If any of you smart guys read this

[thatsbaseball]

please tell me what it says

Wall Street Hits the Locker Room

Private equity firms are maneuvering to invest in college athletes, their schools, and the conferences they play in. The deals could add risk to the whole system.

prospect.org

 

[HailStout]

All I know is that when equity firms get involved it always works out wonderfully for everybody *****

 

[horshack.sixpack]

All I know is that when equity firms get involved it always works out wonderfully for everybody *****

"Nothing will change. Trust us."

 

[dorndawg]

please tell me what it says

Wall Street Hits the Locker Room

Private equity firms are maneuvering to invest in college athletes, their schools, and the conferences they play in. The deals could add risk to the whole system.

prospect.org

Private equity = Enshittification

That's all you ever really need to know.

 

[IBleedMaroonDawg]

 

[patdog]

Basically private equity firms see a lot of money they haven’t already plundered so they’re trying to figure out a way to get it.

 

[OG Goat Holder]

I listened to a podcast about this yesterday. I don't actually see this happening. I think people WAY overvalue these athletic departments, especially on the average. Private equity might become an issue for the top 15-16 teams, once we see a split away at about 60 'power' programs. But they don't realize that the average college football fan's true passion is in the toilet, and that's what they are banking on to continue to fund this machine. Like I've said many times before, they are turning it into a TV show. Yeah, we care and will still watch, but we won't FOLLOW it like we used to.

 

[dudehead]

please tell me what it says

Wall Street Hits the Locker Room

Private equity firms are maneuvering to invest in college athletes, their schools, and the conferences they play in. The deals could add risk to the whole system.

prospect.org

PE will come in and:

1. Buy 95% of the program with a call on the other 5%;
2. Pay 70% of price up front;
3. Escrow the other 25% of price;
4. Condition the escrowed 25% on strong P&L benchmarks;
5. Leverage program assets to extract and recoup now the 70% price paid;
6. Exercise call on the last 5% if P&Ls are met;
7. Fire mid management and C-suite to cut costs;
8. Then put the program back on the market loaded with debt.

Wash, rinse, and repeat.
Wash, rinse and repeat.

 

[thatsbaseball]

PE will come in and:

1. Buy 95% of the program with a call on the other 5%;
2. Pay 70% of price up front;
3. Escrow the other 25% of price;
4. Condition the escrowed 25% on strong P&L benchmarks;
5. Leverage program assets to extract and recoup now the 70% price paid;
6. Exercise call on the last 5% if P&Ls are met;
7. Fire mid management and C-suite to cut costs;
8. Then put the program back on the market loaded with debt.

Wash, rinse, and repeat.
Wash, rinse and repeat.

So you're saying 4-5 wins regardless of what happens ? **

 

[Dawgg]

Long story short, valuations on professional sports teams have skyrocketed over the past decade, well beyond anything on Wall Street. This is due in large part to the huge media rights fees that leagues have been able to command. With some of the recent media deals that college conferences are getting, this is catching the eye of private equity firms.

The Pac-12 looked into it about 10 years ago, but none of the college presidents in the league trusted it (and none of them knew the Pac-12 would dissolve within 10 years). The Big 12 is looking into it now as a way to make up for the money they're going to lose when revenue sharing begins and close the gap with the SEC & Big Ten.

It gives the Big 12 an immediate windfall and gives the private equity firm an asset with the potential for a higher than average return. (Not saying it’s a good idea, just that it’s the idea.)

 

[Dawgg]

I listened to a podcast about this yesterday. I don't actually see this happening. I think people WAY overvalue these athletic departments, especially on the average. Private equity might become an issue for the top 15-16 teams, once we see a split away at about 60 'power' programs. But they don't realize that the average college football fan's true passion is in the toilet, and that's what they are banking on to continue to fund this machine. Like I've said many times before, they are turning it into a TV show. Yeah, we care and will still watch, but we won't FOLLOW it like we used to.

I don’t think the SEC or Big Ten touch private equity. They’re already profitable alone. This would be something like the Big 12, ACC, the American, or maybe the Pac/MWC.

 

[patdog]

I don’t think the SEC or Big Ten touch private equity. They’re already profitable alone. This would be something like the Big 12, ACC, the American, or maybe the Pac/MWC.

Anyone who gets in bed with those guys will regret it 10 years down the road.

 

[patdog]

Long story short, valuations on professional sports teams have skyrocketed over the past decade, well beyond anything on Wall Street. This is due in large part to the huge media rights fees that leagues have been able to command. With some of the recent media deals that college conferences are getting, this is catching the eye of private equity firms.

The Pac-12 looked into it about 10 years ago, but none of the college presidents in the league trusted it (and none of them knew the Pac-12 would dissolve within 10 years). The Big 12 is looking into it now as a way to make up for the money they're going to lose when revenue sharing begins and close the gap with the SEC & Big Ten.

It gives the Big 12 an immediate windfall and gives the private equity firm an asset with the potential for a higher than average return. (Not saying it’s a good idea, just that it’s the idea.)

FSU was also looking at it a couple of years ago to try to raise the money to buy out of the grant of rights. Apparently, after looking at the PE deals they were offered, they decided the GOR wasn’t the worst deal they could have.

 

[OG Goat Holder]

I don’t think the SEC or Big Ten touch private equity. They’re already profitable alone. This would be something like the Big 12, ACC, the American, or maybe the Pac/MWC.

You’ve been a few steps ahead of me on this whole deal, so I’m going with what you say. I don’t understand PE, and that’s the main thing. I figure the power teams will still be the ones who care, so where PE comes into that, I have no idea.

 

[Dawgg]

Anyone who gets in bed with those guys will regret it 10 years down the road.

Oh, I agree, but I see where it looks attractive in the short term to somebody like the Big 12.

Let's say the firm is willing to put up the money to get FSU and Clemson and maybe even Miami out of their grant of rights in exchange for a 7 year membership in the Big 12 and put up enough money to meet or beat their annual ACC revenue for the next 7 years. Well, the ACC can continue a protracted and expensive legal battle with some teams that don't want to be there or they could take a cash settlement put up by the private equity firm. Suddenly, prestige-wise, the Big 12 just upgraded and put themselves into the clear number 3 spot because unequivocally, they have shown they have the ability to poach from the ACC, plus they took their two or three biggest football brands (which would almost immediately become the 3 biggest football brands in the Big 12). Now, when the next round of media rights negotiations come around for the Big 12, theoretically, they're going to be a lot more valuable. Now, "how much more valuable?" is the question. Is it enough to make each Big 12 member more money while also feeding the private equity firm? Would it be worth it to lose a certain level of autonomy within the conference? I don't know.

 

[Dawgg]

FSU was also looking at it a couple of years ago to try to raise the money to buy out of the grant of rights. Apparently, after looking at the PE deals they were offered, they decided the GOR wasn’t the worst deal they could have.

Oh, see I've only read about it being looked at from a conference level, but man... individual programs looking at private equity seems like it will be a crapshow for everybody involved.

 

[Dawgg]

You’ve been a few steps ahead of me on this whole deal, so I’m going with what you say. I don’t understand PE, and that’s the main thing. I figure the power teams will still be the ones who care, so where PE comes into that, I have no idea.

Think of it like any other private investor into an asset, but it's a faceless organization instead of a single person. They plan on purchasing a portion of the business, then take that portion and sell it for a profit some years later or collect some sort of dividend (which is where they're really pillaging their investments by plundering their profits or forcing the company to assume a ton of debt). In pro sports leagues, there's been a hard cap on how much of a team private equity can own, like 30%, which I think is largely to protect teams from getting pillaged and left for dead. The NFL currently doesn't allow private equity ownership, but some people believe that will change.

For colleges and conferences, I think it's really going to be the guys desperate to stay afloat or think they're a few key pieces away from taking the next step. At a conference level, that would be any conference not called the Big Ten or SEC. Now, at an individual institution level, that could be just about anybody outside Alabama, Ohio State, Notre Dame, Texas, etc., but I would suspect that you'll see some legislation within the SEC and Big Ten that forbids members from taking private equity investments or "donations" in return for any sort of ownership or decision-making stake.

 

[patdog]

Oh, see I've only read about it being looked at from a conference level, but man... individual programs looking at private equity seems like it will be a crapshow for everybody involved.

I’m not even sure it would be legal for public universities. Of course that could vary by state.

 

[patdog]

Oh, I agree, but I see where it looks attractive in the short term to somebody like the Big 12.

Let's say the firm is willing to put up the money to get FSU and Clemson and maybe even Miami out of their grant of rights in exchange for a 7 year membership in the Big 12 and put up enough money to meet or beat their annual ACC revenue for the next 7 years. Well, the ACC can continue a protracted and expensive legal battle with some teams that don't want to be there or they could take a cash settlement put up by the private equity firm. Suddenly, prestige-wise, the Big 12 just upgraded and put themselves into the clear number 3 spot because unequivocally, they have shown they have the ability to poach from the ACC, plus they took their two or three biggest football brands (which would almost immediately become the 3 biggest football brands in the Big 12). Now, when the next round of media rights negotiations come around for the Big 12, theoretically, they're going to be a lot more valuable. Now, "how much more valuable?" is the question. Is it enough to make each Big 12 member more money while also feeding the private equity firm? Would it be worth it to lose a certain level of autonomy within the conference? I don't know.

PE would demand a lot more than a 7-year commitment. They’d own you forever. Big 12 has made a lot of good decisions since the SEC took Texas & Oklahoma. Their best option is to stay on the course they’re on. They’ll be the only junior partner to the SEC & Big 10.

 

[dudehead]

So you're saying 4-5 wins regardless of what happens ? **

No