Your move, PGA Tour: Pros and cons to partnership options

NASSAU, Bahamas – The soft deadline that many believed was nothing more than a bookmark in the ongoing negotiations between the PGA Tour, Saudi Arabia’s Public Investment Fund and various private equity offers has evolved into a “firm target,” at least according to commissioner Jay Monahan.

Insiders continue to maintain the Dec. 31 deadline is still flexible and that if all parties believe progress is being made, they would move the talks into 2024. But it’s clear that the intensity of those conversations has increased.

While the outcome of the negotiations is still very much in flux there are essentially four (some would say less than ideal) options:

PGA Tour-PIF

A deal between the Tour and PIF is squarely still on the table but exactly what that would look like and how each side coalesces to create PGA Tour Enterprises – the for-profit entity the deal would produce that includes the Tour, LIV Golf and the DP World Tour – is anyone’s guess.

The pros of this deal are twofold. Partnering with PIF takes, as Monahan explained following the June 6 announcement of the framework agreement, the circuit’s biggest and most threatening competition off the board. The move would also provide the Tour with long-term capital from a partner who is clearly not looking for a quick return.

The cons to partnering with PIF are just as real. As evidenced by the pushback the Tour received on June 6, a deal with the Saudis will produce a healthy amount of public relations blowback. While those PR hits could be short term, there will also be pushback from some sponsors who are reluctant to do business with the Kingdom.

The biggest obstacle, however, will be federal regulators.

The Department of Justice’s antitrust division informed the Tour in June its plan to review the organization’s proposed deal with PIF, in addition to a preexisting investigation. The Department, in July, pressured the Tour and PIF to drop the nonsolicitation (no poaching) clause from its framework agreement, and the U.S. Senate’s Permanent Subcommittee on Investigations has already held two hearings on the deal.

An exclusive agreement between the Tour and PIF would only intensify lawmaker and federal antitrust investigator scrutiny.

There’s also a belief that the rumors of more players bolting for LIV Golf would sink any potential deal with PIF, but that ignores the obvious. A new, high-profile signing would give PIF and its governor, Yasir Al-Rumayyan, real leverage in the ongoing negotiations.

Monahan is scheduled to meet with Al-Rumayyan this week and if another player or players leave for LIV the message would be deafening and abundantly clear – ignore us and your “existential” threat will only grow.

PGA Tour-Private Equity

According to various sources there are three remaining suitors beyond PIF to partner with the Tour – Liberty Media Corp., the owner of F1; a consortium led by Fenway Sports Group; and investment firm Acorn Growth Cos.

The pros of going with private equity instead of PIF are primarily a path of least resistance. A potential, and likely, deep dive by the Justice Department into a Tour-PIF deal would take up to 18 months while a deal with some other private equity likely wouldn’t draw as much scrutiny.

Going with private equity instead of PIF would also keep the Tour from having to answer questions about sportswashing and the awkward heel turn the framework agreement produced.

The potential con of a deal involving private equity is the very nature of investments, which normally expect some sort of a return within five years.

The policy board player directors sent a memo to the membership last week explaining that these potential investors are “not traditional private equity groups as has been reported, but rather multi-decade oriented, strategic partners.”

As one insider put it, the Tour is looking for “patient money.”

The private equity option has also created a potential for palace intrigue with Rory McIlroy – whose TGL team, Boston Commons Golf, is owned by Fenway – and Monahan, who was an executive vice president of Fenway Sports Group before joining the Tour.

Then there’s Tiger Woods, a player director on the policy board and co-founder with McIlroy in TMRW Sports which is behind the made-for-television TGL. Liberty Media CEO Greg Maffei is an investor in TMRW Sports.

There’s also the very real danger that if the Tour doesn’t reach some sort of deal with PIF and leaves it in the cold, Al-Rumayyan will double down and LIV Golf will become an even greater threat.

PGA Tour-PIF/Private Equity

This is likely to be the most attractive option for the Tour and its members.

The pros of a combination move go deep into the dealmaking weeds. The addition of “other” investors could appease the Justice Department and either avoid or at the least mitigate a potential investigation into the new entity.

Based on Monahan’s comments last week at The New York Times’ DealBook Summit it also appears to be the preferred option among the players, saying a deal would include PIF and “likely another co-investor with significant experience in business and sports [that] will help the PGA Tour take share from other sports and be even more competitive.”

The cons to a PIF/private equity deal rest entirely with Al-Rumayyan. The PIF is a minority investor in many companies alongside other private equity but it’s unclear if that model falls into his plans for golf.

Status Quo

This is not an option, at least not as the golf world is currently aligned. Human nature is averse to change, particularly the unprecedented change the Tour is facing. There will always be a portion of the golf world that will pine for simpler times and the ways things used to be.

But the cons of doing nothing have the potential to be devastating. The move to signature events with smaller fields and larger purses was designed to stem the tide of top players leaving to join LIV Golf, but it’s an economic model that’s not sustainable even for a business as successful as the Tour.

Whatever deal is eventually forged will include a partner or partners and the options, if not the ultimate outcome, are starting to crystalize.