Gregor Paul: Silver Lake review could bring changes to top for NZ Rugby

NZRU CEO Mark Robinson, NZRU Chairman Brent Impey and head coach Ian Foster talk after winning the Bledisloe Cup. Photo / Getty Images.

OPINION:

After 16 months of negotiation, the language used to announce the Silver Lake investment proposal was both celebratory and conciliatory, carefully crafted to conform to the exacting specifications both New Zealand Rugby and the Rugby Players' Association wanted to present around what they call the optics of the deal.

The optics, as opposed to the financial mechanics and scale of Silver Lake's proposed investment, became the priority consideration in the past few weeks with the previously estranged NZR and RPA trying to work out what tone to strike when unveiling their ground-breaking deal to partner with the US fund manager.

The presentation became all important because the deal agreed this week, is by all measures, significantly and materially different to the one presented to the provincial unions last April.

And for different, read better.

The new deal is more innovative because it has catered for the creation of a joint-venture company called Global Rugby Opportunities.

GRO will be a Silver Lake vehicle targeting smaller-scale investments which could see them buy into other competitions or national unions, but more probably technology businesses that have a data/digital rugby focus.

Forming GRO doesn't just give NZR and the RPA the rights to 15 per cent of the profits, it creates a greater sense of partnership as it essentially means the two rugby bodies have cheap and open access to Silver Lake's investment expertise, just as the Americans have relatively cheap and open access to the All Blacks playing expertise.

The new deal carries significantly less risk for NZR. For the first three years Silver Lake's investment will only yield a four per cent return as it won't convert to an equity stake until 2025.

There is greater certainty about the likely duration of the partnership as the Americans are locked into a five-year commitment with three proposed exit routes — either via an IPO, a sale to NZR or an approved and reputable third-party investor.

This compares favourably with the original deal which gave Silver Lake a 12.5 per cent equity from day one and only vague — open to interpretation — clauses about the timing and nature of their inevitable exit.

The final kicker is that New Zealand institutions can buy into the new deal, up to a value of $100m, so mum and dad investors can fund their retirements on the back of All Blacks test wins.

This is hardly the first time in history a business proposal has had to be revamped to bring the associated parties to agreement, but the problem here with the optics, is not that the original deal had to be majorly improved, it's that NZR were adamant that it was impossible to do so.

NZR set up the original deal on their own, presenting it to the RPA at completion and then effectively told them to agree to it on the basis it was the greatest private equity offering the sporting world had ever seen.

Former NZR chair Brent Impey was so bullish about the deal's brilliance that he famously said the RPA would be scoring the biggest own goal in the history of New Zealand sport if they blocked it.

It's one thing to serve Jacob's Creek at your Christmas soiree, but to then declare to your guests that it is of unbeatable quality when someone, the RPA in this case, has turned up with a bottle of Ata Rangi, is the sort of faux pas from which it is impossible to recover.

And this is why the optics became all important in the announcement — how could the past be delicately acknowledged without acutely embarrassing NZR's executive and governance teams, and equally there was a need for the RPA not to come across as the white knight who saved the damsel in distress.

New Zealand Rugby Chairman Brent Impey at the announcement of All Blacks squad for the Rugby World Cup 2019 at Eden Park. Photo / Jason Oxenham.

But the hardest task of all was not drawing too much attention to the fact that NZR is likely facing the greatest governance and potentially executive purge since the loss of the co-hosting World Cup rights in 2002 which saw the chair, chief executive and board cleaned out.

Again, back then it wasn't necessarily the loss of the rights which made positions untenable, it was the public relations damage caused by publicly berating World Rugby officials and projecting New Zealand as arrogant and aloof.

The Sword of Damocles is now once again hanging over NZR because when stalemate was reached over the original deal back in June, the RPA — who early in 2021 had determined to assess their own constitution after 20 years — only came to the negotiating table on the condition that there would be an independent review to determine whether the national body's governance structures and processes are fit for purpose.

Such a review was probably overdue regardless of Silver Lake events as the constitution reflects an historic and outdated time when provincial unions were the sole constituents of the game.

The landscape has dramatically shifted in the past 25 years, yet Super Rugby sides are the veritable ghosts at the NZR board table having no prescribed seat, while there is a valid argument that more needs to be done to ensure there are directors with stronger knowledge, experience and understanding of high performance.

The constitution, however, will not be the only component under review and questions need to be asked about what sort of due diligence was applied to the original deal and who signed off on such a belligerent PR campaign to sell it — one which led to former All Blacks captain and current RPA chair David Kirk being branded disingenuous and the professional playing group portrayed as self-interested and greedy.

Whether a partnership with Silver Lake is the right path for rugby in this country remains open for debate, but at least now it feels like the specifics of this proposed alliance make greater sense.

That's why the underlying tone of Thursday's announcement could be celebratory, but the conciliatory element — NZR chair Stewart Mitchell's reference to all parties compromising with the greater good of the game at heart — stretched the credibility of the optics.