As the lights went out in professional sports stadiums across the world in the spring of 2020, Bird & Bird was advising Six Nations Rugby on a private equity investment by CVC Fund VII, a fund controlled by CVC Capital Partners.
The deal, which has been signed and is conditional on merger control approval, comprised a £365m investment into the Six Nations for a 1/7th share.
The firm’s sports group has acted for the organisers of the Six Nations Championship, SNRL, for more than 15 years. The work involves all aspects of SNRL’s commercial programme, its sporting and regulatory role, and all commercial disputes. So, when SNRL was approached by various private equity houses, it turned to Bird & Bird client relationship partner Max Duthie for help in navigating a way through the process.
As the transaction developed, partners Craig Giles and Matt Bonass, alongside senior associate Richard Bloomfield drove it forward. “This deal was many years in the making and was under discussion long before the pandemic”, Bloomfield explains.
“While the general economic uncertainty associated with the pandemic affected every sector, professional sport was particularly affected given the inability to play games and host crowds. Stakeholders had to grapple with issues such as whether the competition could continue and in what format; whether it would be possible to continue hosting capacity crowds in stadiums; how to deal with different national rules governing travel for professional sport; and how that all affects the broadcasting market. Grappling with all of those different issues to come up with a legal and commercial structure which satisfied all of the different stakeholders was a real challenge.”
But Bird & Bird did come up with a structure, taking a central role in the multi-national process, involving the management team of the Six Nations itself, CVC Capital Partners, and the six national rugby unions. “Managing the process in a way that met the requirements of different stakeholders and ensured that everyone bought into the game plan was critical”, says Bloomfield, particularly in the context of a global lockdown.
“This was a deal that involved a large number of different parties and stakeholders, so smooth and effective communication was critical. Working remotely was initially a challenge but we made it work through good organisation and regular calls,” Bloomfield adds. “The pandemic demonstrated the importance of maintaining a personal touch. I found that video calls are much more effective at resolving contentious issues than emails can ever be.”
Moreover, having found a way of working that mitigated the challenges of pandemic life, he says: “The deal gave me excellent experience at managing a complex process and empathy with a wide range of stakeholders.”
Richard Bloomfield’s professional background
Bloomfield joined Bird & Bird in August 2016, having qualified at Herbert Smith Freehills in 2012. His practice has a dual focus on mergers and acquisitions and venture capital investment, “often but not always in the context of high growth technology companies seeking to harness the power of tech to disrupt their chosen markets”, he explains.
Bloomfield says he’s had the chance to work with all the firm’s corporate partners, but highlights have included working with Neil Blundell on the acquisition of Clays Limited, a famous book printer. “Founded more than 200 years ago, it now prints more than half of the black and white books sold in the UK – you will have several of their prints on your bookshelf”, Bloomfield says with evident enthusiasm. “I also worked on the acquisition of an international cyber security company which won a nomination for M&A deal of the year at the British Legal Awards in 2018”.
Commenting on the Six Nations deal, he says: “It was extremely satisfying to be able to successfully complete a major, complex transaction like this in extraordinarily challenging circumstances. The deal gave us insight into the challenges faced by sporting organisations globally. While there are many firms that have an excellent understanding of the private equity investor’s perspective, there are very few (if any) other law firms that understand in detail the impact that private equity investment has on a sporting organisation. Sports organisations need to look at the political, socio-economic and PR impact of their deals as well as the financial aspects – while protecting the interests of a diverse range of stakeholders ranging from players to fans to broadcasters, keeping the interests of fans and players paramount.”
However, he admits, “re-structuring the deal in a way which ensured a good deal for the Six Nations while also giving the investor sufficient confidence to continue despite the unknown impact of Covid on professional sports was a challenge”.
Nonetheless, the deal was successfully signed in the context of a bespoke and complex structure, including dealing with the present status of the Six Nations as an unincorporated association and the need for bespoke tax treatment for rugby unions in the UK, France, Ireland and Italy (respecting in particular the “sporting bodies tax exemption” available in Ireland).
The competition was experiencing uncertainty around whether the tournament could go ahead; around whether viewer numbers might be affected by games being played in empty stadiums; around the financial impact on the rugby unions of the six countries involved; and of the outcome of negotiations with broadcasters. Deal terms were initially agreed pre-Covid and the deal was steered to a successful signing in March 2021 (with a range of innovative, bespoke deal terms dealing with Covid yet enabling the investor to maintain the value of its offer) despite the ongoing pandemic.
Meanwhile, there was political pressure. The Six Nations is at the centre of political debate across Europe around keeping sport on free-to-air television versus paywall broadcasters, which might unlock additional revenues but could reduce viewer numbers. In the UK, the Six Nations is currently a “Group B” listed sporting event, though in 2020 parliament’s Digital, Culture, Media and Sports Committee advocated moving it into “Group A” which would (if accepted) prevent the Six Nations from moving to Pay-TV – a recommendation that referenced the potential deal with CVC.
The deal structure and legal documentation successfully navigated concerns from a wide range of stakeholders, including sporting concerns and player welfare (by ensuring that the rugby unions retain responsibility for all sporting matters), ensuring that sufficient focus is given to growing the women’s competition and women’s rugby more generally, and navigating the Pay-TV environment.
Bird & Bird was responsible for legal negotiations with CVC Capital Partners on behalf of the Six Nations itself and also on behalf of the rugby unions of the six nations. The Bird & Bird team therefore needed to co-ordinate with and take instructions from each of the six unions in order to present a united front to the investor and avoid six-way negotiations.
The rugby unions also had independent representation to advise them on matters specific to each union, particularly in relation to matters where there might be a conflict between the different interests of different unions.
The fact that the deal has signed is an enormously successful outcome in and of itself given its complexity, the number of different stakeholders and the economic circumstances surrounding it. Speaking to the BBC, the CEO of the Six Nations Benjamin Morel described the deal as heralding the start of a “new era” for rugby union.
Private equity firms have historically invested in sports organisations (the most famous examples being CVC’s investment into Formula One and Silver Lake’s investment into Ultimate Fighting Championship or UFC) but there is a growing appetite for these sorts of deal both from private equity investors and an increased willingness from sports organisations to consider them.
The Six Nations deal provides an excellent precedent for how these deals can move forward despite the broader economic backdrop for professional sports and despite the concerns of sports stakeholders, in particular around ensuring that private equity investment does not dilute sporting organisation’s oversight of matters such as player welfare.
Moreover, the rugby unions have indicated that they will use the funds generated by this deal in support of grassroots rugby as well as growing the women’s rugby game. Indeed, Ireland’s CEO Philip Browne has said the union can “look forward to investing funds from this CVC deal into the development of our game, from grassroots to the elite levels for men and women”. This ties into the strategic priorities of the Six Nations organisation itself, which adds that “elevating the women’s game will be one of the biggest levers available to us in growing a more diverse global fanbase, which is another of our key strategic priorities.”
The transaction required a large team effort from the whole Bird & Bird team working closely alongside the Six Nations’ general counsel, James Stebbing. It was necessary for the corporate team to work closely alongside the media, entertainment and sport (MES) team at all times given the importance of corporate structuring, the grant of media rights and sporting matters to the success of the deal. They worked closely alongside a range of difference practice areas including IP, commercial and tax across Bird & Bird’s London, Paris and Milan offices.
In Bloomfield’s eyes “the deal has helped Bird & Bird cement its position as the experts on advising professional sports organisations, particularly on matters concerning their relationships with the corporate world and on their acquisitions or investments”.
Such deals have included advising the Pro14 (now United Rugby Championship) on its private equity investment; advising major sports competitions on whether they should explore private equity investment or not; advising a major sports property on its investment process, and even advising on matters connected with the 2030 FIFA World Cup.
About Richard Bloomfield
2019-present: Senior associate, Bird & Bird
2012-16: Associate, Herbert Smith Freehills
2010-12: Trainee, Herbert Smith Freehills
Who’s Who: the Bird & Bird corporate team
Leading: Craig Giles (partner, MES): Richard Bloomfield (senior associate, corporate), Matt Hanson (associate, MES), Matt Bonass (partner, corporate), Max Duthie (partner, MES), Zoe Feller (partner, Tax)