Saudi Arabia worked with McKinsey on LIV Golf financial strategy

The controversial LIV Golf Tour has caused shockwaves throughout the sporting world, since its first event in the summer of 2022. New documents have revealed the role consultants from McKinsey & Company played in helping hatch plans for the invitational series.

After various attempts to create a new golf tour to rival the PGA Tour, Golf Saudi funded a new entity in 2020, which had its own plan to establish a global professional league, often referred to as the ‘Super Golf League’. This entity launched in October 2021 as LIV Golf Investments, with former professional golfer Greg Norman named as CEO.

While LIV Golf’s launch has been lauded by many for providing a serious alternative to the monopoly PGA Tour long had, others have criticised the initiative, treating the concept – often described as the golfing equivalent to the breakaway attempts in European football – with levels of contempt.

The first LIV Golf Invitational Series event started in June 2022, at the Centurion Club near London, in the United Kingdom. The PGA Tour announced that any of its members taking up lucrative offers to participate in the tournament (including current members as well as those who had recently resigned) were no longer eligible to compete in tour events or the Presidents Cup.

To the individuals behind the idea, however, this was just the latest in a number of challenges they had already considered on the way to launching LIV Golf.

Early in 2021, experts working for Saudi Arabia’s sovereign wealth fund came up with a proposal for the setup of a new professional golf tour, code-named Project Wedge. The main conclusion: to be successful, the new league would need to sign each of the world’s top 12 golfers, attract sponsors to an unproven product and land television deals for a sport with declining viewership.

Despite the huge task at hand, Saudi officials were still keen to push ahead. As with its bid to host the 2030 World Cup, officials believe that bringing top-tier sporting events to the Kingdom is a crucial part of building the kingdom’s reputation on the global stage.

A trusted advisor: McKinsey

Hundreds of pages of confidential documents obtained by The New York Times revealed a number of professional services worked at the heart of the plan to hatch LIV Golf. One of the most significant papers was reportedly prepared by consultants from McKinsey & Company – a trusted advisor to Saudi officials since the 1970s.

In recent years, this has also seen the strategy consulting firm play a key role in the Vision 2030 plans of Saudi Crown Prince Mohammed bin Salman – which aim to diversify the kingdom’s economy from its state oil dependency, and turn the country into a country of global reckoning.

The document prepared by McKinsey analysed the finances of the potential golf league. However, the firm was keen to note in the study that the report was not an examination of whether a golf tour was a strategically viable idea – adding that many of Saudi Arabia’s assumptions of its viability were “taken for granted and not been challenged in our assessment”.In its analysis, the firm went on to call the golf league “a high-risk high-reward endeavour”.

Whether the rewards will manifest remains to be seen. LIV Golf’s inaugural season cost in excess of $750 million, and the league has still not announced major broadcasting or sponsorship deals. Meanwhile, hopes that the PGA Tour would back down have swiftly faded, instead resulting in a fierce court battle.

Meanwhile, the participation of Tiger Woods, Phil Mickelson and Rory McIlroy – which McKinsey included in a slide with the title “What you need to believe” – is a distant prospect. Only Mickelson joined LIV, with a deal reportedly worth at least $200 million. But at the same time, some experts believe the financial cost is worth it for what it has afforded Saudi Arabia in terms of international relations.

“The margins might be thin, but that doesn’t really matter,” said Simon Chadwick, a Professor of sport and geopolitical economy at Skema Business School in Paris, speaking on the release of the documents. “Because subsequently you’re establishing the legitimacy of Saudi Arabia – not just as an event host or a sporting powerhouse, but legitimate in the eyes of decision makers and governments around the world.”