Is physical training ready for college sports?

Is physical training ready for college sports?

After establishing a foothold in the major leagues, private equity is moving into college sports — albeit slowly.

It’s not surprising. Schools in the Big Five athletic conferences generate more than $8 billion in annual revenue from their programs, according to private equity firm Arctos Partners. That number puts them just below the National Basketball Association and Major League Baseball.

“I expect a growing interest from private equity in college sports, especially college football,” said Will Mao, senior vice president of media rights consulting for Octagon, a sports and entertainment agency. Investing in college sports may not be a bad shot, however.


PE firms have the potential to run afoul of for-profit colleges and universities. Managers will have to deal with controversial issues regarding student-athletes, including whether they will be employees and marketing rights. (Dartmouth College men’s basketball players voted earlier this month to unionize.)

Shifting sports conferences, including the Big Ten and Pac-12, could lead to financial uncertainty. Managers may even run into problems under Title IX rules as they pursue football and men’s basketball, the two most popular college sports.

Private equity firms are looking at everything from television rights and product endorsements for athletes to private-public partnerships and sports infrastructure. Clearlake Capital Group, Charlesbank Capital Partners and Fortress Investment Group have invested in Learfield, and Access Holdings has bought a stake in Payfly Sports. Learfield and Payfly are two of the largest negotiators for television rights packages for college sports.

Advantage Capital, Serra Ventures and Flyover Capital have invested in Opendorse, a platform that facilitates college athlete endorsements.

When it comes to television rights for college sports, a lot of money is on the table. The Big Ten has an $8 billion, seven-year broadcast deal with Fox, CBS and NBC to televise some games. Private equity managers may ultimately want to invest directly in the colleges’ broadcast rights revenue streams.

Private-public partnerships for investment in infrastructure and facilities may be easier than direct investment in college sports. Steve Hank, executive vice president of college sports for Affinaquest, which helps colleges manage their data, points to a 2022 deal at the University of Texas at Austin. as a successful example.

The university has partnered with Oak View Group, a sports real estate manager, and Live Nation Entertainment. Oak View developed — for free — and operates the $380 million Moody Center at the University of Texas at Austin. Live Nation helps with the entertainment. “I think we’re going to see a lot more public-private partnerships like this,” says Hank.

Infrastructure investment may be the most stable avenue for private equity investors in college sports.

“The critical question is how institutional capital can invest in college athletics without creating further destabilization in an already fragile ecosystem,” said Ian Charles, co-founder of Arctos, which has invested in several NBA teams. “Successful structured transactions can fund specific growth initiatives such as renovating a stadium or upgrading local infrastructure, which are supported by agreed revenue streams such as ticketing, sponsorship and television rights.”

Meanwhile, a Florida State University development last year caught the attention of sports investors. The school has brought in JPMorgan Chase to see how the school’s athletic department can raise money from institutional investors, including through private equity, according to sports business publication Sportico.

FSU, which is looking to leave the Atlantic Coast Conference, could use the money to fund the $120 million exit fee. Sportico reported in January that FSU officials had consulted with Sixth Street and Arctos about investing in the school’s athletic department, according to emails released by the school.

Schools will increasingly have to turn to private capital when they have big cash needs like those of the former USSR, Hank says. In return, investors could benefit from the schools’ sports revenue streams, such as broadcast rights and sponsorships.

And what about the possibility of direct private investment in sports departments or individual teams? Gerry Cardinale, founder of RedBird Capital Partners, raised eyebrows in January when he said New York Times that the University of Michigan football team could be worth $1.5 billion. But investing in sports departments and teams is highly unlikely, experts say.

It would be difficult to structure deals given issues such as the non-profit orientation of the schools. “Every investment must be accounted for [the] existing capital structure and susceptibility to potential external factors such as conference realignment or a student-athlete employee status decision,” notes Charles of Arctos.

Higher education’s nonprofit status can make investments less risky than private-sector holdings, says Steve Patterson, president of Pro Sports Consulting. But schools typically aren’t trying to maximize profits — and that’s a problem for investors.

Also, colleges may not be receptive to private capital at all after all.

“Athletic faculties are still the front of academic institutions,” explains Hank. “They bring communities together like nothing else. You don’t see 90,000 people at an academic lecture. Departments do not want to cede this role.

Still, the potential may simply be too great to ignore, says Octagon’s Mao: “If someone can successfully navigate the commercial, legislative and political hurdles to restructure this investment ecosystem, there will be a gold rush.” .”

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