The Private Equity College Sports Hellscape Thread

[CTFAN4LIFE]

How does the PE make money in this arrangement?

By sharing in the increased revenue they bring in. And presumably off of a loan aspect of the deal.

 

[noeynox]

By sharing in the increased revenue they bring in.

Wouldn’t it have to be a very large sum for it to be worth it to them? Seems like the risk vs reward isn't really worth it, but i don't know the potential "increased revenue". Where is that increase coming from?

 

[CTFAN4LIFE]

Wouldn’t it have to be a very large sum for it to be worth it to them? Seems like the risk vs reward isn't really worth it, but i don't know the potential "increased revenue". Where is that increase coming from?

Sponsorship deals, media rights deals, licensing arrangements, etc - universities aren't exactly marketing and sales powerhouses, so partner with people that are and let the new monies flow in and share it with them. Pretty basic. I'm sure there'll be a loan aspect as well - just not an equity based deal.

 

[Patman]

By sharing in the increased revenue they bring in. And presumably off of a loan aspect of the deal.

Great non answer

 

[CTFAN4LIFE]

Great non answer

Thanks. See above, bud.

 

[nelsonmuntz]

Sponsorship deals, media rights deals, licensing arrangements, etc - universities aren't exactly marketing and sales powerhouses, so partner with people that are and let the new monies flow in and share it with them. Pretty basic. I'm sure there'll be a loan aspect as well - just not an equity based deal.

That is not what private equity firms do. They invest and own. Some lend, but it is 15-20% money for the lenders, which doesn’t work here.

 

[CTFAN4LIFE]

That is not what private equity firms do. They invest and own. Some lend, but it is 15-20% money for the lenders, which doesn’t work here.

Yeah, I know what PE firms typically do. This deal is going to be atypical - have you looked at the latest reporting on this? It's going to be capital lending, expertise involvement, deal making, revenue share.

 

[Ha Who]

Is college football undervalued? America's second-most popular game still leaving billions on the table

Ripe for venture capitalists and mega streaming deals down the line, college football's bottom line is getting astronomical

www.cbssports.com

 

[huskymedic]

Perhaps it isn't inevitable that private equity will make a big college sports splash

Could it still happen? Of course. But there are reasons it hasn't happened yet.

www.extrapointsmb.com

-> So if you’re limiting yourself to strategic partners who can bring something besides cash to the table, then you’re looking at a smaller number of partners. If you can’t make the deal worth it to that small number of investors, then you don’t have a deal.

Typically, PE firms aren’t in the business of holding assets for years and years. It’s more common for an investor to come in, quickly grow revenues (or slash expenses, or both), and then try to flip that asset. If you don’t have direct influence on how the organization operates, it’s much harder to drive up profitability enough to quickly sell. The NFL doesn’t allow these institutional investors to make decisions…and it’s hard to imagine public universities would be willing to grant substantially more flexibility.

After all…nobody wants to get blamed for letting Mega Capital Partners liquidate the women’s soccer program. <-

 

[huskymedic]

 

[UConnTrumbull]

Interesting point in article:
Elevate has existing relationships with the ACC and Big East

 

[Drew]

 

[Kolumbo]

A couple of programs desperately trying to get into the P2? The Texas Permanent School Fund?

"Elevate is set to announce the creation of the Collegiate Investment Initiative, a $500M initiative backed by PE firm Velocity Capital Management and the Texas Permanent School Fund, Sports Business Journal has learned."

Elevate Opens $500M College Sports Fund with Texas PSF, Velocity

Sports agency Elevate launches a $500 million investment fund for college sports, backed by the Texas Permanent School Fund and Velocity Capital.

www.sportico.com

Velocity, launched less than three years ago, is owned by cofounder David Abrams and Indonesian billionaire Robert Budi Hartono, according to a December regulatory disclosure. It had $257 million in assets as of that month.

The Texas Permanent School Fund is one of the nation’s largest endowments, with more than $57 billion in assets. It’s managed for the benefit of grade schools and high schools in the state of Texas.

 

[nelsonmuntz]

This sounds like a debt fund for capital investments. The first true equity investment will be interesting.

 

[Drew]

 

[Drew]

 

[Kolumbo]

Interesting

 

[huskymedic]

Sun Belt schools gathering information on private capital

Editor's Note: This is the first in a series of stories on the possibility of private equity investments into college sports, including what it might mean for James Madison and

www.dnronline.com

 

[huskymedic]

Sun Belt schools gathering information on private capital

Editor's Note: This is the first in a series of stories on the possibility of private equity investments into college sports, including what it might mean for James Madison and

www.dnronline.com

 

[nelsonmuntz]

I have not seen an analysis of how a private equity investment into college athletics would work that doesn't feel like the logic of the underpants gnomes in South Park.

 

[huskymedic]

 

[ZooCougar]

Nobody like Texas or the Big 10 needs PE. They already have the big money, they have tech, hollywood and the big money on the coasts.

Actually this is where I think the Big 10 will begin show real primacy over the SEC soon. The SEC has car dealership money. The Big 10 has Oracle level money.

Texas is kind of the exception in SEC. Austin is a total outlier.

 

[huskymedic]

 

[Fishy]

I am begging the Big Ten to do this.

Reading the quotes, ("we're not selling anything"), it's lambs to the slaughter.

The only downside is that when the bills come due, somehow, we're gonna have to pay it for them.

 

[Rufus]

If I understand it correctly, the investor is paying for a share of future B1G revenue. So the B1G gets all this money upfront, in exchange, B1G revenues will be split 20 ways ---- 18 shares to each school, 1 share to the conference itself, and 1 share to this outside investor. And new revenue streams will be created that currently do not exist, such as sponsor patches on team uniforms, but the sponsors would have to pay to sponsor on all 18 team uniforms and can't pick and choose who they want. Sounds like they are going to leverage the B1G brand to increase revenue for all members. However, it also said these new revenues will not be shared equally between the 18 schools, so the bigger brands will get more money. This could be a way to keep all media rights revenues split evenly like is tradition, while giving the bigger brands more of the pie through these new revenue streams.

This sounds much better than the original concept of private equity entering college sports that was talked about in the past. Having said that, I still don't feel comfortable with any investors entering college sports.

This will help the B1G separate itself from the other conferences because no other conference can generate the revenue the B1G can. The SEC can keep it close if it goes a similar route. The ACC and Big 12 will fall further behind.