The Private Equity College Sports Hellscape Thread

[ZooCougar]

Now that is funny! Put down the helium. No one is selling their AD department and it takes money to make money.

All those insane knuckleheads borrowing from credit unions to buy their homes. Insanity!!

Do you understand what the equity part of this relationship is?

I don’t think you do. You think this is something for nothing.

 

[AZHuskiePop]

Do you understand what the equity part of this relationship is?

I don’t think you do. You think this is something for nothing.

They Ain’t MTV for sure .

 

[Kolumbo]

Do you understand what the equity part of this relationship is?

I don’t think you do. You think this is something for nothing.

It's all about Cash Flow. Money comes in. Money goes out. Therea are 3100 flavors. As far as I know, conferences are talking to PE, but if it were to help UConn's AD, look into it. I am not necessarily for or against it, but I can see how it would be mutually beneficial if they want to go that route. You post as if no business has ever successfully borrowed from or issued stock to investors. Quite the contrary.

 

[ZooCougar]

It's all about Cash Flow. Money comes in. Money goes out. Therea are 3100 flavors. As far as I know, conferences are talking to PE, but if it were to help UConn's AD, look into it. I am not necessarily for or against it, but I can see how it would be mutually beneficial if they want to go that route. You post as if no business has ever successfully borrowed from or issued stock to investors. Quite the contrary.

So you think they provide cash and then don't any cash in return, and this is all unicorns and leprechauns?

 

[The Yakk]

Now that is funny! Put down the helium. No one is selling their AD department and it takes money to make money.

All those insane knuckleheads borrowing from credit unions to buy their homes. Insanity!!

LOL "It takes money to make money" is the favored cliche of every grifter that ever existed. When someone says that to you in a pitch, you should run.

As I read your ongoing defense of the PE fantasy--in the face of some very good criticism from ZooCougar and others, which you ignore in favor of childish arguments like those quoted above--it strikes me that you have very little understanding of the purpose these investors serve.

Private equity investors exist so that the owner class--including mainly the investors themselves--can extract as much value as possible from the enterprise. They do not care at all about the betterment of the employees, or the customers, or the running of the business itself. If any of those things happen, it is an accidental byproduct. PE firms are pure capitalism, period.

What exactly are you rooting for when you root for UConn? Are you rooting for the taxpayers of the State of Connecticut to run the most profitable college scheme in existence? To make the Fortune 100? If you are, then your PE dream makes some kind of perverted sense.

Most of us here--and probably you, too, if you think about it--are rooting for our teams to win. Beyond that, we are rooting for prestige and acclaim for our beloved school. UConn is a top 30 public University; I would love for it to become top 10.

PE money will be an active hindrance to all that. Profits come first, above all. How will you feel if Hurley has to cut one of Luke or Kimani because the PE creeps have to get paid? Or if UConn has to fire instructors and double class sizes to keep the cash flowing?

I sometimes wonder how many of us actually paid attention in college...

 

[FfldCntyFan]

LOL "It takes money to make money" is the favored cliche of every grifter that ever existed. When someone says that to you in a pitch, you should run.

As I read your ongoing defense of the PE fantasy--in the face of some very good criticism from ZooCougar and others, which you ignore in favor of childish arguments like those quoted above--it strikes me that you have very little understanding of the purpose these investors serve.

Private equity investors exist so that the owner class--including mainly the investors themselves--can extract as much value as possible from the enterprise. They do not care at all about the betterment of the employees, or the customers, or the running of the business itself. If any of those things happen, it is an accidental byproduct. PE firms are pure capitalism, period.

What exactly are you rooting for when you root for UConn? Are you rooting for the taxpayers of the State of Connecticut to run the most profitable college scheme in existence? To make the Fortune 100? If you are, then your PE dream makes some kind of perverted sense.

Most of us here--and probably you, too, if you think about it--are rooting for our teams to win. Beyond that, we are rooting for prestige and acclaim for our beloved school. UConn is a top 30 public University; I would love for it to become top 10.

PE money will be an active hindrance to all that. Profits come first, above all. How will you feel if Hurley has to cut one of Luke or Kimani because the PE creeps have to get paid? Or if UConn has to fire instructors and double class sizes to keep the cash flowing?

I sometimes wonder how many of us actually paid attention in college...

Excellent post but I disagree with you labelling PE firms as pure capitalism. They are in fact the highest form of exploitative capitalism, as far from pure as they can be.

Beyond that, you hit the nail on the head. Kolumbo's analogy of an athletic department receiving a PE investment and an individual getting a mortgage is erroneous. If a state school (like UConn) needed funds in the form of debt funding, it would make far more sense to have the state issue a bond offering. If a private school were to look into debt funding, they would securitize the borrowing with real estate collateral. Neither would need a PE firm to take the role of banker and in all candor, nobody wants a PE form to be their banker.

PE firms don't invest their money for simple interest returns. They wouldn't remain in business of that was what they earned on their capital. They would issue the loan as an investment with many layers of preferred returns which would result in a usurious transaction (without the legal protection for the school). Picture the scenes in Goodfella where Paulie became a partner in the restaurant, ended up bleeding the owner dry, then torched the place for the insurance money. That isn't far from the manner in which PE firms operate.

 

[CL82]

Private equity investors exist so that the owner class--including mainly the investors themselves--can extract as much value as possible from the enterprise. They do not care at all about the betterment of the employees, or the customers, or the running of the business itself. If any of those things happen, it is an accidental byproduct. PE firms are pure capitalism, period.

 

[Stinger92860]

PE money will be an active hindrance to all that. Profits come first, above all. How will you feel if Hurley has to cut one of Luke or Kimani because the PE creeps have to get paid? Or if UConn has to fire instructors and double class sizes to keep the cash flowing?

The company stock I work for was down to 125 and activist investors came storming in as our margins were pitiful. I was laid off and received an awesome package, on which I took a year off. Fast forward to now…I was rehired by said company and stock is 290. That said, I am certain I am an outlier.

 

[CL82]

The company stock I work for was down to 125 and activist investors came storming in as our margins were pitiful. I was laid off and received an awesome package, on which I took a year off. Fast forward to now…I was rehired by said company and stock is 290. That said, I am certain I am an outlier.

I agree with you there are PE opportunities that can be good for a company. That said I haven't seen a single pitch in public discussion that actually makes sense for the schools and conferences. All of them have been giving away a piece of the conference in exchange for cash that will be used for operating expenses. That isn't a growth opportunity that is a death spiral.

That said, I'm glad it worked out for you. What was the capital infusion used for in your company? Or was it a case where bringing in outside management allowed it to restructure to operate efficiently. Just curious.

 

[baggerbob]

Excellent post but I disagree with you labelling PE firms as pure capitalism. They are in fact the highest form of exploitative capitalism, as far from pure as they can be.

Beyond that, you hit the nail on the head. Kolumbo's analogy of an athletic department receiving a PE investment and an individual getting a mortgage is erroneous. If a state school (like UConn) needed funds in the form of debt funding, it would make far more sense to have the state issue a bond offering. If a private school were to look into debt funding, they would securitize the borrowing with real estate collateral. Neither would need a PE firm to take the role of banker and in all candor, nobody wants a PE form to be their banker.

PE firms don't invest their money for simple interest returns. They wouldn't remain in business of that was what they earned on their capital. They would issue the loan as an investment with many layers of preferred returns which would result in a usurious transaction (without the legal protection for the school). Picture the scenes in Goodfella where Paulie became a partner in the restaurant, ended up bleeding the owner dry, then torched the place for the insurance money. That isn't far from the manner in which PE firms operate.

PE is much like hedge fund investors, they give you enough money to keep you afloat, with strings attached. Then when the money you received isn't enough to turn things around, they end up with your buisness, and sell off the good parts, leaving you with nothing.

 

[BlueHen]

Everytime I see 'PE', I think of Phys Ed.

 

[Ha Who]

PE is much like hedge fund investors, they give you enough money to keep you afloat, with strings attached. Then when the money you received isn't enough to turn things around, they end up with your buisness, and sell off the good parts, leaving you with nothing.

I am good with that. Sell off the top of the Big and SEC to some entity leaving you with Rutgers, Vanderbilt etc

 

[Punkbo]

Without singling out any specific poster, I’m curious where these negative views of private equity are coming from. Does anyone on this board work for a PE firm or been funded by a PE firm? There is one story on the board about an “activist investor” (not sure if this is a PE investor) who provided positive results for their company. PE might not be the answer for a public university, but there are plenty of examples in the sports world and many other industries where PE has had a positive impact on the business.

Please enlighten me. Thanks!

 

[The Yakk]

Without singling out any specific poster, I’m curious where these negative views of private equity are coming from. Does anyone on this board work for a PE firm or been funded by a PE firm? There is one story on the board about an “activist investor” (not sure if this is a PE investor) who provided positive results for their company. PE might not be the answer for a public university, but there are plenty of examples in the sports world and many other industries where PE has had a positive impact on the business.

Please enlighten me. Thanks!

From working in finance for 35 years, and seeing what kind of deals are done when people with no ethical sense who are driven entirely by money get their way.

Is this question for real?

Give us some of the "plenty of examples" you cite, and if the "positive impact" is anything other than a higher return for shareholders, you can do your victory dance.

And by the way, capitalism is the system we have chosen. I'm part of it too, and I have done well. The issue here is letting these exploitative ghouls into a space that is supposed to have a mission other than generating profits. Does EVERYTHING have to be for sale?

 

[Ha Who]

From working in finance for 35 years, and seeing what kind of deals are done when people with no ethical sense who are driven entirely by money get their way.

Is this question for real?

Give us some of the "plenty of examples" you cite, and if the "positive impact" is anything other than a higher return for shareholders, you can do your victory dance.

And by the way, capitalism is the system we have chosen. I'm part of it too, and I have done well. The issue here is letting these exploitative ghouls into a space that is supposed to have a mission other than generating profits. Does EVERYTHING have to be for sale?

I might agree with you, but that ship has already sailed. Just look at the cartel that is college athletics.

 

[Punkbo]

From working in finance for 35 years, and seeing what kind of deals are done when people with no ethical sense who are driven entirely by money get their way.

Is this question for real?

Give us some of the "plenty of examples" you cite, and if the "positive impact" is anything other than a higher return for shareholders, you can do your victory dance.

And by the way, capitalism is the system we have chosen. I'm part of it too, and I have done well. The issue here is letting these exploitative ghouls into a space that is supposed to have a mission other than generating profits. Does EVERYTHING have to be for sale?

Thanks for the honest response. I’m a private investor who has worked alongside private equity for many years. While there are some “bad actors” in the business, the results in my experience have generally been positive, not only for the investor group, but also for the companies, their customers and their employees. I’ll assume you’ve had a different experience.

I agree that injecting private equity into the college experience is not ideal, but the mission of college athletics is solely about generating profits at this point. Not to repeat past narratives, but the Ivy League is the only conference which at least tries to place academics above athletics and even that is questionable.

When athletic departments spin out of the universities and become profit centers, private equity investors are much better suited to run these businesses rather than college administrators. Time will tell. Pick your poison.

 

[The Yakk]

I might agree with you, but that ship has already sailed. Just look at the cartel that is college athletics.

You're talking about something different.

Because of the public's demand for college sports, broadcasters and advertisers are throwing a lot of money at it. The P2 cartel's greed to keep ALL the money may well be ruining those sports. I think I agree with you there.

But there is nothing intrinsically wrong with schools accepting the windfall and using it to better the teams, or better the schools, or decrease tuition, or pay the athletes, or ease the burden on the taxpayers.

The mistake would be letting the financial sector in to raid the cash. Because thats what they would be doing.

I think some of the PE fantasists here really are naive enough to think those firms are coming in to help. Others are probably hoping to work in those firms and want to get their share while they can. Whatever.

 

[The Yakk]

Thanks for the honest response. I’m a private investor who has worked alongside private equity for many years. While there are some “bad actors” in the business, the results in my experience have generally been positive, not only for the investor group, but also for the companies, their customers and their employees. I’ll assume you’ve had a different experience.

I agree that injecting private equity into the college experience is not ideal, but the mission of college athletics is solely about generating profits at this point. Not to repeat past narratives, but the Ivy League is the only conference which at least tries to place academics above athletics and even that is questionable.

When athletic departments spin out of the universities and become profit centers, private equity investors are much better suited to run these businesses rather than college administrators. Time will tell. Pick your poison.

Yeah, I figured that. Your fake-naive question didnt really fool anyone.

So your support for this idea is the colleges are already greedy, then why not let me and my Wall Street friends in to grab our cut. Least surprising comment ever.

Still waiting for those examples, by the way.

 

[CL82]

Build a high speed rail for CT with a stop at Storrs and East Hartford. While we are at it, connect it to NYC and Boston.

We can finally be like other developed nations or China.

[CL82 thinking] Wants to be like China? Probably is a communist.

 

[UConnJim]

I'm not in favor of PE getting involved in college sports, but there are many business ideas that colleges need to adopt for the Athletic Departments to save money. For example, Texas and Texas A&M are state schools in Texas. Do they need duplicative AD administrative bureaucracies? Can a conference outsource their athletic ticketing to a 3rd party? Can a conference purchase athletic equipment cheaper than each individual college? Can a conference negotiate travel contracts like air and hotels cheaper than each athletic department? The more questions you ask, the greater the possibility for savings.

 

[JohnFSilver]

Everytime I see 'PE', I think of Phys Ed.

You must be like me, and don’t have millions, because that is what I thought too.

 

[JohnFSilver]

You're talking about something different.

Because of the public's demand for college sports, broadcasters and advertisers are throwing a lot of money at it. The P2 cartel's greed to keep ALL the money may well be ruining those sports. I think I agree with you there.

But there is nothing intrinsically wrong with schools accepting the windfall and using it to better the teams, or better the schools, or decrease tuition, or pay the athletes, or ease the burden on the taxpayers.

The mistake would be letting the financial sector in to raid the cash. Because thats what they would be doing.

I think some of the PE fantasists here really are naive enough to think those firms are coming in to help. Others are probably hoping to work in those firms and want to get their share while they can. Whatever.

If you are in business school, or lap up stock market, PE people are like gods.

If you worked with them, and realize that they have to drop their pants when they go to the bathroom, then you see them more as people.

They are capital. They are also using other people’s money to generate returns that consistently heavily out perform the market.

So, their interest is in free cash flow. That’s it. That is what they are there to generate .you must know that going in.

They are excellent at efficiency, process enhancement and analysis.

They are hit or miss on-execution, disregard culture culture and change management, and seriously really don’t focus on the customer.

That is my one criticism. Fanatics apparel is a good example of lack of focus on customer and product. It’s all marketing, efficiency, and scale. Their products are actually less quality than what we have had previously at a premium price.

Edit: I hate fanatics apparel.

 

[Stinger92860]

[CL82 thinking] Wants to be like China? Probably is a communist.

I was thinking who needs an environmental study, just build it.

 

[The Yakk]

If you are in business school, or lap up stock market, PE people are like gods.

If you worked with them, and realize that they have to drop their pants when they go to the bathroom, then you see them more as people.

They are capital. They are also using other people’s money to generate returns that consistently heavily out perform the market.

So, their interest is in free cash flow. That’s it. That is what they are there to generate .you must know that going in.

They are excellent at efficiency, process enhancement and analysis.

They are hit or miss on-execution, disregard culture culture and change management, and seriously really don’t focus on the customer.

That is my one criticism. Fanatics apparel is a good example of lack of focus on customer and product. It’s all marketing, efficiency, and scale. Their products are actually less quality than what we have had previously at a premium price.

Edit: I hate fanatics apparel.

Fanatics Apparel an excellent example.

An even better example is Boeing.

From the perspective of the investor class dipșȟits, Boeing is a huge success story. Maybe that's one of the examples Punkbo had in mind.

 

[The Yakk]

To be clear, before the b-school geniuses jump in to correct me: yes, I know Boeing's merger with McDonnell Douglas was not strictly a "private equity" deal.

But the principal was the same. Excess/windfall returns were unlocked for the investors, while the quality of the products--which include aircraft that carry human passengers at ludicrous altitudes and speeds--went down the toilet.