On Thursday morning, Dennis Dodd of CBS Sports reported that the Big 12 members are “considering a first-of-its kind private equity investment to ensure the league’s long-term financial and competitive security.” The reported investment would include a cash influx of $800 million to $1 billion in exchange for a 15% to 20% stake in the Big 12. “A portion of the money would go directly to the 16 conference members, and the partnership would give the conference access to CVC’s investment services and clients,” Dodd reported.
The implications of a potential deal would change the landscape of college athletics. Today, we’re evaluating the pros and the cons of private equity investment in the Big 12 from the persepctives of the member schools, including BYU.
1. Close the financial gap
The first and most obvious pro is the money. The increase could help the Big 12 close the gap on the SEC and the Big Ten. Currently, the gap between the SEC and the Big Ten is scheduled to increase once the new media deals and CFP kick in.
In an era of future revenue share, remaining competitive on the field will become more and more difficult as the financial gap widens.
This is the only viable option to close the financial gap over the next ten years. If the Big 12 is able to remain competitive on the field and grow the brands of the 16 member schools, the risky private equity bet could pay off down the road.
2. Stability
“The CVC investment would likely require the Big 12 to stay together long term,” Dodd wrote in his article. “That might require some sort of assurance for CVC that a new grant of rights would be signed in 2031. The investment would certainly be a significant motivating factor to stay together, but with realignment, anything can always change quickly.”
In an era of complete instability in college athletics, private equity investment could enforce some stability for the Big 12. Nothing is completely stable in college athletics regardless of when the Grant of Rights expire (look no further than the ACC Grant of Rights and Florida State), but a third party like private equity would be financially motivated to keep the Big 12 together.
For any conference not named the Big Ten or the SEC, long-term stability is invaluable.
3. Improve Position with Expansion?
The relationships between the ACC and its top brands (Florida State & Clemson) is on the rocks. If there is a shift in the ACC, the Big 12 could be better positioned to poach a few valuable ACC schools if they are backed by private equity money.
At this point in the realignment cycle, it’s unlikely that any ACC school would get a full revenue share if they move to the Big Ten or the SEC (just like Oregon and Washington). If those two conferences are unwilling to offer full shares, the Big 12 could give out a few compelling offers and scoop up schools like Miami or Virginia Tech.
4. Access to services and clients
An important part of this story that will go largely undiscussed. Private equity companies have billions of dollars worth of resources at their disposal. They own many companies, and they could use resources from those companies to boost the Big 12.
This is a classic move out of the private equity playbook – they use their scale to create efficiencies across their entire portfolio.
CVC is invested in the Women’s Tennis Association, the Gurajat Titans (cricket franchise in the Indian Premier League), LaLiga (Spain-based soccer giant), Ligue de Football Professionel (governing body that runs soccer leagues in France), Premiership Rugby (England’s top league) and Six Nations Rugby United Rugby Championship (top league in Ireland, Scotland and Wales).
While they don’t have experience in college athletics, they do have experience in sports. There are likely valuable resources under CVC’s portfolio that could be utilized by the Big 12 member schools.
5. Be the pioneer
The Big 12 isn’t the first conference to look at private equity investment. Florida State is considering it to get out of the ACC Grant of Rights. Whether it’s private equity or another mechanism, college athletics is clearly in the business of making money. The Big 12 could be the pioneer of this new era.
1. No love for college sports
CVC’s biggest investment in the US? Petco. No disrespect to Petco, but there are not a lot of similarities between Petco stores and the things that make college sports great.
CVC would not invest in the Big 12 for the love of college sports or the long-term health of college sports. They would invest if they see a potential return on their investment. Their only connection to the Big 12 is their path to making money.
That’s a dangerous ingredient in this equation. People with no knowledge or connection to the sport could be making critical decisions that impact the people who do love the sport: the fans.
2. You better make them money
Private equity is all about the dollars and cents. There’s two ways for private equity firms to make money on their investments: revenue growth or profit growth.
Revenue growth is the priority. CVC’s primary interest would be the revenue growth of the Big 12. If the revenue didn’t grow at the same rate they were expecting when they made the investment, the attention could quickly turn to cost savings. Cost savings could increase the profit for CVC if the revenue growth is not there.
Cost savings could be short-sighted (think staff reductions, facility reductions, or salary reductions) and harm the Big 12’s competitive position in the long run.
Once the Big 12 is married to private equity, they will want to call some financial shots.
3. Rock the boat
Private equity investment would rock the boat and change the college landscape. The two most powerful conferences, the Big Ten and the SEC, might not appreciate the interference of private equity money in college athletics.
That’s a risk that needs to be weighed in this equation. Could this deal alienate the Big 12 from the two most powerful conferences? If the answer is yes, the long-term implications could be catastrophic.
4. Get ready to meddle
What happens if a football program is underperforming. Would CVC ask the coach to be removed? Or even the AD?
Private equity firms like to bring in their own people when they make a deal. Perhaps CVC is different with their experience in sports and the face that they would have minority ownership, but decision-making interference would be a risk in this equation.
Think of it like a bad owner in pro sports (cough cough New York Jets). A short-sighted owner can make on-field production that much more difficult. The Big 12 can’t afford anymore on-field disadvantages.
5. The church and BYU
The BYU angle of this deal is particularly fascinating. Since the beginning of the university, BYU’s entire purpose has been to further the mission of The Church of Jesus Christ of Latter-day Saints.
The need for financial growth and the mission of BYU don’t necessarily go hand-in-hand. This deal would create some obstacles for BYU that would be uncomfortable to overcome. That doesn’t mean they couldn’t be overcome, but it would require forward-thinking leaders. New BYU president Shane Reese and veteran BYU AD Tom Holmoe seem like the perfect fit for the job at this time.
