'I thought my Wallabies career was over': Arnold reflects on surprise spring tour call up

the final English Premiership deal structure will kill them if sporting rights values take off. In return for the extra cash they were desperate for, they move to 45% revenue share at a certain revenue point. Desperation to get their hands on the cash drove the deal. I think we were pushing so hard for preferred host status because certainty probably just allows them to borrow against repayment in 2025 (Lions) and 2027 (RWC). I think there are better options, just a lot more work and transparency required. That is the real attraction of PE, can all be done around the board table and inside Moore Park. There is no plan and no evidence of any change into the future. RA is a SME sized business without any capital and poorly managed. I presume it is in safe harbour and only not insolvent because this PE deal is potentially on the table. A transparent planning process recognising where they are today and demonstrating that they know what needs to be done would be a signal that the ship is turning.

I did remember your article and have read it again. I stand by my thoughts that the AR product has a better business case today than it has done for a while. Even since your article we’ve had SR AU success when measured in bums on seats and eyes on TV, Stan, 5 consecutive wins, and Rennie bedded down. But I am not ignoring continued disasters vs NZ and poor SR club finances. AR, as do many sports, falls over on many of the measures for valuation, it has poor business management track record, an unattractive capital structure, and asset valuation not a consideration of course. So it’s all about potential earnings value. I suggest RA hire an M&A specialist to put together a business plan and produce a valuation that stacks up. If the valuation is so low that it leaves AR toothless, then walk away. Looking at other PE deals in sport I believe AR’s potential earnings value is enough to secure a deal that would result in better outcomes than the road we are currently on. Be assured I am not a fantasist and think AR can negotiate a deal where it buys back the PE’s holding if certain metrics are achieved. AR’s valuation is low but I would suggest it’s come out of junk status and the penalties of bedding down with PE (as listed in your article re ownership and revenue sharing) are less punitive than what could be negotiated with any financial institution in the next 3-5 years. When I say the time is right for a PE deal I should have caveated that the time is right for the right PE deal. That being one in the opinion of specialists would add value in the long term.

Thanks for linking, missed that the first time around. Cracking read and deserved much more attention.

Sorry for being so blunt, but you are wasting your energy and confusing the issue. After my post I realised I had put the information into a document here: https://www.theroar.com.au/2020/07/23/rugby-versus-private-equity-no-prizes-for-guessing-who-wins-part-1/ As per Micko's post part 2 did not quite happen, I hoped nobody noticed. I will be updating it shortly for the Silver Lake proposal et al as well as the funding alternatives. I look forward to picking up your further thoughts then.

If he’s in form, I’m all for him playing Realist. Have you watched him lately?

What is the interest rate at the moment? It’s so low that money is practically free - paying down debt in such a time makes no sense.

It seemed like an odd thing to say, especially from your fine pen. Marinos really has no idea at all. Completely out of his depth, even in the safety of the Moore Park bunker. I don't think it ever occurs to them that they need to be out and about nurturing grass roots rugby. They rule from on high and only need to stir themselves for important stuff like board meetings and negotiating debt, TV broadcasts and sponsorships. They certainly don't understand that they lose money because of their failure to look after all of rugby's stakeholders. Would have no idea how to manage a multifaceted business like a corner shop or cafe.

G'day mate, I'm just suggesting that re-paying debt is not a good reason to enter a PE relationship in the first place. Certainly not with future windfalls from a Lions tour in 2025 and potentially the WC in 2027 on the horizon. Sure, if they enter PE then eliminating debt before investing in whatever they are going to invest in is the path. Sadly, I've got zero confidence in them having any sensible idea what to do with the remaining funds.

i’m not sure its so obvious tho as she does seem to always speak her mind. maybe a few feel the same way, which is normal in teams as there’s varying opinions. I’ve tried to find the article in stuff.co.nz and read a few but cant find that one. no biggy.

Sounds like business as usual at Fortescue. I had in mind it almost amounted to Twiggy promising to put in 49m or so, but RA basically giving it back, maybe even at a faster rate than he was putting it in. I am only going off my recollections of some previous comments made on the Roar. I will make a note of it and go back and have a look one day if I have time. I may even have downloaded some of the documents and final report.

Hopefully the first thing they do is repay debt Jez. PE would be a disaster but if you have a pile of money earning little interest it truly makes no sense to be paying interest on debt. Second I have come across business owners with the mindset of keeping their lines of debt open. It usually means they will be prone to the wastage of the PE 'investment', subsequently running through the funds and needing to borrow again; the debt 'junkie'. If RA can do a PE deal there would be a quite a range of cheaper alternative deals which would not require a permanent sacrifice of a share of revenue. Complex and less sexy but better for the long term health of the game.

RA needs to lift its game with getting more value out of its expense side and promoting the game properly to increase registrations and match attendances. Not only does it restore some profitability but there a serious compounding effect on the potential for TV rights. As you know I am a perpetual whinger about RA's governance and performance, but it recently occurred to me that the size of any potential deals on the ownership of commercial rights, and the total lack of accountability and transparency around the RA board is an extremely serious matter.

I would like to hear of there being a plan. Second there is no plan on earth that requires the minimum number the PE guys will invest. It is the dumbest and laziest way to get hold of money, but also the easiest and most painless for any directors worried about taking any personal risks securing rugby's future. They should resign instead. Second thing is you need to read a bit more widely on what a "PE deal" is in the rugby market e.g. 6 nations, English Premiership or the NZ Silver Lake proposal. You have no idea what you are talking about.

But I am not suggesting a new way to utilise funds. Everyone baulked at Hooper's deal but AR is now getting a return on the "risk" it took. (Although I'm not pushing for these 3 or 4 players to get an MH size deal). Yes a deal means same costs yet less ownership on the first day. But on the second day those costs fall significantly with the reduction of debt. I'd love to hear an alternative business plan that provides realistic opportunities to help grassroots, build competitive SR vs Kiwis, more rugby in govt. sçhools, better attendance and so on. The price of all this is a drop in ownership %, but I feel its 70% of a tangible successful product. Others don't feel the same way, I can see why and I suspect AR will not bite the cherry, yet.

100% ML. Marinos has even talked about using PE money to pay down debt which is mind numbingly terrifying. WR look set to give us the RWC. That should generate profits that let us pay off WR and HSBC. Selling future revenue to pay marquee players and pay down debt is madness.

If RA signs a decent TV deal in the next couple of years that changes the equation. Current value is decent then so the chunk of cash you get will be better. Or ideally the same chunk of cash they'd get now, but less of their future revenue given up for it.

It involved Twiggy parting with money, it just required RA to maintain a commitment for money they couldn't touch being sent elsewhere. I suspect if anything, he knew they wouldn't and couldn't accept it.

Not when 70% of something is 25% lower than your costs. We don't develop enough players because of RA negligence. We don't earn enough revenue because of RA incompetence. You don't change that by just giving RA a whole lot of money. The whole story of bankruptcy in professional sport is over paying players today instead of investing in the future. They are not the same thing.

Smoke and mirrors continues to be one of the biggest threats to rugby over the next five years. I remember you succinctly describing this offer some time back and I am not exactly sure it really involved Twiggy parting with anything. You are already familiar with this TWAS, it would probably be useful if you could write a short article on it. While people can go and find it, you sort of know where to look and already understand it.

Absolutely TWAS. I have also been tuning into some commentary on where English Premier League club ownership is going, as well as the IPL. That is around sporting content becoming a lot more valuable, partly driven by COVID. If the pundits are right, it is a blessing we have not sold out to PE early, as streaming rights will be more valuable in future, and can be sold for a fixed term not in perpetuity. PE will always want high returns and reduce their risk by underpaying. It is an easy way out for RA but a straight transfer of value out of rugby to PE. As PS says, and McLennan repeatedly states, the money will go on marquee players, driving up wages across the game. That is before the real wasteful spending kicks in. As Jez says, it might make sense if there was a credible plan and transparency over its execution and success. However, if there was, it would be far cheaper to just borrow it from supporters or banks. We all know that RA is waiting to see how 2021 finishes up before they think too much about 2022.