UP397 Other People's Money: The sports investment podcast

What does sport look like from the money side of the equation? 

What’s the investment rationale behind buying a football team, cricket franchise, the new sports tech thing or a sports agency? What are assumptions about how the market will develop? Who’s going to win, who will lose out?

These are just a few of the questions we’re looking to explore in this series, with my co-host Matt Rogan, co-founder of Two Circles, C-suite consultant and someone who’s sat on either side of the sport and money divide.  

00:29 The Concept of 'Other People's Money' in Sports

01:11 Investor Decision Making and Sports Business

02:32 Seeking New Perspectives 

03:36 Due Diligence and Investment Strategies

05:48 Challenges and Opportunities in Sports Investments

08:27 The Real Role of Private Equity 

13:40 Beyond Broadcasting and Media Rights 

18:03 Minority Partnerships, Jim Ratcliffe and Women's Sports

21:07 Ethical and Philosophical Questions - the Saudi question

35:53 Global Investment Trends 

40:34 Beyond the sports biz bubble

Unofficial Partner is the leading podcast for the business of sport. A mix of entertaining and thought provoking conversations with a who's who of the global industry.
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Transcript

Other People's Money #1

The sports investment podcast

An Unofficial Partner Production

[00:00:00] Hello, and welcome to Unofficial Partner. The sports business podcast. I'm Richard Gillis today. We're talking about money. What a sport looked like from the money side of the equation. What's the investment rationale behind buying a football team, a cricket franchise or a sports agency. What are the assumptions about how the market is going to develop and who's going to win and who will lose. 

[00:00:19] These are just a few of the questions that we're looking to explore in this and subsequent episodes with my cohost, Matt Rogan, co-founder of two circles. And someone who's sat on either side of the sport and money. Divide. 

[00:00:30] Matt Rogan: one of the things I think sport does very badly is recognize this as a two way process. Whether you're an agency, club, team, league, whatever, If you have a really strong, idea of why you want investment, what you're going to do with it and how it's going to help you make things move quicker. Then you should be in a position where you have several different investment options. And then it gets to the point where actually you're interviewing them as much as they're interviewing you 

[00:00:56] Unofficial Partner is the leading podcast for the business of sport, a mix of entertaining and thought provoking conversations. With the who's who of the global industry? To join our community of tens of thousands of people. Sign up to the weekly Unofficial Partner newsletter and follow us on Twitter and Tik TOK. 

[00:01:20] Richard Gillis UP: Hang on, I've got these various 

[00:01:22] Matt Rogan: Hee hee.

[00:01:23] Richard Gillis UP: things where I think, okay, yeah, I'm going to get organized. I'm going to keep it in Notion or Obsidian or 

[00:01:29] Matt Rogan: Yeah, I know

[00:01:30] that feeling. I just end up in notebooks.

[00:01:32] Richard Gillis UP: and then I think, I don't know, fuck it, I'll just write it down. 

[00:01:34] but I get, it's a bit like, I think the productivity stuff on YouTube and, TikTok is a bit like happiness. There is this idea that if you could crack it, everything will be good. And you think, actually, I don't, I'm not sure that's right.

[00:01:46] You know, all these that promise perfect note taking. Okay. the first bit I want to talk about. Other people's money. This is cool. 

[00:01:54] Matt Rogan: Yeah, that

[00:01:54] Richard Gillis UP: You've got sport and the people who run sport, who are running sports organisations, and it might be football teams or cricket teams or boards, national governing bodies, Olympic sports, blah, blah, blah. Any, all of that. So you've got the bubble of sport and the sports business.

[00:02:09] And then you've got the money, which is Again, I never quite know whose money is, and so that's why we're calling this other people's money. It's something that we might get closer to an answer to that at some point. But you've also got the people in the middle. You've got these sort of advisors who are, again, we couch this in the sports business conversation as private equity.

[00:02:29] That's normally the phrase that is used, or venture capital. So you've got these sort of, these, these, Words and phrases that we dandy around and which are quite often wrong or, or, you know, in terms of, on a, on a fundamental basis about what you're talking about, so you've got capital and then you've got the people who manage it and run it and place it and invest it.

[00:02:47] So you've got the investor decision making process, and then you've got the sort of running narrative in this world is that money and the capital side is bad. They are lying bastards lying to me. You know, they are the, bad bastard bankers of the. The crash, some of which might well, you know, a lot of it might well be true, but we just want to sort of just park those binaries of business is bad and community sport is good and that all we need to do is get money to the sport and all will be well because I don't, I don't buy that, argument.

[00:03:19] And then the national journalism, football journalism, sports journalism, and a lot of sport business journalism actually assumes that that binary still holds true. So they, they write from the, from the perspective, they sit down and their view is based on that binary of sport is good, money is bad, and what's going to happen.

[00:03:42] And there is a, predator prey relationship, which is essentially in the framing. 

[00:03:48] All of which there are runs of truth to, but we just want to sort of penetrate that a bit. And the bit that I think I'm really interested in is what sport looks like through the eyes of the people outside of sport with the money. Because I think we don't get that perspective enough. And I think it's quite revealing in terms of their assumptions about what sport.

[00:04:08] And how various sports are going to evolve. We've all seen various sort of projections of the value of the marketplace. And we've seen various bets being taken around, every area of the business. A lot of it is, you know, the assumption of growth. And we just want to sort of say, well, what actually.

[00:04:25] Let's just ask some questions of, that, because you've been in rooms and you've been involved in negotiations and you've talked to the finance side. And I'm really interested in what you've seen. And then the ultimate aim of the series or of other people's money is just to get an outsider's perspective.

[00:04:44] So that's what I think. I think we're asking questions here initially at least, and then we're going to go in search of some answers. I'm interested in what you think the questions are before we get to anything else.

[00:04:55] Matt Rogan: Yeah, It's a good place to start. So I guess I've seen deal doing in sport from most of the seats in that room. So started off doing due diligence. So understanding the size of the market, whether revenues could go up and down, costs are going to go up and down for businesses looking to invest in digital transformation. I've done biscuits, I've done bottling and way back in the day, turn of the century stuff looked at Newcastle United for NFL, for NFL? Not NFL, NTL, and that would be a story wouldn't it? So looked at, Whether any business in sport or any other business had the right dynamics for somebody to put private equity money into or trade money into then sold two circles twice.

[00:05:36] First to trade WPP, second time to pe in brewing and now sit in all sorts of different seats, different times for an advisory perspective. So, get involved in due diligence support for a couple of PE houses again, 25 years later. And also help businesses of all sorts really in sport, both clubs and teams, but also more often sort of agencies and third parties seeking that investment. And I've even thought a couple of times, though I'm told I'm not allowed to do it anymore put my own money into this jigsaw puzzle as well. So I've had to look at it through all sorts of different sides. And it's funny, really, if you think about When we called two circles, two circles, we said, well, that's because you have one circle that's the fan and one circle that's the club, the team on the league, and they exist as two separate circles looking into the other, not really sure what to make of each other. and it and it feels like, you know, Equally, you could call this, this pod two circles as well, because you have the rights holders, the clubs, the teams, the agencies looking at funding saying, I'm not really sure what to make of that. I feel like I should want it, but I'm not sure why. And the investors, sporting and otherwise, looking into the industry of sports saying, I'm not really sure about that.

[00:06:48] I see full stadia. I see my kids following it on their phones, even if they're not watching 90 minutes with me on the seats. And that feels compelling. And yet the conversations I have, it all seems a bit scatty and a bit loose and I'm not really sure. So, so they, I guess they're the two circles in this case we're looking to bring a bit closer together and just make some sense of.

[00:07:08] Richard Gillis UP: There's also the, so the assumptions you quite often hear that run on the other side, on the money side is they look at sport and they see inefficiency, they see historical things that don't work in the modern world, blah, blah, blah. And they've seen it hosed with media money. over the last 20 years.

[00:07:28] And then they're saying the next 20 years is not going to be the same. The broadcasters, you know, that story. And they're saying, right, we can bring organizational rigor. That's why I like a phrase like that. Or I like, you know, the sort of fresh thinking. And I'm all for, Yeah, I get that. But sometimes I think I'm looking around at various places and I'm looking at particularly at Live Golf, but I'm also looking at other, other big bets that people are taking in tennis, for example, buying, paying a lot of money for the middle market.

[00:08:00] of various sports. And then with our in organizational rigor and outsider zigzag thinking, , move fast, break things, all the cliches that we're very aware of.

[00:08:10] Matt Rogan: You've done the whole bingo list under 10

[00:08:12] minutes. 

[00:08:13] Richard Gillis UP: We're going to transform. I've spoken to too many. I've, there's a, there's a that's the story and I'm looking around for success stories and I can see a few, but not as many as I might anticipate.

[00:08:26] And then I'm listening to the various bits of, you know, we've, I'm obsessed with triathlon, I am not. going to be doing a triathlon anytime soon, but there is money going into that sport at various things, various bits of the, sport. And then people are looking and we, you know, go tennis to paddle to pickleball.

[00:08:43] And then there's others of, okay, let's have a nascent sport, a new sport. Let's pop, make that pop. Or we just say, right, okay, let's buy Man United and make that bigger and do the obvious front, do through the front door thing. So there's a whole load of entry points and we'll get to all of that at some point.

[00:08:58] Those. basic assumptions. There's a sort of mixture of, there's a bit of arrogance in the, in the money, on the money side. There is real really interesting thinking as well. There's a sort of fatalism, I think, in terms of, well, this is where the world is going and nothing can change that.

[00:09:16] The macro is just in, is moving and this is how sport is going to have to do it. It's sort of presented with this absolute certainty. And it's quite often a doomsday scenario where you're saying, right, okay, look, it's five to midnight and we're going to have to, you know, unless you change fundamentally, it's all going to go to shit.

[00:09:38] So I'm just trying to, again, these are all binaries, which I want to put some grey in there.

[00:09:46] Matt Rogan: speaking to a man who can give you some grey. So, from a, why you would seek investment in the first place is, I guess, is to enable faster paced change you could otherwise deliver. We have in a time, if you just look at a rights holder at the moment where the traditional sources of revenue coming in are changing quickly, right?

[00:10:05] So broadcast and sponsorship, even the staples like selling t shirts. The question is, you know, how much of that is direct to consumer, how much of that is through our stores or how much of that we just outsource entirely to somebody like Fanatic. So, there is nothing certain in that environment. And you're also having to work your way to all the governance challenges that Jack, I thought, talked really eloquently about on the, the recent part about the Olympics.

[00:10:28] So in, in that context, everything needs to change. It all needs to happen immediately, and there's a temptation to think investment will help you in that will give you the roles you need to protect your business for tomorrow, as well as deliver the p and l you're being told you need to deliver today. So you can see why investment in that context is, is potentially really compelling. And there are all sorts of different reasons for it. You know, Two Circles reason for looking for it twice was because the business had grown quickly and needed something else in the next stage. And I'm sure Gareth and the, and the team want different things out of the Chard House journey as well.

[00:11:03] So, you can see why it's a, it's a compelling engine. If you think you need to, move quickly either to safeguard your business or to grow to the next stage.

[00:11:12] Richard Gillis UP: I think there's a, there's a sort of, it's interesting you mentioned that, because I think my framing initially was about the sports bodies themselves and teams and whatever, but actually within our, within this world, who a lot of them listen to this podcast, you've got the agency and the vendor supplier market.

[00:11:30] to this world. I think there's some, we'll do a whole load on that as well because you, you know, Two Circles is, is, we talk about them and, you know, we've had Gareth on several times because it's a really interesting case study, you know, in terms of what they do next. to go from 250 million valuation to whatever Charterhouse have seen.

[00:11:49] And they're going to, you know, multiples of that. it's fun to put yourself in the series of, so someone like Steve Martin's come out of M& C Sarty with Jamie and they're about to build something else. And now what would, and that's going to be, I'm going to buy something. And again, what would you buy?

[00:12:05] What, what areas. would you look at? So again, it's, it's sort of, there is the, what I would call the sort of big and famous elements of it, but there's also the supply chain, the plumbing conversation, because I think that's really important and they're very linked obviously, but, what do you think?

[00:12:22] Matt Rogan: course, and, and you we sh, we shouldn't come away entirely from the rights holder discussion, but if you're we'll clock back a few years, you're the FA, you know, do we want, investment to come in to take the ownership of Wembley off our hands so we can reinvest in grass artificial pitches up and down the country. You know, so actually, whoever you are, it takes you through to what are we actually for? And what is superfluous in all of this? And, you know, you look at cricket in the hundred is another really good example of will cause ECB to reflect on what we're here for and which areas of our broader industry are better off external to our own entity.

[00:12:59] So, Against that context, you know, that's why you have PE firms getting involved, who have strict funds they need to deliver on and exit in full, who have by necessity there for four years to buy in and get out. And you have, I mean, Broome is an organization for two circles. There are plenty of others looking to invest at the moment, you know, Clear Lake and Chelsea, they're saying, 10 year horizon.

[00:13:22] Not a problem. And the kind of returns you might want a difference. You look at Saudi money coming in, that's, that's obviously about a sensible business, but it's also about sort of the international ecosystem. They're looking to increasingly influence. And so the things they're looking for, the horizons they have and the things they'll prioritize in the way that cash gets used will be entirely different. And that's what I think we're trying to do in the pod, which is just to say, we need to get away from this binary external investment is. It's evil growing for grassroots and community is the only way to go in this brave new world. It's a balance, and it depends who's getting involved, why they're getting involved, and what the end objectives are. You know, there's all sorts of things at the moment with mutualization of um, cricket. Counties up and down the country, for example, is it best to be a member organization or do you need to be commercial to cope with the bumps in the waves at the next five years? And there's pros and cons, right? And that's hopefully what we'll start to get into, which is we need to get beyond the, the mainstream press hype.

[00:14:22] We need to get beyond the. Our own industry hype. We're good ones for deals, aren't we? You know, we love a good deal in this industry, but all of a sudden external investment deals are evil and sponsorship deals are good. And like the world's more sophisticated than that now.

[00:14:35] Richard Gillis UP: What do you think, I mean, just done, as you know, I had a conversation with Andrew Umbers at uh, Oakwell about cricket and about the hundred franchises. So that's a story that's, that's going on as we speak. And, you know, the, it's a sort of case study that we'll come back to quite a lot, I suspect, because it's got a lot in it that's just interesting and probably are directional.

[00:14:56] There's a couple of things that I wanted to just sort of talk about. You mentioned there about television. And to Jack Buckner's point, you can pay a lot of money for a lot of expert advice, but he suspects no one knows what the future of broadcasting is and how sport plays in that world with any certainty.

[00:15:12] But I think one of the interesting bits, and I'm just teeing up or referencing a bit of the conversation I had with Andrew, which was Sky have put a lot of. The 100 is interesting because Sky's role is interesting. It's different. It feels different. It was much more foundational. The idea of it grew at least in collaboration with the rights holder, with the ECB.

[00:15:37] And they've invested time and they are also, which I think is really useful to, to remember, a big bit of the sort of investment that Rationale for the 100 is the certainty of Sky sitting in the middle and being a partner and the BBC and then the Sky also haven't just wrapped a paywall around the 100, they've given them.

[00:16:01] considerable ground to BBC to take the thing and make it a big, almost old school public free to air moment. And that's why The 100 is interesting, because you've got that combination. So, again, I then wonder, if I'm Sky, and again, we talk about, you know, you know, the money, but they are pumping and have pumped billions and billions of billions into the sports economy as a renter of rights on the whole.

[00:16:27] Do you think they see the next 10 years differently? Is the hundred, do you think an anomaly, or do you think that they're thinking, well, actually I should leverage, we can leverage our position here. Cause we're really, we're putting a lot in and. The rights come up for renewal in 28 or whatever it is. I am sure that the ECB would not turn around and dump them and say right now we'll go with TNT because, you know, for a higher check because that would just would be outrageous.

[00:16:54] But I would want more, I would want some different relationships.

[00:16:58] Matt Rogan: I agree and promised myself I wouldn't go into stories from the old world of music industry. I

[00:17:04] used to work in Rich for this Pub, but you know, you can cope with one. So I remember back in the day, I was responsible for the search for Europe's best dancer, right? Which

[00:17:15] was before it's time before strictly happened before anything like that happened was won by a guy called Hugo Marmalade from Portugal.

[00:17:22] Anyway um, 

[00:17:24] Richard Gillis UP: to know what Hugo Marmalade is doing today, wouldn't you?

[00:17:28] Matt Rogan: he's not, he won't

[00:17:29] be 

[00:17:29] Richard Gillis UP: bet you were you in a, a sort of Simon cow. I'll, I'll have 20% of whatever hug Hugo Marmalade makes

[00:17:35] Matt Rogan: Well, the, the the reason I went there was because our anchor partner was Unilever Ice Cream, right? Across the whole of Europe. And there was a conversation that Unilever sort of said to MTV, you're not making this show without our investment. On that basis if you sell the rights to show MTV Shakedown in America or Africa or anywhere outside of your network, we should have a piece of that. So I don't think those kind of conversations are particularly new, but I do think in a world where broadcast rights is so fundamental to our understanding of the deals getting done with each of the franchises, there must be a sort of a fluid conversation around things like

[00:18:17] Richard Gillis UP: the per they, they want, they wanted a piece of marmalade. They wanted a, they they were 

[00:18:20] Matt Rogan: They dip

[00:18:20] on 

[00:18:21] Richard Gillis UP: cream. I, I mean, immediately you think, okay. Oh, I can see brand partnerships there I, Hugo Marmalade ice cream. It's just waiting. Waiting for a clever top of the room thinking like I bring to these occasions.

[00:18:33] Matt Rogan: if only we'd had the Paddington franchise out 20 years earlier I think they've been a really creative three way deal sadly not But the other one I think is interesting in in something like that is talent access

[00:18:45] and international broadcast rights market So, you know, is there a smart relationship you could create between the BCCI as the provider of the talent and then the provider of the largest international broadcast rights market for a mature product like the 100.

[00:18:59] So the IPL in terms of broadcast rights per match embarrasses, frankly, any other sports franchise around the world, including the Premier League, including the NFL, the NBA, sorry, not the NFL, but including the, the NBA and Premier League and La Liga and stuff. So, 

[00:19:15] Richard Gillis UP: there's 

[00:19:16] Matt Rogan: those sort of, 

[00:19:16] Richard Gillis UP: another thread. though. Also the, the, again, we'll come back to a lot is, and this is a conversation I've had several times, it's about minority partnership. So the hundred franchises, if, if, again, if we put ourselves in the seat of the money, other people's money. Do I want to buy a minority partnership?

[00:19:34] What, what's possible? The running case study is Jim Ratcliffe and Ineos at Man United, and they're saying, right, I mean, there is a sporting bit that I'm going to get control over and whether that's replicable and whether that's worth it. You know, whether Man United is a sort of outlier in that sense, cause it's Man United, there is something else happening there, but do I want a minority partnership of.

[00:19:59] a hundred franchise, or do I want a minority partnership of a WSL team? So again, there are several multi club ownership women's team partnerships. investment groups that are, that are circling, and we know Mercury and we know, I've spoken to three or four others who have got the same business plan.

[00:20:21] So there is money, other people's money gathering around women's club football. And then what are you buying? So Todd Boley turns around and says, 200 million for our Chelsea women's team. That's the valuation. You can have a bit of it. That's what they're hoping that someone is going to buy on.

[00:20:37] I, and 

[00:20:38] Matt Rogan: I mean, 

[00:20:38] Richard Gillis UP: do you buy? I don't know. It's interesting.

[00:20:41] Matt Rogan: mean, ultimately that your hypothesis there has to be entirely based on the fact that the cake's going to get bigger without your influence, right? Without your material influence, unless you're Jim Ratcliffe and so much of a fan and so passionate about your abilities, transform, performance, that you think all that time, effort, sweat and energy is, and the equity upside and the, The opportunity to do that as a fan is worth still having a relatively small piece of the ultimate cake. You know, when Newcastle bought 9. 9 percent of, sorry, when NTL bought 9. 9 25 years ago, they just wanted a sense. Within a club of how the broadcast rights conversation was going to move. And if your hypothesis is, look, the market is going to grow the, you know, the overall value of what we're investing is going to grow is useful for us to have a seat at the table in terms of what we might learn for the rest of our, our business, whatever that looks like, then maybe it is worth doing.

[00:21:38] But you can't then extend the hypothesis into, we're going to have a material. chance of shifting this, turning this boat around.

[00:21:46] Richard Gillis UP: What happens at the end is the other, is another question. So if I take investment, if I'm again, if I'm looking at say, well, I am going to buy a WSL women's team and I'm going to buy a bit of Chelsea, I'm going to buy the Chelsea thing. I'll take Todd Boley at his word and his valuation. Okay, question mark.

[00:22:04] We'll just park that for a moment. But let's just push that a stage further. Then the other question is, I'm going to have that. I'm going to own it. I'm going to build value in it over time. And then at some point, three, five, 10 years, whatever the window is that we've, I've set myself, I'm then going to sell it.

[00:22:22] Does Todd Boley have any controller who, over who I sell it to is a question. And this, I think is relevant to all of the sports conversations, because the worry is, again, other people's money, what's the money I'm buying it with? Can you really check that? , the money system is so complicated.

[00:22:42] There are so many ways of hiding the true ownership of money. We're seeing it with 777, you know, , whose money is it you're paying me? Is one question. And then, What about in three or five years time, I'm in charge of this thing. I need to protect the future of athletics, of Chelsea women's team, of London spirit, whatever, whatever the entity is that is being discussed at some point, I don't want you to then send it, selling it to bad money.

[00:23:13] Inverted commas.

[00:23:15] Matt Rogan: I mean, there's a distinction there between selling a controlling stake and not, because first thing I said, so, the controls you would expect to put around the selling of a majority stake in a sort of league franchise environment are very material. My understanding of how the NFL does it is, you know, ultimately they have a block. From a minority state perspective, you might expect to have slightly less control of those. I've no idea how the ECB are thinking of structuring the hundred deals. And to be fair to them, you know, even they've said, look, we've got a bit of time. We need to spend working through the detail of this. But there, there's one other thing I pick up in that though, which is it's, if our industry loves loves an acquisition. They love a sale more. It's amazing the number of organizations I find myself talking to that are obsessed on a sale, especially the right, you know, sports technology or agencies are classics for it. And actually the question sometimes can be, , why would you sell and give yourself you know, the handcuffs of five years working against profit targets to release what you'll do. Why don't you just use some investment, get to a position you have a nice, sustainably successful business gently empower the management to take on more and more ownership and have a lovely dividend that kicks out to you at the end of every year. And there are some really successful independent businesses that have continued forever in a day to work on that basis. So if you're going to be. You can be excited about gaining investment, but not see a divestment down the road. And that's okay too.

[00:24:49] Richard Gillis UP: Yeah, yeah, yeah. And then the other bit is what, and this particularly, I think true of the sort of pure private equity is what happens when you let them in the door, you know? So what is it? Is it, is there a fundamental change in the way the organization behaves, how the management and the executive start to make decisions, because the promise.

[00:25:12] of private equity is, is transformation, organizational skill, energy, removal of complacency. What does that actually mean? Do you think from a sports perspective?

[00:25:24] Matt Rogan: Well, firstly, 

[00:25:25] Matt Rogan: one of the things I think sport does very badly is recognize this as a two way process. Whether you're an agency, club, team, league, whatever, If you have a really strong, idea of why you want investment, what you're going to do with it and how it's going to help you make things move quicker. Then you should be in a position where you have several different investment options. And then it gets to the point where actually you're interviewing them as much as they're interviewing you 

[00:25:50] Matt Rogan: in terms of how they would help, to use the cliche, make your boat go faster. And then it comes into the specific way in which you agree the way you're going to operate in the set on purchase agreement. You know, who sits on the board, how decisions are made, what happens when there's Disagreement, which is inevitable between. the investor and the owner operators of the business, so on and so forth. So, all of that is relatively navigable. And what you tend to find is , in most cases I've seen, including two zeros, there's a very benign relationship between the investor uh, the areas they're contributing and supporting in and the management of the business. The question becomes, you know, things start to go awry. Then what are the what are the conditions that the investors put around that? For example, often there'll be deals, terms that says, well, the investor's money comes out first. And so they're, you know, elbows might come out at a point where they see that, you know, they're not going to realize what they hoped and they have to protect their own investments.

[00:26:50] So it's sort of case by case, but one of the things I think we do very badly as an industry. is interview the investment coming in. And if I think about the deals I've been involved in that have worked only one out of four, I think has the highest price investor, the highest offer being taken as the investor they've gone with for exactly that reason.

[00:27:12] Richard Gillis UP: And then looking through their eyes at the, they would look at the leadership. I always think it's sort of interesting because again, if I'm there, if I'm being cynical, I would say, right, okay, I'm going to go in. Is the top person up to it? You know, do we need to get rid of that person is that the first thing or do we own them?

[00:27:32] Do we just overpay them? And they become our puppet, that's one route I can see being, you know, potentially useful. So they just carry out, you know, they sort of take the flack for decisions that we want to make. They take them, they're the human shield and then, you know, they get well paid for that, if that's their job.

[00:27:54] So what, what the role of the person in charge becomes, And this is particularly true probably of majority, you know, if someone comes in and buys a majority of it, and then you've also got, do we just move our team in? And again, what it looks like to the public might be different than what it looks like inside.

[00:28:15] , so I'm just spewing questions out, but there is that, what to make of the, executive as it stands and what you can reasonably do about it and how that plays out. What do you think about that?

[00:28:26] Matt Rogan: I think George Pine talks really well to this actually, George would say you know, ultimately they invest in management teams first and businesses second. Because if the management team in his view is high quality and the relationship between the investor and the organization being invested in is solid then strategic differences or things that need changing or adopting will be made because ultimately they all want the same thing, which is for the business to succeed. You know, it's not like the management team don't have a share in the upside of the business going well, so they all want the same thing. And certainly. in areas where an investor is coming and investing in human capital, be that a talent on a pitch, be that a management team with the IP to build a new widget, those kind of things, then keeping the management in place is relatively fundamental.

[00:29:16] That doesn't mean you might take a view you don't need six CFOs in six Portfolio businesses, and you can rationalize that a bit, or you actually need a CFO who's got experience of growing from 10 to a hundred rather than one to 10, you know, so they might make some tactical changes, but fundamentally where it's worked well, I've seen they've been discussed ahead of time there are instances where you know, not everyone who buys a, an agency or a piece of technology. Puts everyone who's invested in on earn out. Sometimes the, the owners on signing the deal, just leave the building. That often have will happen in some way like a, I don't know, like Salesforce by a piece of marketing technology. They're going to integrate it into their stack. They don't need an independent management team, dah, dah, dah, dah, dah.

[00:30:00] But again, all that stuff should get discussed.

[00:30:03] Richard Gillis UP: , back to George Pines point 

[00:30:05] Matt Rogan: Yep. 

[00:30:06] Richard Gillis UP: Bruin by the management team that works from a agency. sports tech supplier type scenario. When you throw it into rugby inverted commas, or, you know, the sport, broader sport, you get to the sort of sport problem essentially from an investment perspective is that it isn't just a business.

[00:30:29] If I go in and buy, you know, the rugby premiership, if I go and buy Six nations, if I put you in, if that's possible, or if I go and buy a football team, there is this other bit, which is the most controversial part, which is the, you know, let's call it the soul of sport, the sports community.

[00:30:46] , you are running this sport, but you're just a guy, you know, custodian is the cliche. And, 

[00:30:50] Matt Rogan: Yep.

[00:30:50] Richard Gillis UP: and if I'm, Looking at it from, again, I look at this and say, right, okay, the management team talk our language. That's a red flag for everyone else because that's just, okay, there's a, there's a team, which is a bunch of useful idiots for private equity.

[00:31:06] Yeah, they're going to come in, they're going to make an enormous amount of money. And then at sort of some point, They will go in three, five years time. They'll be off doing another job in the sports business, doing another speech you know, leaders doing represented wearing another badge. And then the sport is left with what, you know, so that's that deal that is being done is because the sort of management team just had a narrow agenda and they, it was all about profit.

[00:31:31] And all about money. And you come back to the, you know, again, it's the cliche, but it's very fundamentally important. It's the butting of the sport business question in terms of, it's when sport isn't a business. You can have all these conversations about, the potential and the media rights valuations and the 20 year outlook, all of this stuff.

[00:31:49] But you get to the nub of, hang on a minute. five years later, and we're still suffering because of that really crap, selfish deal that the CEO made at that point and got through 

[00:32:01] Matt Rogan: we'll, we'll get rid of your biases over time, mate. The, the this is where these two circles I think are really interesting. So you seek investment, not just for capital to change your business, but also skills and different experiences to bring to bear, right? So for example, the average understanding and senior leadership team with the nuances of managing your balance sheet, as well as your P& L are generally pretty low.

[00:32:27] Um, My experience. So you're looking to harvest those skills as well. So it is just as toxic for an investor to come in, said, say this has worked in the NHL. Therefore it will work in the Premier League. And I don't need to question that. Or this has worked in supply chain logistics. Therefore it will work in rugby. It's exactly the same stuff. It's just a different industry. That's just as naive and toxic as for somebody who's been running a football club for 10 years to say, there is nothing I can learn from somebody coming in. Who's been a success in another industry. Give us your money and bugger off. And you don't even

[00:33:05] need to come 

[00:33:06] Richard Gillis UP: you're assuming good actors on the money side, aren't you?

[00:33:09] Matt Rogan: that.

[00:33:09] I think

[00:33:10] Richard Gillis UP: That's that again, I'm, I'm all for

[00:33:12] opening my eyes and 

[00:33:13] my bias of, the barbarians at the gate scenario, all these things. But one of the problem, the fundamental problems is when these types of conversations do go onto the back page of the daily mail and it becomes a, you know, the money is bad question that's the sort of.

[00:33:32] The bit that the money quite often underestimates, just the sheer force of that, you know, when it's the Super League thing where you sort of think, shit, these fans really do, it does matter what, you know, that they think and they think they are innately conservative. So change is really hard. Talking to, you know, About the hundred is a good example where you've got this, this is our sport and you're selling us down the river.

[00:33:57] That's the narrative of the anti hundred lobby, which is substantial within county cricket. that's one of the problems that you're facing. It's not, it, there's, there's comms in that, but there's also substance.

[00:34:10] Matt Rogan: They can make decisions for the longterm financial health and value ultimately of the asset they're investing in. Yes, there is an awful lot of bad acting in terms of arrogance and complacency in terms of thinking sport is an inverted commas, easy industry to make a fast buck in and naivety in the performance assumptions on pitch.

[00:34:35] And In terms of revenue and sponsorship and things that drives some very bad deals getting done. There's also, when those happen, there's also, it comes around to interviewing the investor as well. If you're in the management team, as well as just, just kind of taking the highest number is also short sightedness on behalf of the rights holder, right?

[00:34:55] Because you're gonna have to work with this individual. And if you spot that in IOT that helps you drive a higher price initially, because they've overestimated what they can do to ticket prices, for example, in their business model, you're going to have to live with that for three to five years. So on that basis, you know, it comes down to, you know, making a longer term decision on your behalf as well.

[00:35:15] So like they really understood our business to the extent we are going to be good conscious, be able to work with them for the, for the longer term.

[00:35:24] Richard Gillis UP: Quite often though, That, again, assumes a rational environment. So for example, I suppose what I'm saying is that post COVID, a lot of the conversation has been private equity has just essentially been a bridging loan. It's been money. They would, the governing bodies or whoever it was, the sports teams, desperate for money just to keep the doors open.

[00:35:44] And they haven't got time or frankly, the inclination to do the work that you're, you know, the due diligence work that you're talking about, we've got to get the money in the door. This was just a way of doing it. We've let them in and now we're going to have to deal with it. That's, , a real world scenario that you sort of hear quite a lot.

[00:36:00] It's like, you know, Everton and CC 777, we need the money. Where's it going to come from? Or we're going to go bust.

[00:36:07] Matt Rogan: yeah, and there are plenty of, you know, despite COVID, I would still say poorly managed businesses haven't gone through the thought process of saying, look, there are two ways we can get ourselves out of this. We can either try and right size ourselves. And that means not resigning the striker. That means not looking at the stadium extension.

[00:36:26] That means not What else would it not involve doing? It would certainly involve not promising our supporters the earth for the benefit of the, the kind of longer term. And even if that means we suffer some pain, then fine. But we're going to go through that. As distinct from the option that says right now, we think we can write the shit, but it's going to take us three years and some external investment to enable that. And that would take the equity value of our, of our organization from 100 to 500. You know, I don't think there's enough thinking about those being two options. There's a tendency to just think my cashflow is negative for the next three years. I need some investment to prop it up because that's a separate slope.

[00:37:07] Richard Gillis UP: and we haven't talked about Saudi. So I was looking the other day at, so PIF and its role is quite interesting, it seems to be wanting to be a sort of more of a consumer facing brand, or they're at least wanting to, have an identity that isn't dark, secretive, smoke filled rooms, backroom deals.

[00:37:24] It's, it feels like they're doing, you know, it's particularly in tennis, they're behaving a marketing sense slightly differently than they did in golf. So, you know, rather being chased around a course by Dan Rowan with a microphone, you know, which immediately makes you look, Shifty, they putting their brand up there with a WTA on on the big posters, doing press releases and all of this.

[00:37:47] So there's a sort of marketing aspect to it, but then there's the Saudi question, which again, we'll do a whole thing on in terms of just what it really means and what, actually happens, but just give me your sense of, and this is true of, across everything we've spoken to, so it's sports, whole sports that they're going after, but also the plumbers, you know, there's the money that is, that is in the system already.

[00:38:13] what's happening there?

[00:38:14] Matt Rogan: So if, if the, changes in business model and dynamics for sport weren't enough for us to cope with. If you kind of go up a level, the reality is that Western Europe and North America is losing global traction on the world stage, right? So I was in Sri Lanka recently for a holiday. It was really interesting to see Asian investment outside of China, Chinese investment. Other pockets of European union, even investing in the kind of regeneration of Sri Lanka, UK has plastered a no travel ban to the Brits. And, you know, wherever you look around the world in Africa, you got today, you got yesterday, Joe Biden welcoming the the head of Kenya because America is losing traction in, in, in Africa as well.

[00:39:05] So that is an inevitability and there, we have created a global industry in sport and therefore investment will be coming in from all sorts of places around the world for the foreseeable, I think. And it's it's going to be true in North America. It's going to be true in Western Europe. And if as a global tennis tour or global golf tour or whatever, you're going to be confronted with those conversations. That's not to say there aren't philosophical questions and ethical questions around each of those, but the inevitably of the inevitability of money coming in from around the world in a world where if you look at the UK, we've chosen to come out of the federated organizations we were part of. Like that's just been inevitability. And there are some things in terms of international investment in sports and entities, actually really similar to sort of family office type deals, if you look at sort of, more traditional equity investment where, you know, there's a, there's a profile and prestige and a natural interest piece as part of the jigsaw puzzle. And probably a longer term capital part of that as well, which if you're a sport, like say tennis, which. Starting to recognize the ridiculousness of it operating with genders, separated. Some newer formats, which probably are slightly more TV friendly than the traditional. Then you can see why long-term patient capital from some growth areas of the global economy is not a daft idea to entertain. Notwithstanding, as I said, all the, you know, the values sort of economic ethical questions that everyone needs to ask themselves.

[00:40:38] Richard Gillis UP: Yeah,

[00:40:39] Matt Rogan: So I think it's, it's an inevitability. It's here to stay. When I look at the Chinese building ports in Sri Lanka it was a really a moment for me where I thought, okay, well, you know, the reality is global balance of power and it's changing,

[00:40:53] Richard Gillis UP: I mean, it's, it's, there's a, you know, this idea that, because people go back to like, you know, we've got an Olympics coming up in the summer and people talk about, you know, banning various, so China is is a good example. And the Economist had a really nice number, I'll dig it out, which was essentially, you can't isolate China because.

[00:41:12] they're isolating you. You know, it's not that if you, if you count the number of countries that are more dependent on China than, than not, it's actually outweighs the people that you think are your allies. So , yeah, it's fascinating. And

[00:41:25] Matt Rogan: but that's not to say IOC on the ethical grounds of, you know, are they playing a you know, a game? You know, athletes playing along the lines, the ethical value system of this sport. Are they following the rules? That's one thing. Can we exclude parts of our world because they don't work in or operate in the same way as us or just to becoming more economically viable than us?

[00:41:49] No, absolutely not.

[00:41:50] Richard Gillis UP: okay, we've asked loads of questions, which I was hoping we're going to do. And we're going to start to invite other people on and pick out some of the themes that we've sort of. And we'll start going around and getting more specific about sports, but also about, you know, some of the themes that we're talking about and it might be from the nature of investment.

[00:42:14] It could be. The athlete question, there's a whole load in here. So we're, gearing up and then anyone listening, if they've got questions that they want us to focus on, then give us a shout either by the newsletter or, or just get in touch on LinkedIn or whatever. And then we'll see where it goes.

[00:42:32] I think we're in a good spot. I really liked the idea of looking at the agency sector and seeing what that, you know, cause that feels like that's a sort of ripe conversation. It's very current and likewise, people will have questions about CVC and rugby, what is actually happening, versus what we're being told is happening and how does it work and whether it's possible.

[00:42:52] So there's a few sort of definitive, feel like definitive case studies that are happening at the moment. Which others will, will either have lived through or are about to live through, whether they want to or not.

[00:43:05] Matt Rogan: I'd like to also get, get ourselves out of the sports

[00:43:08] bubble. Speak to some private equity firms or advisors who advised against coming to sports.

[00:43:15] We've looked at it and said, thanks very much, but we'll do biscuits instead. Like I,

[00:43:20] I think it'd be interesting to sort of see how we're perceived outside our little world as well.

[00:43:25] Richard Gillis UP: Very good. Right. People outside the bubble, get in touch.

[00:43:27] Matt Rogan: It's my long term vocation to see what you look like wearing a suit.

[00:43:31] Richard Gillis UP: Yes. ​