The Private Equity College Sports Hellscape Thread

[ZooCougar]

The reason why PE makes no sense in college sports is because profitability is measured in prestige and championships and not in bottom line. Schools like Ohio State will gladly lose $37M a year and more if that’s what it takes to win championships.

If all of the sudden these places has to actually be profitable then fans would turn away in droves.

 

[noeynox]

The reason why PE makes no sense in college sports is because profitability is measured in prestige and championships and not in bottom line. Schools like Ohio State will gladly lose $37M a year and more if that’s what it takes to win championships.

If all of the sudden these places has to actually be profitable then fans would turn away in droves.

Or UConn for that matter.

 

[Kolumbo]

The reason why PE makes no sense in college sports is because profitability is measured in prestige and championships and not in bottom line. Schools like Ohio State will gladly lose $37M a year and more if that’s what it takes to win championships.

If all of the sudden these places has to actually be profitable then fans would turn away in droves.

To me that seems like an argument for PE rather than against PE and I am sure you will find this take humorous, as usual. The schools don't have to be profitable in order for PE to make money. PE will take its cut whether the schools make money or not. In fact, that's what makes this attractive to PE. These schools have very deep pockets.

I am sure PE firms have all different strategies and they have some winners and some losers. It takes just one PE firm to look at the future cash flows which are in the billions and figure hey, if we can make 5%-10% per year, guaranteed, for 20 years, then sure, let's do it. And that revenue stream is guaranteed by the fine folks of California, Texas, Florida, Georgia, Illinois, Ohio, Penn, Michigan...huge enrollments and large populations willing to pay.

 

[ZooCougar]

To me that seems like an argument for PE rather than against PE and I am sure you will find this take humorous, as usual. The schools don't have to be profitable in order for PE to make money. PE will take its cut whether the schools make money or not. In fact, that's what makes this attractive to PE. These schools have very deep pockets.

I am sure PE firms have all different strategies and they have some winners and some losers. It takes just one PE firm to look at the future cash flows which are in the billions and figure hey, if we can make 5%-10% per year, guaranteed, for 20 years, then sure, let's do it. And that revenue stream is guaranteed by the fine folks of California, Texas, Florida, Georgia, Illinois, Ohio, Penn, Michigan...huge enrollments and large populations willing to pay.

Except when taking their cut amounts to us paying them exorbitant sums of money to use our own facilities.

Not happening.

 

[nelsonmuntz]

To me that seems like an argument for PE rather than against PE and I am sure you will find this take humorous, as usual. The schools don't have to be profitable in order for PE to make money. PE will take its cut whether the schools make money or not. In fact, that's what makes this attractive to PE. These schools have very deep pockets.

I am sure PE firms have all different strategies and they have some winners and some losers. It takes just one PE firm to look at the future cash flows which are in the billions and figure hey, if we can make 5%-10% per year, guaranteed, for 20 years, then sure, let's do it. And that revenue stream is guaranteed by the fine folks of California, Texas, Florida, Georgia, Illinois, Ohio, Penn, Michigan...huge enrollments and large populations willing to pay.

A private equity firm’s hurdle returns are 15% at a minimum, and over 25% for any firm that would actually consider this.

And the revenue stream is nothing close to guaranteed. Let’s say a PE firm was stupid enough to invest in FSU. It decides it wants to start pulling money out, so it cuts the player and coach salaries. What will happen to the product on the field? What will that do to revenue?

 

[Kolumbo]

A private equity firm’s hurdle returns are 15% at a minimum, and over 25% for any firm that would actually consider this.

And the revenue stream is nothing close to guaranteed. Let’s say a PE firm was stupid enough to invest in FSU. It decides it wants to start pulling money out, so it cuts the player and coach salaries. What will happen to the product on the field? What will that do to revenue?

You don't cut costs. You know the revenue side and even though returns won't be 25%, it is basically guaranteed revenue. FSU will come up with the money to cover the costs if it has to, and it will have to. Every type of business wants to be as profitable as possible, and it is always smart to lock in recurring revenue streams even if to "keep the lights on." I don't think you are saying every PE firm would reject an investment guaranteeing 10% returns until the day you retire.

CR is causing every program to sell out and keep part of this growing money grab. UCLA and USC destroyed the PAC 12. Texas and Oklahoma succumbed to join the SEC. All because of much much more revenue. It is guaranteed cash flow.

 

[Patman]

You don't cut costs. You know the revenue side and even though returns won't be 25%, it is basically guaranteed revenue. FSU will come up with the money to cover the costs if it has to, and it will have to. Every type of business wants to be as profitable as possible, and it is always smart to lock in recurring revenue streams even if to "keep the lights on." I don't think you are saying every PE firm would reject an investment guaranteeing 10% returns until the day you retire.

CR is causing every program to sell out and keep part of this growing money grab. UCLA and USC destroyed the PAC 12. Texas and Oklahoma succumbed to join the SEC. All because of much much more revenue. It is guaranteed cash flow.

The problem is there's only money to grab if the PE firm sees money. Anything else is cargo cult behavior

 

[Ha Who]

The problem is there's only money to grab if the PE firm sees money. Anything else is cargo cult behavior

Burn baby burn

 

[Patman]

Talk about a Friday Night Massacre, the NIH dropped a bomb tonight; the cost rate for research grants is going to be capped at 15% from 60%. Considering the State of Connecticut has $1.8b in funding to its research institutions from the NIH, this is a big big loss.

Cuts at the hospitals? Cuts at UConn in STEM? Or cuts everywhere at UConn?

This gravity of this is the biggest bomb to ever hit Higher Ed in America.

NIH plans to slash support for indirect research costs, sending shockwaves through science

The NIH said Friday night that it would slash support for indirect costs on all existing and future grants to 15%

www.statnews.com

Things i could say... I'll reserve to this

What the hell does it have to do with the thread

 

[upstater]

Things i could say... I'll reserve to this

What the hell does it have to do with the thread

All departments including sports will get severe cutbacks.

 

[Patman]

All departments including sports will get severe cutbacks.

No

 

[upstater]

No

already seeing it

 

[nelsonmuntz]

No

LOLOLOLOLOLOLOLOLOLOLOLOLOLOLOL

You either have no idea what you are talking about or you are so brainwashed that you refuse to acknowledge the disaster that is coming for universities. There are going to be schools that have no choice but to slash athletic costs just to keep the doors open.

 

[ZooCougar]

No

Lawst

 

[Patman]

LOLOLOLOLOLOLOLOLOLOLOLOLOLOLOL

You either have no idea what you are talking about or you are so brainwashed that you refuse to acknowledge the disaster that is coming for universities. There are going to be schools that have no choice but to slash athletic costs just to keep the doors open.

sports ain't getting a damn haircut

 

[Chuck]

sports ain't getting a damn haircut

Everyone gets an opinion. I'm just curious where you think the money is going to come from? Real question, not picking a fight.

At real universities they may have to cut sports subsidies/funding. Unless they plan on shutting down most of their research. The money needs to come from somewhere to support the actual mandate of the schools (research and education). Maybe they'll all become exclusively business schools like Babson?

We want to beat China and other countries in STEM developments, but we'd rather subsidize minor league professional sports that lose money?

 

[nelsonmuntz]

Everyone gets an opinion. I'm just curious where you think the money is going to come from? Real question, not picking a fight.

At real universities they may have to cut sports subsidies/funding. Unless they plan on shutting down most of their research. The money needs to come from somewhere to support the actual mandate of the schools (research and education). Maybe they'll all become exclusively business schools like Babson?

We want to beat China and other countries in STEM developments, but we'd rather subsidize minor league professional sports that lose money?

He has no idea why, he just thinks it will just sort itself out.

 

[upstater]

Everyone gets an opinion. I'm just curious where you think the money is going to come from? Real question, not picking a fight.

At real universities they may have to cut sports subsidies/funding. Unless they plan on shutting down most of their research. The money needs to come from somewhere to support the actual mandate of the schools (research and education). Maybe they'll all become exclusively business schools like Babson?

We want to beat China and other countries in STEM developments, but we'd rather subsidize minor league professional sports that lose money?

I spent yesterday morning defending the jobs of 3 unprotected instructors, one of whom has a Pulitzer Prize. "How significant is that?" I had to reply.

 

[Kolumbo]

This thread is about private equity getting involved in big time college football. NIH is a governmental agency which funds biomedical research. Whatever happens with NIH, I'm not sure it would affect athletic department revenues at the big football schools. G5, sure. State funding would need to be reallocated, but the football schools would be fine. Interesting reading about funding for "indirect costs" though. perhaps these elite institutions are bilking us.

"In an announcement issued by the NIH Office of the Director, the agency noted that it has historically supported indirect costs — administrative, facility, and other expenses not directly linked to the goals of a scientific project — with a quarter of the agency’s grant expenses going to these costs. Many of the nation’s most elite research universities receive 50% or more in addition to direct research expenses to cover indirect costs. Going forward, the rate of support will now be 15% for new and existing grants."

 

[CL82]

We want to beat China and other countries in STEM developments, but we'd rather subsidize minor league professional sports that lose money?

Then again, we don't want to lose to them in basketball at the Olympics either.

I'm just saying.

 

[UConnTrumbull]

 

[nelsonmuntz]

Investing in a conference is not quite as stupid as investing in an individual athletic program, but it is still out there as far as a PE firm's investment parameters. It is a partnership with states, which is problematic, and the number of customers in the entire market is pretty limited unless the conference goes direct to consumer someday. Ownership in a state affiliated entity is tricky, and the schools could never leave once they took the PE money. In the short term, I don't get what the schools would even do with the PE money.

There have been stupider deals in PE history, but I remain skeptical that this will ever happen.

 

[CTFAN4LIFE]

Investing in a conference is not quite as stupid as investing in an individual athletic program, but it is still out there as far as a PE firm's investment parameters. It is a partnership with states, which is problematic, and the number of customers in the entire market is pretty limited unless the conference goes direct to consumer someday. Ownership in a state affiliated entity is tricky, and the schools could never leave once they took the PE money. In the short term, I don't get what the schools would even do with the PE money.

There have been stupider deals in PE history, but I remain skeptical that this will ever happen.

I don't think there's much chance this is a typical PE deal. It'll be much more based on revenue increase gain-share. This creates performance without all of the entanglements of traditional PE. Think of it more like a vendor that brings the needed expertise and shares in the lift that they will drive due to their connections/networking/other owned properties/etc.

 

[noeynox]

I don't think there's much chance this is a typical PE deal. It'll be much more based on revenue increase gain-share. This creates performance without all of the entanglements of traditional PE. Think of it more like a vendor that brings the needed expertise and shares in the lift that they will drive due to their connections/networking/other owned properties/etc.

How does the PE make money in this arrangement?

 

[huskymedic]

I don't think there's much chance this is a typical PE deal. It'll be much more based on revenue increase gain-share. This creates performance without all of the entanglements of traditional PE. Think of it more like a vendor that brings the needed expertise and shares in the lift that they will drive due to their connections/networking/other owned properties/etc.