There is a mad rush for money in college sports.
Between several billion dollars TV dealsthe institution of transfer portal and the escalation of NIL – name, image and likeness – deals for athletes, college sports programs, especially football, have never looked so lucrative.
Now, private equity and venture capital firms such as College sports tomorrow, Destroy the capital And Collegiate Athletics Solutions are seeking to join, and schools with the most valuable sports programs be in the best position to capitalize.
At the very top of the rankings are schools that excel on the field. According to people familiar with economics, football generates about 75% of revenue for sports programs at typical Power 4 schools, which include the ACC, Big Ten, Big 12 and SEC conferences.
This year’s expanded, 12-team College Football Playoff will begin Dec. 20. ESPN’s parent company, Disney, in March signed a six-year extension for rights to the games through 2031. The deal is worth an average of $1.3 billion a year, more than double that. the previous agreement, according to media reports.
Since the SEC dominated Based on college football ratings, experts CNBC spoke with believe the conference will surpass the Big Ten with the richest television deal when its current deal expires in 2033-34.
“The SEC is almost a super-conference and, with its football teams, has the most valuable content in college sports,” said Irwin Kishner, a partner in Herrick Feinstein’s corporate department and co-chair of his group. of sports law.
Of course, private equity is not a new concept in sports. In North America, Major League Baseball, the National Basketball Association, the National Hockey League and Major League Soccer have allowed private equity firms to hold limited partnership interests for several years. The National Football League voted in August allow certain private equity investors to take minority stakes.
Attention now turns to college programs.
“As a business, college sports, especially football, is doing well and continues to grow, which is why investors are turning to this asset class,” said Greg Careyglobal co-head of sports franchising in investment banking at Goldman Sachs.
Institutional investors such as Collegiate Athletic Solutions – a proposal from RedBird Capital Partners and Weatherford Capital – would provide capital to help grow a school’s athletic revenue. In exchange, private equity firms would receive a cut.
Some also believe that the business acumen of outside investors could push profits even higher.
“There is a big opportunity to increase EBITDA (earnings before interest, taxes, depreciation and amortization) in college athletics because there are simple ways to maintain quality while reducing expenses,” Kishner said.
And schools are encouraged to call on external investors.
On the one hand, $2.8 billion regulation between the NCAA and the five largest conferences would award compensation to 14,000 students who were previously barred from earning money. A hearing to give final approval to the deal is expected to take place in April, but the schools are already in the process of doing so. plan ahead.
And even among the largest conferences, a gap in television revenue could lead to large competitive and economic disparities.
“Schools in the ACC and Big 12, as well as those at the bottom of the SEC and Big Ten, which generate less local business revenue, will have no choice but to tap private capital and operational expertise, or they are virtually guaranteed to be excluded from the upper echelons of competition in the future,” said Jason Belzer, publisher of Sports DirectorUwhich has advised universities on NIL transactions and now does the same for athletic departments seeking private equity.
Certainly, the move to private equity is complicated and could still take months. Florida State was would have I’ve been working with JPMorgan Chase for about a year trying to raise institutional capital.
Still, bankers and lawyers interviewed by CNBC believe private equity will eventually invest in college sports programs.