Is a private equity venture something Bama could or should explore?

[Tideflyer]

I would quit watching/supporting CFB if/when this becomes the norm. A lot more outdoor activities for me.

Well, we wouldn’t be giving up true COLLEGE football anyway.

 

[Power Eye]

That’ll probably do it for me. I’m 78 years old and will in all likelihood shuffle off this mortal coil not giving a damn about something that for most of my years on the rock was a highly anticipated part of every fall season. Living in the EST zone, I’m already hitting the sack at half time, something I would have never done even 3 years ago! More and more I’m just opting to watch highlights the next day. The connection of the team with the University just isn’t there for me anymore.

Unfortunately, this seems to be feelings of many I would call the Bryant generation. My parents are around the same age and simply just don't have the excitement that they did even five years ago. I would chalk it up to getting older and priorities shifting, but their parents and others in that same generation were passionate fans until the end.

The fan support will always be there because it's deeply rooted in most of us to the point that we can't help ourselves. We are definitely frustrated with the dramatic changes in the sport, but we begrudgingly still follow our team. Any PE or outside investor that comes along probably is aware that there will be a large contingency of the fan base that gets turned off by their involvement, but they will banking on the fact that that large, die hard fan base we have will still provide its support, and more importantly, its money.

I do wonder if the bigger, more financially supported schools, will figure out a way to mirror PE involvement without having to go that route.

 

[Cruiser]

Well; it has started
"The school announced Tuesday the formation of Utah Brands & Entertainment LLC, which will be owned by the university's foundation. It's being touted as a way to build the school's brand and enhance the athletic programs. The new company could generate around $500 million in capital, according to Yahoo Sports.

In a joint message, school president Taylor Randall and athletic director Mark Harlan spelled out the groundwork, saying the university will transfer some of its revenue-generating operations from athletics and auxiliary services to Utah Brands & Entertainment."
"The school added it plans to partner with prominent university supporters along with Otro Capital, a private equity firm with a sports and entertainment background."

Portfolio – Otro Capital

otrocapital.com

A Private Equity firm has two goals for the holdings in their portfolio; improve return on investment and grow the holding so it can be sold for a substantial profit.

 

[BamaNation]

Several observations:
1) Hard to tell right now whether, long-term, this is good or bad. PE - in and of itself - is not bad regardless of what the talking heads try to make you think. So much depends on the PE managers and the managers in the org being invested in. Same is true here. If there's a bad AD office the outcome will not be good. Will the PE get control over hiring new AD / officials? What are the limits of the PE being involved? How does this affect the AD office relationship with the PTB & the Univ. president/board?

2) I've read PE in college sports described as a payday loan. This may be true. Get the money and use it today to be successful in the near-term. What happens longer term?

3) There should be NO PE money accepted until there is structure put in place that we've been talking about for the last 3 years.

4) There HAS to be congressional action to eliminate the risk of collusion charges being brought, creation of a CFB Commissioner to oversee the structure, and a limit on NIL & pay-to-play. Otherwise, PE money will just be equivalent of giving loads of money to someone who's starving, and they go out and blow it on bling-bling and in Vegas.

5) NIL has given the wanna-bes with deep pockets the ability to level up and get players to come to them for paydays when, previously, top players would have never given these wanna-bes a look. Think: Herschel Walker going to play for the NJ Generals instead of the NFL. Benjamins & playing time immediately matter these days more than tradition or winning.

 

[arthurdawg]

Well, we wouldn’t be giving up true COLLEGE football anyway.

There is Mr. D3 and a Mr. FCS on the line for you, something about seeing the quality of ball they play for the love of the game?

 

[CB4]

I have been involved in several PE deals during my career. They make some businesses more profitable because that is what they ruthlessly focus on, quarter by quarter. Long term for them is 9 months from now.

Do they make businesses “better?” Not in my experience. And they don't really care whom they antagonize in the relentless pursuit of cash — customers, vendors, long-term employees, other shareholders, business allies, etc. If profits don’t increase at levels they like, things turn ugly fast. In short, they tend to be bullies.

Will it ultimately happen? Probably. Will it be “good” for the athletic department, fans, players, coaches, or my alma mater? Probably not.

I spent the last 12 years of my career in a healthcare company run by PE. The first 10 years were okay because the PE firm was investing in multiple healthcare businesses. They, for the most part, trusted our corporate leadership. Demanding? Yes. Fair in terms of goals and expectations? Absolutely.

That changed when the company was sold to PE outside of the healthcare industry. Within 6 months, 75% of the corporate leadership team left. The company now is a mess. Any of the “old guard” with more than 10 years of experience with company was either pushed out the door or work life was made so miserable they left of their own accord (me included).

The company is now run by “Ivy league -Wharton Business School type number crunchers” that can whip out spread sheets and dazzle you on a Team call, but have not a clue how medical practices are run and how physicians take care of patients. The handful of people in executive director/VP positions that remain hate it.

 

[Power Eye]

3) There should be NO PE money accepted until there is structure put in place that we've been talking about for the last 3 years.

4) There HAS to be congressional action to eliminate the risk of collusion charges being brought, creation of a CFB Commissioner to oversee the structure, and a limit on NIL & pay-to-play. Otherwise, PE money will just be equivalent of giving loads of money to someone who's starving, and they go out and blow it on bling-bling and in Vegas.

100% correct on this. It's the wild west right now in college football and there is absolutely no one in charge, and that's not being hyperbolic. I was listening to Kirk Herbstreit and Joey Galloway's podcast the other day and they were talking with Mario Cristobal about the college football calendar, and asking him "who is in charge of making changes to the college football calendar?" None of them knew. These are three relatively prominent figures involved in college football and none of them know who would be able to initiate any changes to the college football calendar. Forget about the most basic aspect of all of this, which is making the sport better. The dollars involved are getting way too big for this to go on with no oversight, and I do feel like that will change very soon.

 

[davefrat]

Seems like some kind of NFL-style salary cap is needed, and along with it, a very serious and strong enforcement mechanism to punish the inevitable cheating that will go on. Perhaps some kind of contractual controls that trigger automatic penalties for violations sort of like liquidated damages or something like that.

The entire process is just a total mess and no one is at the wheel.

 

[RdunawayTX]

That’ll probably do it for me. I’m 78 years old and will in all likelihood shuffle off this mortal coil not giving a damn about something that for most of my years on the rock was a highly anticipated part of every fall season. Living in the EST zone, I’m already hitting the sack at half time, something I would have never done even 3 years ago! More and more I’m just opting to watch highlights the next day. The connection of the team with the University just isn’t there for me anymore.

I slept through the first half of GA/AL. I'm glad I did. Lol.

ETA: I had a private equity firm purchase the large pharmaceutical company I worked for in the early 90s. The day after they bought them, they laid off 25% of their workforce, one of which was me. The PE firm cared about one thing. Squeezing every last drop of money they could from the company their bought. It was terrible.

Selling your soul to the devil eventually has consequences.

 

[CrimsonNagus]

Maybe PEs can be good, but in practice, they are horrible for consumers. Every restaurant I know that has been bought out by PE has had the same thing happen. Prices shoot up, portion sizes decrease, and the food quality takes a nose dive.

PE only exists to make money, and they will squeeze every penny out of every crack to get it. I'd expect Utah fans, and any other school that goes this route, to pay a lot more for much less in the coming years. You think it is expensive now for a middle-class family to go to a CFB game, just wait until the PE wants a larger return on their investment. Don't be shocked when student sections shrink and get more expensive for the students. Those seats are too valuable to be used by college kids who have no money.

I don't see any good coming from this for the consumer/fans. But the people involved will make a killing.

 

[Tideflyer]

There is Mr. D3 and a Mr. FCS on the line for you, something about seeing the quality of ball they play for the love of the game?

Yep, those and the academies will pretty much be it.
Want to see what a PEF can do? Look up Cerberus and Remington Arms. Textbook case on how to ruin an iconic American company.

 

[denver]

Be careful what you wish for....and for unintended consequences...Ive already seen a statement that if a University wants to go after PE money, then they should be considered a private entity and be treated as such...i.e...the end of State and Federal funding. So whats good for the Athletic dept may not turn out to be good for the University overall. It shall be interesting to see how this plays out.

 

[crimsonaudio]

Several observations:
1) Hard to tell right now whether, long-term, this is good or bad. PE - in and of itself - is not bad regardless of what the talking heads try to make you think. So much depends on the PE managers and the managers in the org being invested in. Same is true here. If there's a bad AD office the outcome will not be good. Will the PE get control over hiring new AD / officials? What are the limits of the PE being involved? How does this affect the AD office relationship with the PTB & the Univ. president/board?

Fundamentally disagree here - until now, the AD has tried to operate profitably, but it's not been a necessity (some 80% of college ADs operate in the red). There will HAVE to be compromises that affect all collegiate sports for this to be a profitable investment by VCs. The desire to extract more money from the sport won't be good for it, there's no dancing around that.

Beyond that, working in an industry that's very different but is under the entertainment umbrella I can say, without caveat, that VCs have been detrimental to my industry every time they get involved. Every. Single. Time. It's ALL about the money for them, nothing else matters, and CFB has historically been about much more than the cash.

 

[UAH]

Fundamentally disagree here - until now, the AD has tried to operate profitably, but it's not been a necessity (some 80% of college ADs operate in the red). There will HAVE to be compromises that affect all collegiate sports for this to be a profitable investment by VCs. The desire to extract more money from the sport won't be good for it, there's no dancing around that.

Beyond that, working in an industry that's very different but is under the entertainment umbrella I can say, without caveat, that VCs have been detrimental to my industry every time they get involved. Every. Single. Time. It's ALL about the money for them, nothing else matters, and CFB has historically been about much more than the cash.

Having been involved in a significant private equity deal and following the business through several iterations with the last one being an IPO, I can see the challenges of involving private equity at the university level. The only value proposition I see for equity investors is a valuation proposition. Similar to the Dallas Cowboys growing in value from perhaps $100 mil. to several $ billion. The only investors that would be realistically interested would be long term investors such pension funds, country funds, and perhaps large financial institutions such as life insurance companies. Few investors are going to put in money without a management team having a seat at the table on strategic decision making, capital spending and budgeting. I can see issues around intial funding with investors putting in say 50% of the initial valuation with the remainder made up through a bond offering or similar vehicle. Regardless it is a difficult proposition for a state supported institution.

 

[Cruloc]

https://twitter.com/x/status/1998439627863076994

 

[Cruloc]

https://twitter.com/x/status/1998557684451447023

 

[davefrat]

Be careful what you wish for....and for unintended consequences...Ive already seen a statement that if a University wants to go after PE money, then they should be considered a private entity and be treated as such...i.e...the end of State and Federal funding. So whats good for the Athletic dept may not turn out to be good for the University overall. It shall be interesting to see how this plays out.

When the university hired David Matthews as president back in the 60's- 70's he quipped about wanting to give the football team a school it could be proud of.

In all fairness, the importance of college football at many places has been severely warped for a long time.