Big 12 Considering $1B in Private Equity

[jbhtexas]

Everything people are saying about how the deal is structured and expected return is true. Those items will be huge in whether this is a good deal or not.

Another thing not mentioned is this could be catastrophic for both parties if media rights for the Big 12 don’t increase in 2031.

If a Super League forms, if streaming partners don’t get as involved as we think, if ESPN is spun off or greatly cuts budget, etc., the B12 could be royally f’d.

Like we wouldn’t need to worry about playing second fiddle to the P2, we’d need to worry about remaining solvent.

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.

 

[1UNI2ISU]

Well let's just all go outside and shoot ourselves, then.

Let me see if I can find a revolver around here somewhere...

I didn't say that.

There is still absolute value in being a fan even if you aren't competing for national titles.

 

[cykadelic2]

I'd like you to tell me one thing in college sports that's been rational at any point in history.

TV doesn't give a **** about parity, TV wants brands that bring eyeballs and those brands are consolidated in two leagues plus the school with enough pull to get it's own TV contract.

It's an absolute fool's errand that the Big 12 or ACC or anybody else can realistically expect to stay within shouting distance of those leagues long term.

Yeah, this goes back to CFB/College Presidents acting like the NFL and not let ESPN/Fox dictate conference configuration, roster limits, etc. Right now, ESPN and Fox are running the sport with Sankey and Pettiti as their puppets.

Perhaps the best thing long term for CFB is for the ACC to blow up sooner than later and get more school ADs destroyed like Oregon St and Wazzu. Maybe then Fed intervention will occur as part of the House settlement process and stop the current ESPN/Fox stranglehold on the sport.

 

[cycloneworld]

Way too much focus is being put of the PE deal being an exercise in keeping up with the SEC and B10. Yes, that is a concern but it shouldn't the primary concern or goal.

This deal is being primarily done to assist B12 ADs with addressing near-term House Settlement obligations and addressing other needs that are at high risk of not being funded (in ISU's case, Hilton upgrades/maintenance, retain CMC/Otz and potentially saving Women's Swimming/Diving). And the PE partners are reportedly banking on a significant increase in B12 Media Rights in 2031 for their ROI. The need for a near term cash infusion is real amongst all B12 schools, including ISU, but obviously the deal needs to consider long term financial and PE management/ROI implications. The PE management risk is not onerous if their stake is 20% as reported.

Fair point and if that is the intended reason, then you’ll have to deal with the PE “consequences” down the road. But this would be like taking a cash advance out on your credit card.

And @SolterraCyclone is exactly right. If there is not a huge increase in media rights in 2031, the Big 12 is totally screwed.

This is a very short sighted decision. If it has to be done, you don’t have many other options. But the concept that ADs who manage $125+ million annual budgets have “no money” is crap. There is no money because you’ve spent like drunken sailors for decades on the back of nearly free labor.

 

[isucy86]

I completely agree. My point is something like Barclays Premier League can easily be changed to the HSBC Premier League and it doesn’t damage the brand. It is still the PL at its core. If the Big 12 changes to the Allstate 12, it would be a bad decision in my opinion

I have a tough time believing just keeping the #12 has any value. Especially with the Big12 being 16 teams and likelihood it will be 20 or more within a decade.

Last year the conference decided to keep Big12 name when adding teams. But maybe that decision was less about keeping Big 12 name as coming up with a distinctive name if/when conference naming rights occurred. Aka Premier League.

 

[CascadeClone]

I didn't say that.

There is still absolute value in being a fan even if you aren't competing for national titles.

I don't want to compete for national titles. But I'd like to be in the same sport as those that do.

I don't want ISU to be FCS, Division 1AA, AAA baseball level. You have to stay within shouting distance.

FWIW, I think they absolutely CAN stay within say, 30%, but it will take a lot of effort and creativity.

 

[WooBadger18]

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.

It might be riskier to them, but I could also see them trying to have some way of clawing the money back. If nothing else then by having the athletic departments be on the hook for the money.

 

[MountainManHawk]

How can any discussion regarding the increase of FB schollies to 100+ be rational? The opposite should be happening in light of House settlement obligations. Reducing FB schollies from 85 to 70-75 is a no brainer not only for House reasons but also to provide much needed parity (and resulting TV dollars) for the sport.

It hasn’t yet been finalized so they could still change their minds. But my understanding is it’s an attempt to prevent cheating now that schools can pay NIL.

I guess the fear is if they didn’t make the scholarship limit the same as the roster limit, then schools would stock the roster full of “walk-ons” that are receiving so much NIL that the tuition is inconsequential.

Probably more of a concern in sports like baseball with low scholarship limits but it’s going to apply to football too so instead of 85 scholarships and 115 roster limit, the number will now be 115 for both.

 

[Cloned4Life]

I don't want to compete for national titles. But I'd like to be in the same sport as those that do.

I don't want ISU to be FCS, Division 1AA, AAA baseball level. You have to stay within shouting distance.

FWIW, I think they absolutely CAN stay within say, 30%, but it will take a lot of effort and creativity.

Huh?

 

[ClubCy]

I don't want to compete for national titles. But I'd like to be in the same sport as those that do.

I don't want ISU to be FCS, Division 1AA, AAA baseball level. You have to stay within shouting distance.

FWIW, I think they absolutely CAN stay within say, 30%, but it will take a lot of effort and creativity.

I’d like it on the record that I would like Iowa State to compete for National Titles.

 

[Sigmapolis]

Public universities operating sports teams on a (notionally) nonprofit basis (else why the heck are they paying for a women's tennis team) mixed with private equity is the most bizarre mixture I can imagine.

It's like dipping Cheetos in chocolate milk.

 

[t-noah]

Way too much focus is being put of the PE deal being an exercise in keeping up with the SEC and B10. Yes, that is a concern but it shouldn't the primary concern or goal.

This deal is being primarily done to assist B12 ADs with addressing near-term House Settlement obligations and addressing other needs that are at high risk of not being funded (in ISU's case, Hilton upgrades/maintenance, retain CMC/Otz and potentially saving Women's Swimming/Diving). And the PE partners are reportedly banking on a significant increase in B12 Media Rights in 2031 for their ROI. The need for a near term cash infusion is real amongst all B12 schools, including ISU, but obviously the deal needs to consider long term financial and PE management/ROI implications. The PE management risk is not onerous if their stake is 20% as reported.

A couple of questions. Do we need to do this private equity agreement to survive, keep our heads above water, over the next 5 - 10 years? If we do it may be necessary/beneficial, I don't know. Then would the equity company own 20% if the Big 12 profits in perpetuity? That seems a bit hard to swallow.

The House settlement obligations you refer to, is that the 22 M/per year, I keep hearing about that we all (universities) have to pay the student athletes now? When does this start? Is this all college schools or just Div. 1? And if that includes ISU, we really don't have the money to pay this, do we? If won't don't have the money (and other universities also don't have the money), why was it mandated?

I think I know the answer to the last question, but I'd like it spelled out just to be clear.

 

[t-noah]

Blum stated that ISU needs to find 35-40 M/year, now, to stay afloat.


I thought we were getting 31-33 M/year with the Big media rights package? And now if D1 universities have to pay 22 M/yr to the athletes, does that mean we really only have about 10 M/yr (32 M - 22) to operate an athletic budget on?

Do we have no other recourse but to do this equity thing (and naming rights), if we want to try to stay at the same competitive level we are on now?

 

[cykadelic2]

A couple of questions. Do we need to do this private equity agreement to survive, keep our heads above water, over the next 5 - 10 years? If we do it may be necessary/beneficial, I don't know. Then would the equity company own 20% if the Big 12 profits in perpetuity? That seems a bit hard to swallow.

The House settlement obligations you refer to, is that the 22 M/per year, I keep hearing about that we all (universities) have to pay the student athletes now? When does this start? Is this all college schools or just Div. 1? And if that includes ISU, we really don't have the money to pay this, do we? If won't don't have the money (and other universities also don't have the money), why was it mandated?

I think I know the answer to the last question, but I'd like it spelled out just to be clear.

Do we need to do this private equity agreement to survive, keep our heads above water, over the next 5 - 10 years? If we do it may be necessary/beneficial, I don't know. => The cash from PE will help mitigate the impact of House Settlement obligations and potentially enable spending on previously planned (and currently postponed) projects such as Hilton upgrades. IMO, the near term PE cash infusion is necessary assuming terms of the PE deal are a win-win for both parties.

Then would the equity company own 20% if the Big 12 profits in perpetuity? => The PE firm will reportedly have a 20% stake in B12 assets (including value of Media Rights) and have 2 seats on the B12 Board. I doubt their stake will continue in perpetuity but not enough details of the proposed deal have been disclosed to determine if that is accurate.

The House settlement obligations you refer to, is that the 22 M/per year, I keep hearing about that we all (universities) have to pay the student athletes now? When does this start? => The House settlement obligations would be the $20M-22M annual payment from ISU directly to athletes. The $20M-22M is the annual cap and it is my understanding ISU can elect to spend below the cap but I am assuming ISU's goal to max out vs the cap. The details are still pending but the plan is to start House payments in Fall 2025.

Is this all college schools or just Div. 1? And if that includes ISU, we really don't have the money to pay this, do we? If won't don't have the money (and other universities also don't have the money), why was it mandated? => I think House applies to D1 only but not sure about that. ISU has the money to pay athletes but not sure if they can afford up to the $20M-22M cap, the issue is that existing expenses will need to be cut in order to pay for House and the PE cash will mitigate but not completely eliminate those cuts.

 

[CycloneDaddy]

Blum stated that ISU needs to find 35-40 M/year, now, to stay afloat.


I thought we were getting 31-33 M/year with the Big media rights package? And now if D1 universities have to pay 22 M/yr to the athletes, does that mean we really only have about 10 M/yr (32 M - 22) to operate an athletic budget on?

Do we have no other recourse but to do this equity thing (and naming rights), if we want to try to stay at the same competitive level we are on now?

You are missing a lot of revenue in your math.

 

[CascadeClone]

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.

I'd disagree on the risk. Live sports is still considered super valuable, and the revenue is pretty well guaranteed for the current contract. Growth at the next contract is less assured, though it would be hard to imagine it goes to zero. I'd say this is actually pretty low risk.

There is a segment of PE money that is just looking for somewhere to invest to get a good return that isn't passbook interest, but also isn't in the stockmarket. Buying a slice of sports media revenues is actually kind of a creative and fairly safe way to go about that. It's like a GIANT chunk of commercial property the more I think about it.

 

[t-noah]

You are missing a lot of revenue in your math.

And its my best subject!

Not

 

[CascadeClone]

I’d like it on the record that I would like Iowa State to compete for National Titles.

I was thinking in terms of football. BBall I would 100% agree!

 

[cymonw1980]

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.

 

[FriendlySpartan]

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. 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 they 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.

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.