Private equity firm CVC Capital Partners needs to become more active as an investor in rugby and is the best-placed stakeholder to help realise a British and Irish league, believes leading sporting governance expert Nicola Johnston.
The Scot, who is a member of the Scottish Rugby Union’s standing committee on governance and part of lobbying group Progressive Rugby, which is calling for the game to be made safer to address head impact injury concerns against the backdrop of an ongoing class action from former players, also described as “at best amateurish” the consultation document from the Welsh Rugby Union on the future of the professional game, in which its preferred option is to reduce the number of regions from four to two.
With the consultation now closed, the board of the WRU is expected to make a decision later this month. Although the union did reference a number of outcomes, including three regions and maintaining four (but with two being on more favourable funding), Ms Johnston, who runs Nicola Johnston Consulting and is a leading expert in regulatory compliance, said it was too heavily loaded in favour of its preferred option.
CVC has minority equity stakes in the English Premiership, the United Rugby Championship (URC), in which the four Welsh regions compete, alongside an interest in the Six Nations.
The WRU, as with other unions whose sides compete in the URC, has fully drawn down its payment instalments from CVC, which gave the private equity firm a 28% interest in the competition in return for a £120m investment. For the Six Nations deal, which gave CVC a 14% interest and rights to a share of commercial income generated, the WRU in July received its last phased drawdown payment (£8.5m) for its £40m share in what was a £360m deal with the Six Nations unions.
All the unions are now facing a straight dilution, with CVC taking its revenue share after completing its phased payment schedule. The original thinking was that, with CVC’s involvement, the commercial pie from television and sponsorship deals across the three competitions would grow enough to offset the private equity firm’s income share.
However, the current media and sponsorship market for the prized Six Nations is a challenging one - even more so for the URC - which, over the next five years (with South Africa also now having a stake in the competition), will see the four Welsh regions collectively losing around £6m.
As part of the consultation on the number of regions going forward in Wales, the WRU’s performance director Dave Reddin said that trying to get Welsh teams into the English Premiership isn’t part of the union’s current thinking.
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However, Ms Johnston said that, as a counter to the proposed R360 tournament tournament, the focus should be on trying to create a British and Irish league - in which CVC would need to play a pivotal role in getting buy-in from all stakeholders. Critically any proposed new league would need to ensure a commercial uplift for the English clubs compared with what they currently receive from the Premiership.
The first rugby deal for CVC - which has billions invested across a wide range of sectors and for which its exposure in the game makes up only a tiny part of its overall investment portfolio -was the English Premiership, which in 2019 saw it taking a 27% stake in a £200m-plus deal.
Ms Johnston said there was a degree of naivety in the game when the equity deals were struck with CVC.
She said:“I don’t think people went into it on the rugby side with their eyes open. I am not proud of myself for telling a lot of people ‘I told you so’. It was a five-year payment term for the URC, and a lot of people up here (Scotland) thought that the 28% stake would then revert back after that, but they have paid for it - it’s like hire purchase. CVC must be wringing their hands, but they have now set up this new sporting arm (Global Sport Group).
"They are putting all their sports holdings under one umbrella, and this is where they could be really useful if there is a restructuring (new league), as they will bring in the right people and say, ‘right, this is how you are going to do it; and there is not going to be any bickering.’
“They (unions and clubs) are never going to reach consensus for shifting from the URC to any British and Irish competition, purely because of the structure of rugby in England. Talk about having too many cooks and all that… it’s shambolic. Also, the unions are not in a position to buy out CVC.”
She said if CVC’s strategy is to float or sell off its sport division - which has been valued at more than $13bn and where interests also extend to football and cricket’s Indian Premier League - it is in its interest to bolster revenues and valuations wherever it can.
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Ms Johnston added: “They are not a charity or invested because they wanted to watch games at Twickenham, the Principality, or Murrayfield. They are doing this as a commercial opportunity and want a return on their money.
In terms of a British and Irish league, I think, to be honest, they are the only people who could do it. Whether they are building up the sporting arm to sell or just looking to maximise commercial revenues, there is an opportunity - and it is going to take someone outside all of the unions, who are very commercially minded, to find ways through or around obstacles.
“And yes, someone who actually doesn’t care at the end of the day whether they are liked, as they are there to do a job. They don’t need to have ongoing relationships like the unions have amongst themselves, so they can go in and ruffle a few feathers. I think that would be beneficial.”
WRU performance director David Reddin said recently that, whatever the outcome of the consultation on the number of clubs, there were no plans - assuming the English had any interest - to create an Anglo-Welsh league, with the union committed to the URC under current contractual arrangements, which run to 2027.
Asked how she thought the Scots and other nations competing in the URC would feel if the WRU and the Welsh cubs managed to create an Anglo-Welsh league, Ms Johnston said: “I don’t think we would be happy, is the succinct answer, as it would leave us scrabbling around to find new teams for what I think isn’t the best competition anyway for Scotland, Ireland, and Wales. I hope it is on Scottish rugby’s radar that there is going to be disruption to the URC contract ending at the end of the 2026–27 season.
" We need to have our ducks in a row and our wish list of what we want, because the status quo is going to change and we need to be prepared for that. So, whether that is losing one team or Welsh participation completely, we need to be stress-testing and scenario-planning.
" I think it would be really sad, and from a governance perspective, to lose four teams out of the URC - they would have to be replaced as it would destroy the league. I wouldn’t be sure about bringing in American teams, as there are Major League Rugby teams folding all over the place at the moment, which is concerning.”
WRU consultation
On the WRU’s now-closed consultation process, for which the document setting out the future of the game was compiled by Portas Consulting, she said: “I would hope it wouldn’t be as sloppy as the PowerPoint presentation in the consultation from Portas, which, quite frankly, was embarrassing. I just wonder if anyone had proofread it. It was at best amateurish.”
She added; "The consultation was completely skewed towards the answer that Portas, the managing consultancy, advised was the best course of action - namely, the reduction of the number of professional teams in Welsh rugby from four to two. The documentation was heavy on the pros of this option and didn’t mention the possible cons. Indeed, it barely mentions the other three options. That makes me think that the consultation was done with the specific solution already decided.
“I would sincerely hope that, given the criticism they have received, they would approach the final decision sensibly. The WRU also receives an element of government funding, so the Welsh Government is involved as well as Sports Wales.
"There is a huge amount of rugby intellect in Wales, so they need to tap into it and use it. David Reddin has been very good in his videos as a very nice and humble individual trying to do his best. There needs to be a lot of that, like helping players find contracts. And it is not just the players, but the back room and administrative staff as well, and they would need to get an HR agency or consultancy to handle it as kindly as possible. I think if you take that approach, it doesn’t leave such a nasty taste in the mouth.
“You have got the 海角视频 Code for Sports Governance and the Sport Wales framework. If the WRU isn’t adhering to those, they would be ineligible for any form of government funding - and it’s not just the WRU, but any rugby club in Wales by association, as it is the governing body. I think they have been quite naive and are desperately trying to find a solution.”
One of the things she found frustrating in the consultation was around success for Wales rugby.
“I think they are using a sledgehammer to crack a nut here, " she said. "They have hit the panic button, and I totally understand why, but my view would be to step back, take a deep breath, and actually, everything is going to be okay. Steve Tandy is a brilliant new coach and was great with Scotland. There are another two years to the World Cup, and I wouldn’t ever bet against Wales. There is so much passion, pride, and ability as well as rugby intellect. I would love to see Wales succeed.”
While the union is confident of its legal position and acting in the best interest of the game, she the best outcome, if the number of teams is reduced, would be go to three rather than two, via an agreed merger between two existing sides - although at present there is no suggestion of such an outcome materialising.
On any potential legal action for clubs impacted negatively, she said:“It is unknown on both sides, but it is probably more likely in the employment area, like cases for constructive dismissal. However, if the WRU decides not to implement its preferred option, having listened to the views of stakeholders across the game, I would be really impressed if they took that approach, and if they did, they shouldn’t be criticised for it.”
Legal challenge
There is currently a class action from several hundred players, who are being represented by law firm Rylands Garth, against World Rugby, the WRU, and the RFU, who claim to be suffering neurological issues as a result of playing-related head trauma.
Ms Johnston said: “You have questions around player welfare and the number of games they are playing a year. I am on the board of Progressive Rugby, a lobby group that is trying to make the game safer from head injuries. One of the things we have been lobbying for is a limit on the number of minutes or matches a player can play in a season. At the moment, the RFU suggests 30 matches (time equivalent), and players like Maro Itoje and Ben Earl played 34 last season, while Finn Russell hit 37.
“There has to be a question as to whether the game will get insurance after this, even if World Rugby, the WRU, and RFU win the case. The fact that all this information is going to be in the public domain means there is no pause in liability, as there could be another potential lawsuit in, say ten years’ time, and the unions will have no defence at that point. It is desperately sad that it has come to this. I think it might be an uninsurable risk. You would have to have disclaimers all over the place. I genuinely don’t know how that might work, and you would lose an awful lot of players.
“It is going to be tricky. If Rylands Garth (acting for several hundred players) wins the case, then it is going to come down to who is liable - the insurers and underwriters, or World Rugby itself. It could feasibly bankrupt the game. “ I
If this happens she said the game could almost be reduced to being touch rugby.
She added: “I hope that it doesn’t. I also hope it doesn’t get to court and that people see sense, medical interventions are covered and changes are made. They don’t have to be massive, like mandatory limits on minutes and matches played per season and limits on contact in training. The current HIA (head impact assessment) protocol is pointless, as concussive symptoms can take 72 hours to develop.
"You just have to look at Finn Russell against Ireland in the Six Nations, He passed his HIA on the side of the pitch but couldn’t remember the calls, and the Scottish coach decided he couldn’t be allowed back on. There is a massive education piece there, from grassroots up, but it does annoy me when you hear people say the game has gone soft when you see the size of the players.”
Rebel league
On the proposed the R360 rebel league whose public face is former England international Mike Tindall, but whose backers have not been disclosed, Ms Johnston is sceptical. Many unions, although not the WRU, have indicated that players participating would no longer be eligible to play international rugby.
She said: “I think there is about £1.3m in the R360 pot, which is paying people like Mike Tindall. We don’t know who the backers are, but I would suspect it is Middle Eastern money. They haven’t sorted out stadia, and the dates they came up with didn’t take account of the Rugby Championship. The talk about women’s rugby is pathetic.
"None of them have contracts, and it is a case of ‘we will talk to you when there is some sort of agreement,’ but it is not legally binding. What we don’t want to happen is what happened in 1995 when rugby went professional and the RFU were caught completely unawares and the Premiership was set up independently.
“It might get backing, although I sincerely hope it doesn’t, or it will fall by the wayside because they cannot get their ducks in a row. Their figures also don’t stack up. To think they are going to sell 60,000 tickets in the US between two sides nobody there has heard of, and at the best part of £100 per ticket, then you don’t have to be a genius to look at that and say it doesn’t smell right.
Even if it were sanctioned by World Rugby, she said: " do not see how they can do that in a year. I would be amazed if it was even before the next Rugby World Cup. Stadia and commercial agreements take time, and until any are signed off by World Rugby, they cannot sign any of these deals.”