Smells of desperation. If you can’t beat them, just find money.
B1G considering $2B private equity deal
- Thread starter BamaNation
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The irony is this actually probably will do more for non-revenue sports than it will for NIL.
I was kind of dumbfounded by this whole thing at first until I considered it a bit. Firstly, I don't get the valuations, that's dumb. Unless I consider the fact that despite athletic departments not making a profit, they do still generate revenue. So setting that aside, my understanding of the limitations of both Title IX and the NIL funding from schools means that this won't change things at all for the top programs, which is probably why they seemed to be opposed. The big schools are going to max out their NIL funding much more easily.
For instance, Ohio State made 250 million in revenue in 2023 from what I understand. I would expect about 150 million of that to be from the football program. Maryland made 107 million while UCLA made 103 million. Those numbers should come up some, but that shows the gap they are dealing with. In UCLA's case they are dealing with a estimated increased in 10 million annually for travel along with the new 20 million annual NIL allotment. That's going to be a big chunk of their budget.
The issue is as far as I'm aware the Big 10 isn't busy dropping sports, so their response to increased travel and NIL cost (which carry with it additional Title IX burdens) is to basically go around looking for money. That just speaks to the poor position they find themselves in. The 100 million will be gone swiftly, but that fee they'll have to pay will go on forever.
Edit: Also if you want to add a weird wrinkle to it, the fund is the University of California pension system, which includes UCLA but oddly enough California which is in the ACC. So an ACC college is essentially investing in the Big 10, weird stuff.
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USC & Meechagan throw a wrench in...
www.espn.com
Sources: USC, U-M question Big Ten capital deal
Trustees at Michigan and USC questioned the Big Ten's proposed $2B-plus private capital deal, with one sticking point during a Tuesday call being it doesn't address the root issue -- soaring costs -- that has made the need for cash so imperative.
www.espn.com
It has not improved the state of medical care in this country by and large.
I have yet to see a person/group who are solely interested in profit make any organization, system, company, group, school, country, city, county, church better in any meaningful way. On the contrary, mostly they suck the resources out of every organization they invest in and often leave those organizations either in desperate straights or completely ruined/shut down.
A short list from the internet of companies that have been bankrupted by Private Equity groups. Many of these could and maybe should have been saved. Best of luck to the Big10 if they think they are immune to the disastrous profiteering of private equity.
- A&P (grocery chain)[1]
- At Home[2]
- Big Lots[3]
- Brookstone[4]
- Claire's[5]
- Envision Healthcare[6]
- Friendly's[1]
- GenesisCare[6]
- Genesis HealthCare[7]
- Hearthside Food Solutions - aka "H-Food Holdings LLC"[3][8]
- Hooters[9]
- Hudson's Bay Company[10]
- Instant Brands (maker of Instant Pot and Pyrex)[11]
- Joann[12]
- Kmart[13]
- On the Border Mexican Grill & Cantina[14]
- Party City[15]
- Payless Shoe Source[4]
- Prospect Medical Holdings[16]
- RadioShack[4]
- Red Lobster[11]
- RJR Nabisco[17]
- Sears[4]
- Sports Authority[4]
- Steward Health Care[18]
- TGI Fridays[19]
- Thames Water[11]
- The Limited[4]
- Toys R Us[4]
- True Value (hardware retailer)[20]
- TWA[21]
- Vice Media[22]
- Wellpath[3]
I believe you've hit a nail on the head.
Bringing in the west coast teams. For football, it's one thing. But for all of the non-revenue sports and the increased travel costs it has brought to the table...
I agree with you that the SEC needs to sit tight and let this play out.
Make that Greg Sankey says hold my beer. Generally not impressed with his tenure.
He seems to be the one resisting. Not sure if he'll be forced out and his successor takes the kick-back (did I say that?) to do it.
Given the nature of an athletic conference, I'm not sure the PE group is looking for increased profits through cost-cutting and other standard PE moves when they buy an interest in more typical operating companies. I think they're looking for increases in conference cash flows that would in turn increase the value of their 5% share.
There are a couple of interesting points to speculate on, though. Starting with hiring and firing of coaches.
As in, say a school wants to fire its coach and is willing to pay a $50 million buyout to do so. Does the PE group have any say over that? In the extreme, they could claim that their 5% share is being unnecessarily diluted by the $50 million reduction in cash flows.
Alternatively, say the school has a booster group that is willing to pony up the buyout. Does the PE group say, "That's fine....so long as we get our 5% share of the cash."
Conversely, if a school wants to sign a $100 million extension with a coach with an unproven track record, can PE raise their hand and say, "Not so fast, my friend."?
What about the hiring or firing of the conference commissioner? What about school revenue that doesn't go through the conference -- like licensing fees on school gear and other merch? Does PE get a cut of that?
Those things are pretty obvious, and they'll probably hash them out upfront. Still, the possibilities are endless and not entirely foreseeable. Eventually, something's going to come up that the B1G didn't anticipate, and PE will have them where it hurts.
More interesting to me, though, is when PE wants to sell -- and at some point they will want to cash in on some or all of their profits -- what limitations are there on who they can sell to?
Could they, for example, sell to Fan Duel? How about Tinder? Just for laughs, imagine if they sold to another PE fund controlled by the SEC.
PE usually invests with the expectation of a 20% average annual ROI. Granted, that doesn't always materialize. But it's their goal, they can be pretty aggressive when that goal isn't being met, and they have plenty of money for lawyers. Shoot, a lot of the PE principals are lawyers. They will bring an M1A2 Abrams MBT to any gunfight, and they know how to fight dirty.
Very, very schools few make a profit on anything other than football and men's basketball. Even with those two sports footing the bills, the significant majority still lose money on a net basis. So I can see where, if you're not Michigan or Ohio State or maybe USCw, you might be sorely tempted by a $100 million +/- ex cathedra cash injection.
But it's a one-time shot. Given how universities and conferences manage finances and contracts it probably won't last long, and they'll be dealing with PE forever. That will be some incredibly expensive money.
There are a couple of interesting points to speculate on, though. Starting with hiring and firing of coaches.
As in, say a school wants to fire its coach and is willing to pay a $50 million buyout to do so. Does the PE group have any say over that? In the extreme, they could claim that their 5% share is being unnecessarily diluted by the $50 million reduction in cash flows.
Alternatively, say the school has a booster group that is willing to pony up the buyout. Does the PE group say, "That's fine....so long as we get our 5% share of the cash."
Conversely, if a school wants to sign a $100 million extension with a coach with an unproven track record, can PE raise their hand and say, "Not so fast, my friend."?
What about the hiring or firing of the conference commissioner? What about school revenue that doesn't go through the conference -- like licensing fees on school gear and other merch? Does PE get a cut of that?
Those things are pretty obvious, and they'll probably hash them out upfront. Still, the possibilities are endless and not entirely foreseeable. Eventually, something's going to come up that the B1G didn't anticipate, and PE will have them where it hurts.
More interesting to me, though, is when PE wants to sell -- and at some point they will want to cash in on some or all of their profits -- what limitations are there on who they can sell to?
Could they, for example, sell to Fan Duel? How about Tinder? Just for laughs, imagine if they sold to another PE fund controlled by the SEC.
PE usually invests with the expectation of a 20% average annual ROI. Granted, that doesn't always materialize. But it's their goal, they can be pretty aggressive when that goal isn't being met, and they have plenty of money for lawyers. Shoot, a lot of the PE principals are lawyers. They will bring an M1A2 Abrams MBT to any gunfight, and they know how to fight dirty.
Very, very schools few make a profit on anything other than football and men's basketball. Even with those two sports footing the bills, the significant majority still lose money on a net basis. So I can see where, if you're not Michigan or Ohio State or maybe USCw, you might be sorely tempted by a $100 million +/- ex cathedra cash injection.
But it's a one-time shot. Given how universities and conferences manage finances and contracts it probably won't last long, and they'll be dealing with PE forever. That will be some incredibly expensive money.
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When I read the title of this thread I was thinking you were talking about our member and friend B1GTide -
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