background in television, many clubs were expecting a broadcasting bonanza, however the last rights package with BT Sport, now TNT, renewed at the same value.

More problematic was how few strings were attached to how the Premiership clubs spent their windfall. This directly influenced CVC’s subsequent moves into La Liga and Ligue 1 in Spain and France, according to Francois Godard, a media analyst at Enders Media.

“The mistake they made was not to control their spending,” Godard said. “They invested in these leagues but they did not have any commitments in contract terms on what the clubs could do with the liquidity. As a result, the clubs spend a lot on players as opposed to investing in their stadium, branding, infrastructure, digital services. As a result, the football clubs in France and Spain are committed to spending around 70 per cent of their liquidity on infrastructure.”

Some of those missteps have been rectified. The new management team of Phillips, CEO Simon Massie-Taylor and Nigel Melville, who acts as the interface between the clubs and league, are respected inside and outside the Premiership. While the broadcast income has been flat, they have massively expanded the reach of the league through free-to-air television deals with ITV as well as setting up a Premiership on-demand service. The Premiership attracted record numbers on both TNT and ITV last year while sponsorship has also increased.

As Phillips argues, Covid wiped out at least two years of progress and for Clarry this is the first stretch of calm for the Premiership after nearly five years of stormy waters. “It has been harder work than we expected because of the financial difficulties of Covid, the situation with Worcester and Wasps, and also the fragmented nature of the game,” Clarry said. “But the Premiership Rugby sponsorship business is up, the data business is up, and the media business is now on the way up, since our investment five years ago. We have also gone from a fraction of the games being on air to all of the games being shown across TNT Sports, ITV and Premiership Rugby TV – which is a huge win for the fans. Sports are momentum businesses, and rugby has now turned the corner, with the prospect of much better results for everyone in the game.

This brings us to the question of whether either CVC or Premiership Rugby regrets their pact. Clarry’s answer is emphatically no. Phillips concurs: “What I look at it is if we had our time over again would we do the same thing again? My answer would be yes, definitely. I think CVC have probably found that quite challenging but I just think rugby is really, really difficult to get change done” Exeter chairman Tony Rowe is among a handful of voices who have always opposed CVC’s involvement, questioning whether they have delivered upon their promises.

Yet Phillips, who was still with the WRU when Covid struck, believes there might not be a Premiership now without CVC’s investment. “If you look at what is in the public domain, if that £200 million was not in the Premiership economy when Covid came along, I don’t think we would have a club-by-club problem, I am not sure we would still be here,” Phillips said. “If you look at how tough it is right now, even having that level of injection, then either it would not be here or it would have been seriously, seriously wounded.”

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