When you read the announcement issued Tuesday spelling out the merger of the PGA Tour, DP World Tour, and LIV Tour, one obvious point of conflict emerges.
What happens when the board of the unified entity – with a majority of its members appointed by the PGA Tour – takes a controversial action that is in conflict with the Saudi side – which is providing the money?
In the real world, mergers never work that way. In business, the Golden Rule is “He who has the gold makes the rules.” The PGA-LIV Tour merger runs afoul of that most basic of all understandings, raising the question of how it will be implemented and whether it can withstand the inevitable first conflict.
For those not familiar with the pertinent terms of the deal, here is a condensed version of the essentials of the announcement:
"“Under the terms of the agreement, the Board of Directors of the new entity will oversee and direct all the new entity’s golf-related commercial operations, businesses and investments. … PIF (The Saudi Public Investment Fund) will initially be the exclusive investor in the new entity, alongside the PGA TOUR, LIV Golf and the DP World Tour. … The PGA TOUR will appoint a majority of the Board and hold a majority voting interest in the combined entity.”"
Read that paragraph carefully and consider the inherent conflict. The Saudi PIF puts up the cash.
But the PGA Tour retains the majority vote.
No business in their right mind operates that way – at least not for very long – for the simple reason that it is a train wreck waiting to happen, and only diplomacy of the type not yet displayed by PGA Tour commissioner Jay Monahan can prevent it.
It’s always possible, of course, that there are side understandings not contained in the public announcement that are not being revealed to us. If they exist, those side understandings may – I said may – soothe a path through the minefield. Time will tell.
Most of the outrage regarding this agreement is likely to be moral in nature. It will come from those – and they are both numerous and sincere – who believe no responsible entity would do a deal with a body (such as the PIF) that is part of a government exercising human rights policies they find abhorrent.
That’s understandable, and in a way admirable. We all want to believe that principles ought to matter in business.
The truth is not necessarily in alignment with that hope, however. When large amounts of money are involved – and large amounts of money are involved here – entities often find a loophole in their moral outrage big enough to drive an exception through.
So don’t be surprised that the PGA Tour was able to summon up enough resolve to set aside its outrage at the policies of the LIV-related people with whom it was forced to deal.
The more substantive question is what happens when that new majority-PGA board wants to take an action that is not in the best interests of the guys who are funding it? When that happens, we will know with certainty whether this merger is – if you’ll forgive the expression – ‘successful.’