Private equity\u2019s entry into college sports has been more of a tiptoe than a march, and as Week 0 of the college football season begins, PE players are still on the hunt for the right opportunities.<\/p>\n
College sports is supposed to be the new frontier<\/a> for private equity, and there\u2019s more of a need for capital than ever, given that the new House v. NCAA settlement allows schools to share millions in revenue with players and offer extra scholarships. Yet it remains unclear exactly what form PE investment will take\u2014and whether it will include any traditional equity at all. It\u2019s very different from the major North American pro leagues, all of which allow some form of private-equity ownership after the NFL approved limited PE investment<\/a> last summer.<\/p>\n David Gringer, a partner at law firm WilmerHale who focuses on antitrust issues in higher education and sports, tells Front Office Sports that part of the reason for private equity\u2019s slow walk into college sports is that the \u201cfinances don\u2019t make the same degree of sense\u201d as they do on the pro side.<\/p>\n \u201cIt\u2019s not like you\u2019re going to buy 10% of the University of Alabama,\u201d he says.<\/p>\n So far, the clearest path for investors has been lending. Most major PE firms now have credit arms, and those deals don\u2019t create ownership stakes like in the NFL, where firms can buy in and later sell out. Instead, they\u2019re structured as loans: investors provide financing, collect interest, and get repaid.\u00a0<\/p>\n The arrangements tend to carry less risk and fewer restrictions than equity, but also less reward, since lenders don\u2019t share in the big upside of college sports\u2019 commercial growth. Private-credit deals aren\u2019t private equity\u2019s Trojan horse; they are simply the sort of agreement that both sides\u2014the investment firms and the schools\u2014are most comfortable with for now.<\/p>\n We\u2019ve already seen a version of this type of deal: A $500 million initiative<\/a> from sports business consultancy Elevate, announced in June, brought institutional capital directly into college sports, and a number of deals have already been reached. The money came from PE firm Velocity Capital Management and the Texas Permanent School Fund. The initiative uses private-credit agreements\u2014loans on a deal-by-deal basis with negotiated repayment terms.<\/p>\n At the time of its announcement, Elevate said it had already closed on eight-figure deals with two unidentified Power 4 schools, and up to six more were expected by football season.<\/p>\n Jonathan Marks, chief business officer for college at Elevate, told FOS in June that the goal for the initiative was to maximize revenue, which could mean using the institutional capital to upgrade stadiums and arenas to sell more premium seating, or converting little-used areas in them into club spaces for which schools can sell memberships.<\/p>\n \u201cOne reason college sports have become so attractive is the recurring cash flows,\u201d says Josh Harlan, managing partner of Harlan Capital Partners. \u201cMedia rights, sponsorship, naming rights\u2014these are multi-year contractual revenues.\u201d<\/p>\n Harlan notes private credit is particularly efficient in smaller deals that might be overlooked by equity investors chasing larger opportunities. For now, this makes credit the simplest way for PE to gain exposure without taking on governance or control issues.<\/p>\n When it comes to the \u201cequity\u201d portion of private equity, investment in college sports has remained tentative. Theoretically, funds could invest in corporate structures holding revenue-generating athletic operations\u2014something Clemson University<\/a> and the University of Kentucky<\/a> have both done\u2014although questions remain about how well PE would mesh with the mission of higher education.<\/p>\n \u201cPE can add a ton of value. It\u2019s not just capital, it\u2019s expertise,\u201d says Brian Anderson, who co-leads the sports practice at law firm Sheppard Mullin. \u201cThese funds often have portfolios of companies they can leverage to help schools commercialize stadiums, [secure] naming rights, sponsorships, fan engagement\u2014all the things pro teams already do.\u201d<\/p>\n But, he cautioned, \u201cPE likes control. They want governance rights, board seats, influence over how an entity operates. That\u2019s where you can see conflict in college sports, especially with public institutions that have an educational mission.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"Private equity\u2019s entry into college sports has been more of a tiptoe than a march, and as Week…\n","protected":false},"author":3,"featured_media":168701,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[43],"tags":[1318,1317,1315,1316,62,67,132,68],"class_list":{"0":"post-168700","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-ncaa-football","8":"tag-football","9":"tag-ncaa","10":"tag-ncaa-football","11":"tag-ncaafootball","12":"tag-sports","13":"tag-united-states","14":"tag-unitedstates","15":"tag-us"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@us\/115077159690778724","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/168700","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/comments?post=168700"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/168700\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media\/168701"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media?parent=168700"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/categories?post=168700"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/tags?post=168700"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}