Big 12 Considering $1B in Private Equity

[cymonw1980]

The thought that any college athletics has any appeal at all in an international market is the single most absurd thing I have ever heard. If that’s the big part of the deal sign it up in a heartbeat because that PE group has no idea what they are talking about.

I don't disagree... and this seems too good to be true. That said, there is no question that BY is trying to drive additional value by increasing international exposure.

I don't know if this will work. Could end up failing miserably.

But if you are able to increase exposure and viewership of your brands internationally (especially true of WBB and MBB) and drive incremental media dollars great! if you can get $1B for them now before their value is known... even better.

 

[CascadeClone]

Here are some interesting details *IF* true. This guy has a decent track record (not perfect):

From @ MHver3 (on X):





1) Not a traditional PE deal, not a loan, but obviously, not a gift either.

2) CVC Would get:

a. unlimited access to the B12 name (?), accept where current contracts prevent
b. two board seats on the B12 conference with voting rights (assume this would be similar to a school's voting right - could be a big deal for BB only adds? not sure...)
c. Future contracts for apparel, equipment, travel, etc. would be negotiated in conjunction with CVC
d. CVC gets large stake in international media dollars when the next contract opens - BUT WOULD NOT TOUCH DOMESTIC RIGHTS
e. CVC retains ownership as long as they are solvent for a period of no less than 15 yrs (not sure if that means they would lose their stake after 15 yrs????)

Thoughts:

1) If above is true, this seems pretty reasonable for $1B in cash. However, it's important to note that PE firms do not hand out $. So, the assumption they are making is that by 2031 (next media deal) the B12 will have significant value currently untapped in the international media rights market (how will B12 international value compare to international value of b10, sec?; this will be key since we will give a "Large" cut of ours to CVC, while the sec/b10 may get full value of their international rights if they do not take any PE now).

2) It makes more sense that Yormark is pushing international games for Football and Basketball... increase exposure, secure additional Media dollars in next deal through international media rights - will it work? No idea.. if he has convinced a european PE company that the B12 is under valued to the tune of $1B (+ their required return of "x%") that is note worthy.

3) With 2 added board seats and focus on driving international value how will:

- MBB/WBB be highlighted moving forward?
- How will international exposure for all sports be driven (ISU in Ireland, BB games in Mex, etc.)?
- How will CVC view Basketball only additions like gonzaga, big east schools to drive additional international media $?

If the $1B of PE money provides opportunities for the B12 conference to increase future value beyond the payback to the PE company this could be a win/win... only time will tell. But the international expsure BY is driving makes more sense if the goal is to catch up by selling rights internationally.

My thoughts-
1. MHVer is a tool
2. If these details are true (and I am super dubious), they should sign before CVC can get out of the f***ing room. It's hard for me to believe they would only take international rights, and nothing from domestic media rights?? There's just not much in that for their $1B stake. And only 15 years worth? Hell, you could give them the 20% of domestic TV money and it would still be a good deal for the Big12, just on time value of money.

Maybe they think they can put the Big12 on the EuroOcho as a niche sport and get $50M annually out of it just for them?

I also wonder what (c) means exactly. They get a chunk of any money paid to Big12 for apparel contracts? They get a kickback from Addidas if Big12 signs up with them?

 

[WooBadger18]

My thoughts-
1. MHVer is a tool
2. If these details are true (and I am super dubious), they should sign before CVC can get out of the f***ing room. It's hard for me to believe they would only take international rights, and nothing from domestic media rights?? There's just not much in that for their $1B stake. And only 15 years worth? Hell, you could give them the 20% of domestic TV money and it would still be a good deal for the Big12, just on time value of money.

Maybe they think they can put the Big12 on the EuroOcho as a niche sport and get $50M annually out of it just for them?

I also wonder what (c) means exactly. They get a chunk of any money paid to Big12 for apparel contracts? They get a kickback from Addidas if Big12 signs up with them?

One thing on the 15 year’s thing, unless there is more information in subsequent tweets which I can’t see, it’s a minimum of 15, not that it will end in 15 years.

 

[cymonw1980]

My thoughts-
1. MHVer is a tool
2. If these details are true (and I am super dubious), they should sign before CVC can get out of the f***ing room. It's hard for me to believe they would only take international rights, and nothing from domestic media rights?? There's just not much in that for their $1B stake. And only 15 years worth? Hell, you could give them the 20% of domestic TV money and it would still be a good deal for the Big12, just on time value of money.

Maybe they think they can put the Big12 on the EuroOcho as a niche sport and get $50M annually out of it just for them?

I also wonder what (c) means exactly. They get a chunk of any money paid to Big12 for apparel contracts? They get a kickback from Addidas if Big12 signs up with them?

yes.... agree there is a "too good to be true" feel to this.

I wonder if the "access to the B12 name" means that this initial sale of the conf naming rights to All State for $50M / yr would basically be an interest payment to CVC... so, the conf gets none of the $50M naming deal, CVC gets those $ for 15 yrs x $50M = $750M... they give us the $1B cash infusion...

They probably still need to find at least another $750M (probably more) in value across the rest of those items - would they get a cut of ticket sales for 15 yrs of international sporting events that Yormark wants to have? games in Mexico, Canada, Europe? What are the international media rights worth? $50M/yr for 8 yrs could be another $400M?

Not really sure.. but if you can piece together enough potential revenue streams maybe there is some untapped value.

 

[boone7247]

Because that’s not even close to how American sports work since we have a draft in the major sports. College sports and schools also benefit greatly from the athletes time there so it’s by no means this one way transaction you think it is.

Gee I wonder what is different about the past than now. Oh yeah, players will be getting paid. Previously it was easy to swallow to not get paid for the work put in, but now, having to pay the players changes the equation.

As far as that isn't how American sports work, things change just look what has happened over the last couple of years at this level. Don't think that further changes are coming, player empowerment isn't going to stop.

I would guess we will get a case related to why college players are only limited to 4 years within the next two years, and then after than I wouldn't be surprised to see challenges to the professional leagues exempt status.

Also, won't be surprised if we see club sports expand at the HS level.

 

[FriendlySpartan]

Gee I wonder what is different about the past than now. Oh yeah, players will be getting paid. Previously it was easy to swallow to not get paid for the work put in, but now, having to pay the players changes the equation.

As far as that isn't how American sports work, things change just look what has happened over the last couple of years at this level. Don't think that further changes are coming, player empowerment isn't going to stop.

I would guess we will get a case related to why college players are only limited to 4 years within the next two years, and then after than I wouldn't be surprised to see challenges to the professional leagues exempt status.

Also, won't be surprised if we see club sports expand at the HS level.

Yeah good luck with those ideas coming to pass. That’s the advantage of throwing out stuff like this, you can never be proven wrong, you can just keep saying don’t worry it will happen but guess what, it’s not happening anytime in the next decade. The drafts aren’t going away and thus most of what you said isn’t happening anytime in the near to medium future.

 

[1TwistedCyclone]

Since the number has been thrown out there for equity in a league, $1 billion for 20%, what is the rate for equity in a university athletic department? If school A feels more valuable than school B, why do they not just pursue the private equity independent of a conference?

If a school receives large grants from businesses to pursue research/future employees in specific academic departments then an argument could be made that a stake in an athletic department should be up allowed to be funded by private money with a large say in decisions.

 

[ClonerJams]

The Big 10 and SEC fans can mock this all they want. Their conferences picked apart ours so they don't exactly have any moral ground to stand on. Yorkmark needs to do what's best for the Big 12. I'll trust his judgement over some random Twitter dork.

 

[NWICY]

That's ludicrous. They're trolling you. Cincinnati and AzSt are worried about missing out on their B1G invites?

Agree the only whiny team we got now is Utah hopefully they come around.

 

[t-noah]

The thought that any college athletics has any appeal at all in an international market is the single most absurd thing I have ever heard. If that’s the big part of the deal sign it up in a heartbeat because that PE group has no idea what they are talking about.

Absurd, yes. And the thought that college athletics would be swimming in this sea of uncontained greed, conference realignment, and monetary chaos 20 years ago was also pretty absurd. But here we are.

 

[BWRhasnoAC]

The thought that any college athletics has any appeal at all in an international market is the single most absurd thing I have ever heard. If that’s the big part of the deal sign it up in a heartbeat because that PE group has no idea what they are talking about.

Idk. I could see basketball moving the needle internationally. If the star players start coming here instead of the pro leagues over there due to better pay, it might be more possible than we the see currently. Especially if Yormark negotiates bb rights separate.

 

[mikesright]

I'll just point out something that I haven't really seen discussed yet. The Big Ten already has an investor of sorts which happens to be Fox Sports. Fox doesn't just have a stake in the Big Ten network, they have some sort of backend deal where they are partners on the main media rights package. Its one of the many reasons the Big Ten is the richest conference, Fox Sports knows exactly what the rights are worth and negotiates what it doesn't keep for its own networks for the league. NBC and CBS were literally bargaining with Fox executives for their package rights.

The SEC has a very chummy relationship with ESPN, where they have given up some control in terms of the years left on their deals, and ESPN has never failed to bump up their payouts to come close to matching what the Big Ten makes.

Both the SEC and ACC have partnerships with their conference networks where you could consider ESPN an investor too. The Big 12 is an outlier in this regard - they have a very small deal with ESPN plus to carry those third tier games which are not even produced by them while these conference networks seem to be very profitable. And the average Big 12 school is probably going to have close to 40% of their games for football and MBB on ESPN plus too. I think its possible if Yormark can find the right partner that there might be a beneficial angle to this. Otherwise, if this is just a straight up equity partnership for the cash, it'll be a disaster. JMO

 

[AuH2O]

This is what I was thinking. If things go belly up, it's not like there is real estate, or factory equipment, or some source code/algorithm that could be sold off/repurposed for the equity firm to recover something. The Big 12 has so little control over the college sports landscape. It just seems like a riskier-than-usual investment for an equity firm.

Private equity firms invest a lot in companies that have no collateral or hard assets and become truly worthless if they go belly up. This wouldn’t be anything new to private equity firms.

 

[Cloneon]

Private equity firms invest a lot in companies that have no collateral or hard assets and become truly worthless if they go belly up. This wouldn’t be anything new to private equity firms.

This is a very important point. Yes. Investment is designed for profit, but it also can be a form of shelter. As an investor, I often took risks relating to my liquidation rate because they offset. Hence reduced tax consequences. I can't help but think this is part of the equation in some form or another.

 

[cykadelic2]

The thought that any college athletics has any appeal at all in an international market is the single most absurd thing I have ever heard. If that’s the big part of the deal sign it up in a heartbeat because that PE group has no idea what they are talking about.

Need to keep in mind that the supposed PE firm is based in Europe and is already heavily involved with international firms who sponsor and/or have a stake in sports teams overseas as does the firm itself.

From the Athletic:
The Big 12’s prospective partner is CVC Capital, a firm that has invested billions in Spain’s top soccer league LaLiga, France’s Ligue 1, the Women’s Tennis Association and several rugby properties. It previously owned F1 before selling it in 2016. European sports leagues embraced private equity well before North American sporting organizations, but since 2019, when Major League Baseball first allowed institutional investments, equity firms have taken stakes in the Chicago Cubs, Houston Astros, San Antonio Spurs, Tampa Bay Lightning and many more franchises. It’s no secret why. From 2004-2022, U.S. pro sports franchises yielded significantly higher returns than the S&P 500, according to WealthManagement, which calculated the rise in NBA valuations at 1,079 percent versus 317 percent for the stock index.

 

[1SEIACLONE]

Not saying this is the way to go, but at least Yormark is trying and thinking out of the box. Not setting up a national media network has really killed the B12, sorry thing is that the league was the first to come up with the idea and programs like Texas opposed it so it was dropped.

I wonder if a better way would be going all in with someone like Apple or Amazon as a way to increase their streaming content and slowly moving away from ESPN+.

 

[cyman05]

I'll just point out something that I haven't really seen discussed yet. The Big Ten already has an investor of sorts which happens to be Fox Sports. Fox doesn't just have a stake in the Big Ten network, they have some sort of backend deal where they are partners on the main media rights package. Its one of the many reasons the Big Ten is the richest conference, Fox Sports knows exactly what the rights are worth and negotiates what it doesn't keep for its own networks for the league. NBC and CBS were literally bargaining with Fox executives for their package rights.

The SEC has a very chummy relationship with ESPN, where they have given up some control in terms of the years left on their deals, and ESPN has never failed to bump up their payouts to come close to matching what the Big Ten makes.

Both the SEC and ACC have partnerships with their conference networks where you could consider ESPN an investor too. The Big 12 is an outlier in this regard - they have a very small deal with ESPN plus to carry those third tier games which are not even produced by them while these conference networks seem to be very profitable. And the average Big 12 school is probably going to have close to 40% of their games for football and MBB on ESPN plus too. I think its possible if Yormark can find the right partner that there might be a beneficial angle to this. Otherwise, if this is just a straight up equity partnership for the cash, it'll be a disaster. JMO

Actually FOX does have a stake in the Big10 network. Fox owns 60 percent I believe

 

[BWRhasnoAC]

I like the idea of getting away from espn+. What a piece of ****.

 

[CloneIce]

Not sure what to think either. Having a company that manages $200B owning 20% could help stabilize the league or they could be the downfall depending on their actual intentions.

We know their intention (there is only one) - make money. The question is if that will be beneficial to the Big 12, the schools, and the players.

Thats impossible to know at this point but since we’ve finally acknowledged that big time college sports is a business, it does seem like a logical step.

 

[alarson]

I like the idea of getting away from espn+. What a piece of ****.

It's better than most of the equivalent alternatives and has resulted in us getting a lot more coverage for things that otherwise would not have gotten TV at all