The Private Equity College Sports Hellscape Thread

[ZooCougar]

I’m just blown away at the number of people who believe that it’s a good idea for these conferences to take Private Equity money.

They think it’s just free money.

They think someone is just going to give them a Billion dollars and it won’t be in tranches.

And they haven’t considered what these finance dudes want in return (all your media rights, renting your own stadiums and arenas, all the space on your unoforms and so on).

Please Big 12. Do this.

 

[shizzle787]

Yes. Do it. The Big 12 is doing this because they are dead in the water in football. They have zero brands.

 

[ZooCougar]

Yes. Do it. The Big 12 is doing this because they are dead in the water in football. They have zero brands.

Their best brand may be Utah. And Utah probably won’t be sticking around.

Further realignment will muddy private equity up. If someone important leaves they will want a pound of flesh to compensate.

 

[Kolumbo]

Yes. Do it. The Big 12 is doing this because they are dead in the water in football. They have zero brands.

Come on. I hate to have to list the brands all the time. The Big 12 has some extremely good brands, adding the Corner 4 to a solid Big 12 base.

 

[Chuck]

I’m just blown away at the number of people who believe that it’s a good idea for these conferences to take Private Equity money.

They think it’s just free money.

They think someone is just going to give them a Billion dollars and it won’t be in tranches.

And they haven’t considered what these finance dudes want in return (all your media rights, renting your own stadiums and arenas, all the space on your unoforms and so on).

Please Big 12. Do this.

PE isn't always the bad guy. It's the right move for some companies. I've always thought the best symbiotic PE / Company relationship was one where there is a great product with terrible/inexperienced management. Especially where the company isn't desperate for money, but knows it's hit a ceiling. Isn't that what college sports is? We LOVE the product, but we all talk about how dumb the leaders are.

Of course, a danger of PE is that they'll be in it for the exit. That could result in decisions based on short term gains rather than long term health. But that can be worked into the terms and control that's given up. Colleges and conferences have plenty deep pockets to protect themselves.

And maybe the ACC can bring in a firm that will slash and burn when they get in. Take a look at the balance sheet and spin off BC, 'Cuse, Wake, etc.

 

[How Sway?!]

PE isn't always the bad guy. It's the right move for some companies. I've always thought the best symbiotic PE / Company relationship was one where there is a great product with terrible/inexperienced management. Especially where the company isn't desperate for money, but knows it's hit a ceiling. Isn't that what college sports is? We LOVE the product, but we all talk about how dumb the leaders are.

Of course, a danger of PE is that they'll be in it for the exit. That could result in decisions based on short term gains rather than long term health. But that can be worked into the terms and control that's given up. Colleges and conferences have plenty deep pockets to protect themselves.

And maybe the ACC can bring in a firm that will slash and burn when they get in. Take a look at the balance sheet and spin off BC, 'Cuse, Wake, etc.

Yeah but athletic departments are not there to make money and can't be measured by excel sheets or p&l. Private Equity is fundementally at odds with college sports.

Also, as much as I hate defending BC and Cause, it's not their fault the ACC is in their current predicament. They werent the ones that came up with the brilliant idea of signing a 20 year tv deal.

 

[BigTenFan]

Sounds like the scene in the Sopranos when the owner of the Sporting Goods wants to get in the action...Tony warns him against it. And the rest is history.

 

[ZooCougar]

 

[ZooCougar]

PE isn't always the bad guy. It's the right move for some companies. I've always thought the best symbiotic PE / Company relationship was one where there is a great product with terrible/inexperienced management. Especially where the company isn't desperate for money, but knows it's hit a ceiling. Isn't that what college sports is? We LOVE the product, but we all talk about how dumb the leaders are.

Of course, a danger of PE is that they'll be in it for the exit. That could result in decisions based on short term gains rather than long term health. But that can be worked into the terms and control that's given up. Colleges and conferences have plenty deep pockets to protect themselves.

And maybe the ACC can bring in a firm that will slash and burn when they get in. Take a look at the balance sheet and spin off BC, 'Cuse, Wake, etc.

In this case it’s an awful idea.

In order to get a return the schools will have to slash costs.

PE will not first ne sone hidden value to make the. ACC or B12 worth $80M a year.

 

[Rufus]

Maybe this is why Utah was rumored to want out?

I don't think this is a good idea at all. Much like the ACC GoR was not a good idea and adding Stanford/Cal/SMU was not a good idea. All involve devaluing your future value for a bump in pay in the initial stages. As mentioned already, private equity isn't just handing out money for free...........they expect a return on investment. I'm going to guess that if this happens, the Big 12 schools will be even more tied to each other than the ACC GoR ever dreamed it could hold its members together. If there ever were a day Utah, Kansas, Arizona, etc. were wanted by the B1G or SEC, this would severely complicate matters. Those schools would be fools if they agree to this. Just like FSU, Clemson, etc. were fools for signing the ACC GoR in the first place.

What I think may be feasible is FSU partnering with private equity to buy its way out of the ACC and into the B1G (or SEC). If this happened, FSU would make so much more money that it would still come out ahead even after paying ROI to its private equity partners. But I don't see any of the Big 12 schools having enough value to be able to come out ahead on this long term. Of course they come out ahead in the beginning, but they are selling off their future value for more money today and that is not a good business plan.

 

[UConnJim]

I am a finance guy and PE has no business being involved in college sports. I hope schools/conferences come to their senses.

 

[The Yakk]

PE isn't always the bad guy. It's the right move for some companies. I've always thought the best symbiotic PE / Company relationship was one where there is a great product with terrible/inexperienced management. Especially where the company isn't desperate for money, but knows it's hit a ceiling. Isn't that what college sports is? We LOVE the product, but we all talk about how dumb the leaders are.

Of course, a danger of PE is that they'll be in it for the exit. That could result in decisions based on short term gains rather than long term health. But that can be worked into the terms and control that's given up. Colleges and conferences have plenty deep pockets to protect themselves.

And maybe the ACC can bring in a firm that will slash and burn when they get in. Take a look at the balance sheet and spin off BC, 'Cuse, Wake, etc.

Private Equity is absolutely always the bad guy, 100% of the time.

It is always and only about sucking value out of the enterprise for the benefit of the investors. There is never any consideration for reinvesting in the business; for the customers; for the employees; or for the product. That is exactly the point of it.

 

[The Yakk]

I’m just blown away at the number of people who believe that it’s a good idea for these conferences to take Private Equity money.

They think it’s just free money.

They think someone is just going to give them a Billion dollars and it won’t be in tranches.

And they haven’t considered what these finance dudes want in return (all your media rights, renting your own stadiums and arenas, all the space on your unoforms and so on).

They will want a lot more in return than that.

In the event that media revenues fall short of projections, they will demand to be repaid out of tuition revenues. The students--our kids--will no longer be students, but chattel. Entries on somebody's ledger.

I really hope Florida State continues down this road.

 

[ZooCougar]

They will want a lot more in return than that.

In the event that media revenues fall short of projections, they will demand to be repaid out of tuition revenues. The students--our kids--will no longer be students, but chattel. Entries on somebody's ledger.

I really hope Florida State continues down this road.

That’s what the and so on part is.

You might as well borrow money from the mafia.

 

[nelsonmuntz]

I kind of get why the conference would do it, but I don’t see the rationale for private equity doing this.

 

[auggie22]

With the ACC network and the collapse of the cable model, the ACC is squeezing every drop out of it with additions outside of their current cable footprint. With their recent additions, they will be adding significant new revenue. But highly variable new revenue as the cable model continues to deteriorate. Maybe the Big 12 is positioning to offer their members more certainty in revenue to make a temporary bump from the ACC less appealing?

 

[The Yakk]

I kind of get why the conference would do it, but I don’t see the rationale for private equity doing this.

They see a big state school with huge, dependable revenue streams:

• Media payments, ticket and souvenir sales, and all the ancillary revenue that comes with a big-time athletic department; and
• Annual tuition payments from 50,000+ students.

It is just a matter of price. How desperate is the school for an up-front cash infusion (so, how little will they have to invest) vs. how much of that revenue stream can they claw back for themselves.

If the numbers make sense, they will offer the deal.

And let's be clear--the sharks in that negotiation are definitely not the university presidents or trustees, most of who cannot see past next year's budget.

 

[CTFAN4LIFE]

I wonder if the Big12 is thinking about raising large PE funding in order to launch their own media/tv platforms so they can print more media money by being the distributor/sell their own advertising? Might this help close their B1G/SEC revenue gap moreso than any other move they could make?

If they were ultimately to do this, then it could make UConn even more attractive to the conference given our national appeal and northeast big-market adjacency.

 

[UConnJim]

I wonder if the Big12 is thinking about raising large PE funding in order to launch their own media/tv platforms so they can print more media money by being the distributor/sell their own advertising? Might this help close their B1G/SEC revenue gap moreso than any other move they could make?

If they were ultimately to do this, then it could make UConn even more attractive to the conference given our national appeal and northeast big-market adjacency.

It would be foolish to launch your own media/tv platform in today's world. When the BTN launched, they had a strong linear media partner, FOX, that helped them gain distribution. Same withe the SECN with ESPN. The Pac 12 tried to go it alone with the Pac12N and failed miserably. Look at all the streaming services that have been launched over the past 10 years and not many are profitable.

 

[CTFAN4LIFE]

It would be foolish to launch your own media/tv platform in today's world. When the BTN launched, they had a strong linear media partner, FOX, that helped them gain distribution. Same withe the SECN with ESPN. The Pac 12 tried to go it alone with the Pac12N and failed miserably. Look at all the streaming services that have been launched over the past 10 years and not many are profitable.

Yes and no... live sports are still key to tv ratings whether linear or streaming. The PAC Network failed because most of the Pac schools/markets didn't care enough about college sports in general. Linear is still the lionshare of viewing at this point but streaming is obviously the future. If nothing else, Big12 has fans are loyal and watch their games (hence their survival as opposed to the Pac dying)...

So, it's murky to say the least. But if you're the Big12 and don't take a calculated risk, what else can drive your future viability and growth? They've got to get creative and take chances or they'll remain in purgatory at best.

 

[ZooCougar]

Yes and no... live sports are still key to tv ratings whether linear or streaming. The PAC Network failed because most of the Pac schools/markets didn't care enough about college sports in general. Linear is still the lionshare of viewing at this point but streaming is obviously the future. If nothing else, Big12 has fans are loyal and watch their games (hence their survival as opposed to the Pac dying)...

So, it's murky to say the least. But if you're the Big12 and don't take a calculated risk, what else can drive your future viability and growth? They've got to get creative and take chances or they'll remain in purgatory at best.

Purgatory is better than hell.

 

[CL82]

Purgatory is better than hell.

If it's better to rule in heaven then serve in hell, what do you do in purgatory?

 

[ZooCougar]

If it's better to rule in heaven then serve in hell, what do you do in purgatory?

I think you got that backwards.

 

[CL82]

I think you got that backwards.

 

[TheCatsLair]

I’m just blown away at the number of people who believe that it’s a good idea for these conferences to take Private Equity money.

They think it’s just free money.

They think someone is just going to give them a Billion dollars and it won’t be in tranches.

And they haven’t considered what these finance dudes want in return (all your media rights, renting your own stadiums and arenas, all the space on your unoforms and so on).

Please Big 12. Do this.

This is a company that Yormark is familiar with and has done business with so the Big 12 is much more educated on this than you realize.