College sports have a mad dash for cash.
Among multibillion-dollar television deals, transfer portal institutions and NIL — name, image and likeness — deals for athletes, college athletic programs, especially football, have never looked more lucrative.
Now private equity and venture capital enterprises like College Sports Tomorrow, Smash Capital and Collegiate Athletics Solutions are looking to buy, and schools with the most valuable athletic programs sit in the best positions for capital.
At the very top of the heap are the schools that excel on the gridiron. According to people familiar with the economics, football generates about 75% of athletic program revenue 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 begins Dec. 20. ESPN parent Disney in March signed a six-year extension for the rights to the games through 2031. The deal is worth an average of $1.3 billion annually, more than double previous deals, according to media reports.
With the SEC dominating college football ratings, CNBC experts believe the conference will surpass the Big Ten with the richest television contract when the current deal expires in 2033-34.
“The SEC is almost a super-conference and, because of its football teams, owns the most valuable content in college sports,” said Irwin Kishner, a partner in Herrick Feinstein’s corporate department and co-chair of its sports law group.
Private equity, of course, is not a new concept for 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 own limited partners for several years. The National Football League voted in August to allow select private equity investors to take minority stakes.
Now the focus is on the college program.
“As a business, college sports, particularly football, are performing well and continuing to grow, which is why investors are looking at the asset class,” said Greg Carey, global co-head of sports franchises in investment banking at Goldman Sachs.
Institutional investors such as Collegiate Athletic Solutions — an offering from Redbird Capital Partners and Weatherford Capital — will provide capital to help grow a school’s athletic revenue. In return, the private equity firms would get a cut.
There is also the belief that business expertise from outside investors can drive greater profits.
“College sports have a great opportunity to drive EBITDA (earnings before interest, taxes, depreciation and amortization) because there are easier ways to maintain quality while reducing costs,” Kishner said.
And schools have incentives to bring in outside investors.
For one, a $2.8 billion settlement between the NCAA and the five largest conferences will compensate 14,000 students who were previously barred from earning endorsement money. A hearing to give final approval of the contract is scheduled for April, but schools are already planning for it.
Even among the largest conventions, a gap in television revenue can create a major competitive and economic disparity.
“Schools in the ACC and Big 12, as well as schools at the bottom of the SEC and Big Ten that are generating less local commercial revenue, will have little choice but to accept private capital and operations expertise, or all of it. They are guaranteed to be eliminated from the top of the competition in the future. read,” said Athletic DirectorU publisher Jason Belzer, who has advised universities on NIL deals and is now doing the same for athletic departments seeking private equity.
To be sure, transitioning to private equity is complicated and can still be months off. Florida State has been working with JPMorgan Chase for about a year to raise institutional capital.
Still, bankers and attorneys interviewed by CNBC believe private equity will eventually invest in college athletic programs.
