Highlighting the “IF” part of my comment, let’s just say that CVC is capable of doing something to increase the value of the Big 12 that is beneficial to the conference. The SEC and B1G aren’t going to just sit there and not take the money. Have you ever seen these 2 conferences leave money on the table and say “nah we’re good”?
My point is... you have it backwards. The Big 12 going to Private Equity isn't setting the market rate. The SEC/B1G have ALREADY set the market rate, and everyone is trying to play catchup.
Why would the SEC/B1G give up potential future revenue to PE when they already run the show from the traditional TV media networks? In other words, PE is typically used to help small companies become big (Big 12 = small; SEC/B1G = big).
In another post, I mentioned that it only makes sense for Big 12 to take PE money if they have intention of creating serious value. That value can only be created with brands, such as the Big 12 perhaps using that PE money to go and "buy" Florida State and Clemson. Possibly Miami. Perhaps help them fund their exit from the ACC because obviously the SEC and B1G have no intention of doing the same.
I appreciate the response. I see where you’re coming from I just see it differently, specifically 1) that the P2 wouldn’t turn to selling equity if it benefited them in some way since they’re still in competition with each other and 2) that the Big 12 presidents are going to all agree to give up tens of millions each to bring in FSU and Clemson, or any other school.
Every conference (in this case, Big 12/SEC/B1G) has its strengths and weaknesses. Even for the B1G and SEC, if they both went to Private Equity, it would be for different reasons. Currently, I just don't see why the SEC/B1G would be able to generate more value more than what they already bring. The only way that would be possible, is if College Football separated itself from College Athletics entirely which is not impossibly, but unlikely at least in the near future.
The Big 12 has value and growth potential if the money is put to good use.
The Big 12 cannot play the short game if they are looking for longterm stability because let's face it.... only Utah and Kansas would even be remote targets for expansion for the P2. Everyone else has an uncertain future.
If the Big 12 has to give up even $10 Million just to grab FSU/Clemson, long term, I think that is a worthwhile tradeoff. Which again, is why Yormark is trying to find other avenues of revenue such as selling off naming rights (which I think every conference inclusing SEC/B1G will eventually do)
> Perhaps help them fund their exit from the ACC because obviously the SEC and B1G have no intention of doing the same.
Tinfoil hat theory, but the Big 12 having the reserves on hand to help breakup the ACC may be a worthwhile endeavor. Even if it wasn't for those particular teams. If the P2 sniffs blood in the water, they're going to snatch UNC, Clemson, etc. Big 12 PE money would allow the conference to not be totally left behind as the "P4" transitions into the "P3" upon the death of the ACC.
When the ACC is broken up, if the Big 12 doesn't get a piece of the pie, the Big10 and SEC will gorge on the whole thing because that's their avenue for growth. A PE loan may be less about catching up for the Big 12 and more about keeping some skin in the game as the future of CFB undergoes even more radical changes.
Tinfoil hat theory of course. Maybe the ACC will be fine for a long time. In reality it really do be about them looking at alternative avenues to create growth and stability for the conference.
What benefit does Florida State and Clemson bring to the SEC?
Florida State would easily become one of the top teams in the conference, and I'm not so sure that a conference with enough top-heavy teams already (Texas, Bama, Georgia, Oklahoma) want to add in MORE competition. Then you have middlepack schools (A&M, Auburn, LSU, Ole Miss, Tennessee, FLORIDA) who can't seem to get over the hump, but now they have to worry about Florida State?
Clemson. Clemson? Where have they been the past 4 years? Are they going to actually compete in the SEC? Based on what evidence? Clemson's dynasty is over. The schools is not a flagship, and they will most likely end up 7 to 8 win team per season resulting in loss of viewership. They are a redundant market because the SEC already has a similar profile with the Gamecocks.
The SEC wants UNC and Virginia. They don't have a footprint in those states, and neither school poses a serious threat to the status-quo of the SEC hierarchy. UNC and Virginia also solve the SEC's "academic prestige" problem.
Please, justify why the B1G would invite FSU and Clemson, at anything more than partial shares...
> Florida State would easily become one of the top teams in the conference
?
They'd likely join the middle of the pack group. Which by the way you tossed LSU into, even though they've won 3 national titles since 2003.
That's not true. SEC / B1G set the necessary rates for TV revenue, but the B12 is doing anything they can to close the gap. What they're forgetting here, is that this is a revenue stream that the SEC / B1G are currently not utilizing. So if they prove it out, those two can just add on the extra revenue stream and re-open the gap.
> when they already make buttloads of cash?
I counter with:
- Why poach schools from other conference when they already...
- Why renogotiate payouts when they already...
- Why threaten to blowup college football when they already...
was gonna say.. Banks want their money back. PE firms want to leverage their investment and revalue projected future cashflows and sell their equity stake at 6x what they bought it for and get the hell out. Then if the house crumbles.. doesn't matter, I got mine, the conference should have run their house better.
Dont forget PE stripmining every little detail, cutting every cost of the operation to maximize investor profit, leaving behind little more than a hollowed out husk barely functioning.
It kind of makes sense since the real estate is the real asset. KMart/Sears was the pioneer of this. Running a business that is efficient and turns a profit takes a lot of work. Buying a business for the real estate is quick, low risk, and it cash flows for the duration of the venture.
Quick note, Kmart Sears didn't pioneer this. It's a pretty old move, going back to at least the 80s when PE did this with factories. It might go back further than that.
Honestly it’s why I’m glad Sony bought Alamo Drafthouse.
Better a company with a vested interest in keeping movie theatres going than Private Equity assholes
Ehhh. This is Reddits view of PE but not really how PE ends up working a lot of the time. There are absolutely some times where the assets are the most valuable parts of the business and they're harvested and the business is left to die, but more often, PE just buys poorly run businesses and turns them around.
Some examples of really successful PE investments where the company was successful afterwards: VMware, Dell, Burger King/RBI, HCA, Snapple, Gulfstream, Kinder Morgan, Hilton, Alltel.
But most PE deals you'll never hear about because they're buying small companies worth more like $1 billion that are private. Hexion, berry plastics, and momentive, for example, were all chemical companies that were acquired by one PE group and are still doing well, but no one outside the chemical industry would know about them.
>and they went public 13 years ago.
Dunkin is not public. They were bought by Inspire Brands in 2020.
As a treasury person, that's also just not how debt works. The IPO was done with full knowledge of the current debt obligations of Dunkin, so investors were paying for the company *and* the debt. So it's not like investors considered the debt load unreasonable at the time of IPO.
Also, they didn't struggle to complete significant buyback programs. They weren't struggling with the debt at all. It makes sense as a company to be levered to some extent, so still having debt on the balance sheet doesn't mean they were burdened or that BCG unnecessarily loaded them up with debt. At the time of their sale, they were still generating significant FCF.
Also, Dunkin more than doubled the debt load they IPO'd with by the time they were bought by Inspire. Hardly BCG's fault.
What's the asshole thing? You mean the stripping for parts?
Sometimes that's what makes the most sense in terms of market efficiency, and that's why there's profit in doing it. If you have a business that makes $1 million per year, but the real estate you use for that business could make $2 million per year by itself, your business is effectively losing a million a year. It'd be more efficient for everyone to just use the real estate for something else. Someone buying your business, shutting it down, and then selling/utilizing the real estate better would reap those rewards.
People who buy up a business, set it up to fail, loot it then sell their shares and move on without a second thought are the worst of society. I don't care if they make money.
The stereotype of PE's being a bunch parasites exists for a reason. Corporate raiders are corporate raiders and it's all "just doing business" until it's *your* job that gets liquidated for the shareholders.
>It'd be more efficient for everyone to just use the real estate for something else.
That stuff just sits in a portfolio and you know it.
>until it's your job that gets liquidated for the shareholders.
Buddy, it's happened to me several times. My first job out of college was cut when my JV got sold off. My last team at VMware was laid off entirely with the Broadcom acquisition literally this year. I would've loved to continue working at VMware - it was a great place to work. But ultimately, the economy functions much better when assets and companies are utilized efficiently, and that leads to higher salaries and better jobs for people in the long run. Inefficiency for the sake of saving jobs is not a good thing.
>That stuff just sits in a portfolio and you know it.
Then it wouldn't be making money as a more productive asset. If the real estate from a business is worth more than the business itself, it gets rented out or sold to a business that can better use it, and that company is better off and can hire more people to expand and be more competitive.
It doesn't just sit and collect dust, it gets used better. Otherwise there wouldn't be any money in separating it from its current use.
> It doesn't just sit and collect dust, it gets used better.
As someone who drives by old industrial areas that are now no longer in business pretty much every day I beg to differ. There's a paper factory in town that sits derelict and unused since the day they closed the doors for good. Still owned by the company that ultimately shuttered the place. Any attempt to get them to sell or use the land for something else is always met with either a simple "No." or "We want a match on cleanup costs and grant money". It'll sit there and get passed around shell corporations for tax purposes but that land is never going to be used again unless they can get the taxpayer to pay for the privilege.
I've gone through it twice now too and it fucking sucks. I'm so tired of my life being completely uprooted because some shareholder got scared of a bad quarter and decided the best course of action was the burn it all down and sell it and when I mention this I get "It's all part of the business cycle man, just accept it." PE's are a "Fuck you, I got mine" kind of business and it is not necessary
Can’t wait for his book to come out
Greg Sankey: The Art of the Steal what the futbol Super League tried to do but get away with it because money money money
I guess that's what I don't understand about the proposal.
Say some firm gives the Big 12 a billion dollars in exchange for like a 25% stake in the league.
After that initial billion is distributed and spent, wouldn't the BXII schools be making less money annually because now a quarter of their revenue goes to the private equity firm?
I miss the Big 12. I don't know if they would have added a permanent x division rival to keep the Oklahoma rivalry alive, if that would have kept it from failing or not.
Just seems like one of the many stupid blunders that doomed the conference.
I almost want Congress to step in and send shit back to how it was.
Edit - if a separation by sec and big 10 is inevitable, then get congress involved. Blow every conference up and start from scratch while trying to maintain big program matchups with some regionality and historic rivalries
I still care far more for Oklahoma state and Kansas state, than fucking Indiana, Illinois, Purdue, Rutgers and Maryland combined
No it’s a much longer one, is hard to see how it pays off though if it’s $1bn for 20%. Would need everything to stay in place til at least 2040 to see a positive return on investment
Perhaps they think they can lobby to have the feds pass laws that strong arm a football league that the Big 12 is a part of, therefore drastically increasing the league's value?
Wrong. They are gambling the value of the media deal will increase significantly by 2031. At that point they can sell their stake at a higher valuation. All while collecting some dividends over that six year period.
Saudi’s, GIS, some other PE fund, IPO, SEC (lol).
I’m not saying there is a high likely hood buyer right now, but I bet CVC thinks there will be by 2031. And the fact that CVC is showing interest means there are probably other potential buyers out there already.
CVC invested in the Formula 1 Group in 2005 and exited in 2016 by selling their stake to a media company, Liberty Media. Basically they commercialized as much as possible and upgraded the media infrastructure, then brought in new ownership that they thought could leverage their improvements to greater growth. They seem to have a holding period of 6-15 years. Their exit was cash and ownership stake in the new buyer.
According to the Dodd article, they think we’re undervalued and that given the direction of media rights deals have trended, they believe we’ll be substantially more valuable after the next contract cycle. Buy in now, sell their stake for a profit later
No one. It’s almost entirely confined to weird little pockets on Reddit and based on a combination of the gut feelings of people who don’t work in the industry, plus Disney being vaguely interested in potentially off-loading ESPN. The former is worse than useless. The latter is just normal business.
It’s not even gut feelings, it’s wishful thinking by people that somehow all the largest media companies will fail and somehow college sports will survive that and they can go back to the old local conferences somehow lol
Depends on what you think a wall is. There will always be money for sports, but can we continue to expect media rights to double every cycle? Maybe they only increase 25%.
People have been predicting a media rights wall for 20 years. Only the ACC got hit by it by having their contract coming up the worst time in the last 75 years.
All the above most likely. Still, ESPN offered ~$32M a year and when that was pulled, no other offer came close. It's just a single data point obviously, gonna be a while before we can see if there's a trend.
Which would have been an increase even after USC and UCLA left? I may have that wrong.
Edit that yes ESPN offered the Pac 12 a little more money without USC and UCLA than the Big 12 with Texas and Oklahoma. The Pac 12 did not hit a wall, it was actually not worth as much anymore.
The Pac 10 was offered a media deal higher then their previous one and higher than the B12s. And even still they had an Apple deal that could have paid them their own insane valuation if they hit performance benchmarks.
Pac's problem was poor leadership that had no idea what it was trying to do. There is zero chance Washington/Oregon didn't already have a decent idea what they would have to accept to join the Big Ten very soon after the USC/UCLA announcement. The only question for them was what could the Pac 10 get on their own and how could they use that to negotiate with the Big Ten.
Incredibly shitty strategic management as well as Washington/Oregon waiting for an excuse to leave doomed the Pac.
>they think we’re undervalued and that given the direction of media rights deals have trended, they believe we’ll be substantially more valuable after the next contract cycle.
Allow about 6 more teams in for a huge payout, crank of on field sponsorships, partner and take a cut of NIL, etc - exit in 5 years taking all the extra money as profit walking away with 5x
If they took the money in order to generate consistent and more money in the future, then maybe not a bad deal. If they take the money just for the sake of money, then it’s a terrible idea
How do they make more money? Say we are talking about MLS or the NWSL. You take in $100 millions of investment to build stadiums, improve training infrastructure, buy better players, increase advertising, and create new franchises. You aren’t making back that money thru advertising and concessions. You make it back when you sell the team to someone who purchases it for 5x what you bought it for.
But how do you do that in College Athletics? You have all the built in infrastructure. You can’t sell the college. College basketball could be bigger but outside of undervalued media rights deals, where is there increased revenue that could pay back these dividends? Merchandising? Surely not.
Appearances in the playoff bring in more money. If you're a middle-of-the-road or struggling program, winning will attract more fans, or bring back disengaged fans.
Everyone is just speculating though. No one knows for sure yet what the terms are or what the plans are.
Tentatively, I don't think it's a great idea, but I don't think anyone has enough information yet to form an opinion past "PE bad," which it usually is.
Better players, coaches, facilities, marketing = more winning and more eyeballs = more valuable media rights deal = increased value of the conference = return for the PE fund
For one, there are absolutely revenue streams that arent being utilized. Are the naming rights to stadiums being sold? Are there a dozen corporate logos on your jerseys? The CCG trophy is sponsored by who exactly? What billboard is the side of your stadium doubling as?
They’re giving up equity, it’s a shit deal regardless given their leverage is going to be minimal
This isn’t one team getting a billion, it’s a dozen teams getting a paltry 80
Look, I'm not going to say that the B1G doesn't have some responsibilty here (I mean, what did we even do to the PAC), but the PAC12 kind of just killed itself.
That's so obvious it's almost ominous to say it like that. Is he suggesting that there's going to be a point where the Big 12 simply isn't going to be able to recover the $1 billion to pay it back? Is this a warning to the private equity investors about the future?
They aren't ever going to have to pay the $1B back. PE buys 20% equity for that amount. They'll simply forgo 20% of future earnings, which will pay back the PE firm in about 10-12 years.
I am aware that it's not just a loan, but is the implication that a 20% ownership stake in the Big 12 going to continue to devalue to the point where they may never even recover their principal investment of 1 billion?
No, the implication is that the PE firm expects a certain return on their investment. They’ll do whatever it takes to get those returns, usually at the detriment to the company (the Big 12 in this case). PE is notorious for this
It's not "not just a loan."
It's not a loan in any way, shape, or form.
It's a purchase of equity, just like you forking over cash for dinner. Only the PE firm is buying something which will return to them a guaranteed cash flow, instead of something to eat.
?
If PE takes 20% of all revenues for 10-12 years, they will have earned their money back and will be in the black from that point on. If we figure 20% of those distributions is somewhere around $100M per year, 10 years sounds about right.
Not sure where you came up with $5B, since the reports have only been $1B.
I think the implication is that if the Big-12 can't pay back their PE investors then they'll get the "red lobster" treatment, liquidated for their assets.
Yes but Red Lobster was put in that position by their successive string of owners looking to extract profit.
PE investors made RL sell the land the restaurants were on then lease it back so they could charge rent. Then RL got sold to a fishing company that forced RL to use them as a supplier and jacked up the prices they charged.
This can end disastrously for the Big-12 but unless they sign the land rights to their stadiums over to PE, idk where they’d get fucked as hard as Red Lobster did.
It's not hard to find a business owner who no longer wants to own their business and it's harder than ever to find an average person who has capital to buy out something like a daycare.
Ehh, maybe your experience has been different, but there's a lot to be said for corporate ownership of daycares. Daycare centers have very strong founder effect issues. The 1 person that had the crazy to build it out from nothing and knows all the compliance rules and how to do all the paperwork for the 10+ different state/federal programs they need funding from to break even and puts in all the hours for love of the kids is great. Then they want to retire...
Who's going to buy it? The job pays sweet fuck all, the profit margins are crap and your compliance costs (if you have to pay hourly staff to do it) are insane and your fixed costs are probably damn high as well.
They can sell on a private loan to a trusted employee, but the payback is 30+ years or never (if the person ends up sucking). No normie can finance it and the banks won't give you a loan at economically viable rates for 1-3 centers.
So you amortize out the compliance costs across 5-10 buildings and make sure that the paperwork is actually done correctly and one on time. You have 1 head (but the person heads up 5-10 buildings so it's much lower cost/child) and there's actually enough profit to make keeping them all in existence worthwhile. Maybe you run a few in economically disadvantaged areas b/c it brings your overall costs to a level where you can get grant money. If you can't combine 5-10 of them, you probably close and re-open in the richest area you can afford and never even bother with a marginal area.
Source: 2 kids in private daycare. The owner is great, but if/when she retires their plan seems to be "demolish the amazing building and sell the land to a developer". My kids will be long gone, but it'll be a damn sad day.
There's something distasteful to me about taking a conference's biggest brands and then punching down on it when it's trying to go outside of the box to continue competing (because it really has no other choice)
Yeah, I agree, and the fact that it’s such a mind-numbingly obvious take. It would still be a little distasteful, but it would be different if he gave an insightful answer.
As is, it’s like putting someone who you’ve loaned money to in a position where they have to go to a payday loan place, and then saying “you know, the problem with payday loans are that they charge really high interest.”
My younger brother isn't much of a scholar but I'm still not going to recommend he enroll in DeVry just so he can get a degree like his older sibilings.
Tell him to go to a vocational school at a community college. There's a million grants you can get to pay for that stuff to make it cheap or basically free. And you'll pretty much be guaranteed to get an actual job instead of whatever devry or University of Phoenix can give you.
“Private equity” aka banks controlling CFB would ruin the sport for me once and for all. I’m tapping out if that happens.
Investment bankers will ruin CFB. Full stop.
Trying to be too clever, signing away 20% of their media revenue, in perpetuity, in exchange for $1 billion up front. It's even worse than signing a 20-year media rights deal for your conference.
Who said they are signing away 20% of their revenue?
1) while many companies pay dividends to equity owners, they aren’t required to unless it is specified by the original investment parameter (eg share class)
2) if this deal does specify a dividend or yearly payment to the owners of the 20% stake, it doesn’t need to be 20%, they can set it at how ever much they want. I’m sure for this particular deal there will be some annual disbursement, but I doubt it will be 20% of revenue.
3. Also, disbursements are usually based on earnings, not revenue before operating expenses are paid. I’m sure the deal could specify revenue though since the conference cash flows would be minimal after paying the schools. So forget this point.
4. Back of the napkin math says that if CVC thinks the B12 can 2x the media deal by 2031, through the right investment and management, then CVC can earn 12.5%/yr return over 6 years unlevered. Thats before any dividends or revenue share from the B12. Now add in the high possibility CVC would finance this with debt, and say CVC will ask for 4-5% of revenue annually from the B12, then you get to a nice 25%/yr levered.
Oh and here I thought that they were just handing out money.
No shit, any financial institution expects to be paid back, is expecting some form of ROI/E, and will have terms on collateral.
I thought they were buying a stake in the conference? In which case, it's not a loan, doesn't need to be paid back, and there is no collateral. What it does mean is there will be a reduction in revenues for each member in perpetuity unless the conference collapses, or they buy back whatever they sold.
Obviously easy to scoff at the idea when the SEC and Big Ten are the ones commanding 70%+ of all revenue generated in college football.
It truly sucks for the Big 12 to give away 20% of their conference just for a quick cash infusion. But I don't see a choice unless they just accept that they're not going to keep up and just bow out of the race.
Pretty sure some of the Big XII schools are scoffing at the idea too.
Keep up with whom? The SEC and B1G? Even with the money they are not going to keep up. The B12 is likely going to be firmly the third place conference with a large gap between 2 and 3. That is keeping up.....the AAC and MWC and Sun Belt are the ones not keeping up
> But I don't see a choice unless they just accept that they're not going to keep up and just bow out of the race.
I rather just do that. We don't need to keep up with the Jones. Just be happy being 3rd or 4th and let it be.
The problem the Big 12 and ACC have is they have some members that are just happy to be in any power conference and others that aren't going to be happy unless they're in the Big Ten or SEC.
That makes long term decision making tough.
The difference is the Big 12 is comprised of schools that are somewhat left behind -- none of the brands outside of the ex-P12 members are large enough that they would get any traction from the B1G. There's also the whole AAU status thing to get into the B1G. None of them will make it into the SEC lol.
The Big 12 should be the ones sitting pat and waiting for things to play out, ensuring that their universities continue to invest in their programs and remain as competitive as they can through traditional means.
The ACC is the one that should be looking at out-of-the-box solutions as the conference that is already destined to somewhat implode.
The ACC and Big 12 have slightly different issues with what you're saying though. The cavern that exists between the top and bottom of the ACC is much larger and more consistent than the Big 12. I'm sure there are plenty of programs that are happy to be included in both (especially the new members of each conference), but the parity in the Big 12, and type of competition, is much different than that of the ACC.
That's why I think the "Magnificent 7" idea last year had some legs. It wouldn't be the worst thing in the world if the public/football-first schools split from the private/basketball-first schools like what happened with the Big East.
This is why I think the FBS could still survive being ACC and B12 being the top dogs and having the G5 tag along. 14 team playoff with all 7 champs and 7 at large. Top 2 champs get a bye the other 5 champs host home playoff games. With 7 at large spots pretty much EVERYONE in the restructured FBS would have 2 legit chances of making the playoff. Win your conference or schedule a tough non con and win your games and hope to get in as a at large.
When the B1G and SEC start to consolidate those teams can join the FBS and play for a natty.
The race is done over man.
The Big 12 essentially talking about taking payday loans to keep paying the mortgage on a house in a neighborhood they can no longer afford to live in
I'm not saying the Big 12 should just roll over and die either but the naming rights, and Big 12 Mexico while cringe to me is the type of stuff that atleast isn't destined have a negative bottom line impact.
The college football community: “the big 12 has to be ahead of the curve or they’ll get eaten by the Big 10/SEC and several teams will be left out.”
Also the college football community: “the big 12 needs to stop trying out all these new things and play like everyone else.”
Fucking pick one.
The next thing they’ll do is stop playing other P4 teams completely except in the playoffs. They’ll play FCS or G5 teams and use the strength of their conference schedule to get 2 or 3 loss teams in the at-large bids. Eventually it’ll be used as an excuse to push us out of the playoff completely. The sub feed has been covered in teams cancelling OOC P4 games. Looking at this as the SEC/Big 10 aiming to create a super conference, it makes sense that they’d essentially cut the other conferences out of any opportunities to earn money/prestige from playing even their lower level teams in playoff and bowl games. They want the “average” sports viewer to only watch games from their conference and not even bother watching other conference games. Eventually this would strangle the Big 12 and ACC (if it still exists) and force them to consolidate. And if we do that, a lot of teams would get left out in the dark. My own included.
Super bleak, but an honest assessment. The problem is the two conferences (and the network masters) are driving the bus and have a ton of levers to pull. We all got a small preview with the Seminoles last year how quickly the narrative can be controlled through client media.
It is all starting in the preseason rankings too. Is there any reason that a last season 8-5 USC will be ranked in the pre season while a 9-4 West Virginia won’t be? Not really, and that preseason ranking will carry them and their conference opponents the rest of the year. This will only compound more if/when the B10/SEC start ducking B12 OOC matchups.
He really said this in the dumbest way possible but he's right. Private Equity just spells trouble, they are trying to extract the most money out of your company in the short term. Does not bode well for the future of this conference imo
i feel like webmasters that work for content companies that want 100% of their content paywalled, but allow the product to be crawled by archive(dot)is or similar should be fired. I'm not going to subscribe to an out of state paper for 1 article, though i do subscribe to several that i regularly read - but it shouldnt be one or the other with subscribe or dont read the article (unless you go to archivedotis).
[Here is a non-paywalled gift link](https://www.mercurynews.com/2024/06/18/why-the-big-12-should-consider-private-equity-winning-football-can-counteract-the-enrollment-apocalypse/?share=cromwnesh8cu0moog4hs).
I surely do not want college sports to join this league of companies ruined by private equity:
* Toys R Us, or practically any company bought by [Bain Capital](https://en.wikipedia.org/wiki/Bain_Capital).
* Any newspaper now owned by [Alden Global Capital](https://web.archive.org/web/20211103031950/https://www.theatlantic.com/magazine/archive/2021/11/alden-global-capital-killing-americas-newspapers/620171/) (this includes the *Mercury News*).
* [Yahoo](https://www.theverge.com/2021/9/2/22653652/yahoo-aol-acquired-apollo-global-management-private-equity)
* [Twitter](https://techcrunch.com/2020/03/09/twitter-elliott-silver-lake/)
Those not involved in private equity also want to be paid back when investing in something. That’s more of a “human being” thing.
I’ve yet to hear one person who puts their money in a 401(k) say “man, I hope I don’t get this money back.”
Thanks for the incredible insight Greg. I’m skeptical, but not entirely opposed depending on what the deal itself looks like and how we plan to use those funds. I don’t want us to have to take this route, but our options are try and find some way to grow our revenue or just resign ourselves to being financially uncompetitive.
If we had the mentality of the later, this conference wouldn’t even exist today. Damned if we do, damned if we don’t, would rather we try and attempt to stay in the game than just roll over and wait for death.
[Here is a comparison of FSU's recent capital raise to USF's showing the increased costs of private capital.](https://billfarley.substack.com/p/private-capital-stings-the-university). Private Equity is notoriously aggressive in pursuing a high rate of return for investors without regard for the underlying business.
So do the people signing those media checks Greg, but you don't seem to give a shit what the consequences are when the check is made out to your conference.
Private equity is going to be shit.
But the people who now want everyone outside the SEC/B1G to all become FCS schools are also shit.
There are no winners here because a bunch of gatekeeping assholes are making sure they are the only winners.
Of course they want to be paid back. It is already on record that the Swiss entity says they expect increased valuation to be their reward when they are ready to sell. Nothing unusual in this.
Today: >"In my experience, those involved in private equity want to be paid back." In 2 years >"Wow that's a lot of zeros"
This is a good point. The Big 12 isn't catching up, they’re just setting the market rate for the other conferences IF this works.
In what sense? Why would the SEC and B1G need to go to PE or care what the Big 12 when they already make buttloads of cash?
Highlighting the “IF” part of my comment, let’s just say that CVC is capable of doing something to increase the value of the Big 12 that is beneficial to the conference. The SEC and B1G aren’t going to just sit there and not take the money. Have you ever seen these 2 conferences leave money on the table and say “nah we’re good”?
My point is... you have it backwards. The Big 12 going to Private Equity isn't setting the market rate. The SEC/B1G have ALREADY set the market rate, and everyone is trying to play catchup. Why would the SEC/B1G give up potential future revenue to PE when they already run the show from the traditional TV media networks? In other words, PE is typically used to help small companies become big (Big 12 = small; SEC/B1G = big). In another post, I mentioned that it only makes sense for Big 12 to take PE money if they have intention of creating serious value. That value can only be created with brands, such as the Big 12 perhaps using that PE money to go and "buy" Florida State and Clemson. Possibly Miami. Perhaps help them fund their exit from the ACC because obviously the SEC and B1G have no intention of doing the same.
I appreciate the response. I see where you’re coming from I just see it differently, specifically 1) that the P2 wouldn’t turn to selling equity if it benefited them in some way since they’re still in competition with each other and 2) that the Big 12 presidents are going to all agree to give up tens of millions each to bring in FSU and Clemson, or any other school.
Every conference (in this case, Big 12/SEC/B1G) has its strengths and weaknesses. Even for the B1G and SEC, if they both went to Private Equity, it would be for different reasons. Currently, I just don't see why the SEC/B1G would be able to generate more value more than what they already bring. The only way that would be possible, is if College Football separated itself from College Athletics entirely which is not impossibly, but unlikely at least in the near future. The Big 12 has value and growth potential if the money is put to good use. The Big 12 cannot play the short game if they are looking for longterm stability because let's face it.... only Utah and Kansas would even be remote targets for expansion for the P2. Everyone else has an uncertain future. If the Big 12 has to give up even $10 Million just to grab FSU/Clemson, long term, I think that is a worthwhile tradeoff. Which again, is why Yormark is trying to find other avenues of revenue such as selling off naming rights (which I think every conference inclusing SEC/B1G will eventually do)
> Perhaps help them fund their exit from the ACC because obviously the SEC and B1G have no intention of doing the same. Tinfoil hat theory, but the Big 12 having the reserves on hand to help breakup the ACC may be a worthwhile endeavor. Even if it wasn't for those particular teams. If the P2 sniffs blood in the water, they're going to snatch UNC, Clemson, etc. Big 12 PE money would allow the conference to not be totally left behind as the "P4" transitions into the "P3" upon the death of the ACC. When the ACC is broken up, if the Big 12 doesn't get a piece of the pie, the Big10 and SEC will gorge on the whole thing because that's their avenue for growth. A PE loan may be less about catching up for the Big 12 and more about keeping some skin in the game as the future of CFB undergoes even more radical changes. Tinfoil hat theory of course. Maybe the ACC will be fine for a long time. In reality it really do be about them looking at alternative avenues to create growth and stability for the conference.
What benefit does Florida State and Clemson bring to the SEC? Florida State would easily become one of the top teams in the conference, and I'm not so sure that a conference with enough top-heavy teams already (Texas, Bama, Georgia, Oklahoma) want to add in MORE competition. Then you have middlepack schools (A&M, Auburn, LSU, Ole Miss, Tennessee, FLORIDA) who can't seem to get over the hump, but now they have to worry about Florida State? Clemson. Clemson? Where have they been the past 4 years? Are they going to actually compete in the SEC? Based on what evidence? Clemson's dynasty is over. The schools is not a flagship, and they will most likely end up 7 to 8 win team per season resulting in loss of viewership. They are a redundant market because the SEC already has a similar profile with the Gamecocks. The SEC wants UNC and Virginia. They don't have a footprint in those states, and neither school poses a serious threat to the status-quo of the SEC hierarchy. UNC and Virginia also solve the SEC's "academic prestige" problem. Please, justify why the B1G would invite FSU and Clemson, at anything more than partial shares...
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> Florida State would easily become one of the top teams in the conference ? They'd likely join the middle of the pack group. Which by the way you tossed LSU into, even though they've won 3 national titles since 2003.
The SEC should go public so I can short Mississippi State into the dirt
That's not true. SEC / B1G set the necessary rates for TV revenue, but the B12 is doing anything they can to close the gap. What they're forgetting here, is that this is a revenue stream that the SEC / B1G are currently not utilizing. So if they prove it out, those two can just add on the extra revenue stream and re-open the gap.
> when they already make buttloads of cash? I counter with: - Why poach schools from other conference when they already... - Why renogotiate payouts when they already... - Why threaten to blowup college football when they already...
uh, they ALWAYS want more cash
Because this is a pivotal moment for college football and getting more money up front can separate the conference from the other.
And if it doesn’t?
Hugh mistake.
Greg Sankey Brilliant Maxim #1: Investors want a return.
was gonna say.. Banks want their money back. PE firms want to leverage their investment and revalue projected future cashflows and sell their equity stake at 6x what they bought it for and get the hell out. Then if the house crumbles.. doesn't matter, I got mine, the conference should have run their house better.
Dont forget PE stripmining every little detail, cutting every cost of the operation to maximize investor profit, leaving behind little more than a hollowed out husk barely functioning.
Like what Golden Gate Capital did to Red Lobster before they sold to Thai Union
“I have an idea to make quick money! Sell our land/buildings to people then just rent them back! This won’t backfire at all!”
It kind of makes sense since the real estate is the real asset. KMart/Sears was the pioneer of this. Running a business that is efficient and turns a profit takes a lot of work. Buying a business for the real estate is quick, low risk, and it cash flows for the duration of the venture.
Quick note, Kmart Sears didn't pioneer this. It's a pretty old move, going back to at least the 80s when PE did this with factories. It might go back further than that.
Honestly it’s why I’m glad Sony bought Alamo Drafthouse. Better a company with a vested interest in keeping movie theatres going than Private Equity assholes
Ehhh. This is Reddits view of PE but not really how PE ends up working a lot of the time. There are absolutely some times where the assets are the most valuable parts of the business and they're harvested and the business is left to die, but more often, PE just buys poorly run businesses and turns them around. Some examples of really successful PE investments where the company was successful afterwards: VMware, Dell, Burger King/RBI, HCA, Snapple, Gulfstream, Kinder Morgan, Hilton, Alltel. But most PE deals you'll never hear about because they're buying small companies worth more like $1 billion that are private. Hexion, berry plastics, and momentive, for example, were all chemical companies that were acquired by one PE group and are still doing well, but no one outside the chemical industry would know about them.
I mean, Dunkin is still trying to pay off the debt load put on them by Bain, and they went public 13 years ago.
>and they went public 13 years ago. Dunkin is not public. They were bought by Inspire Brands in 2020. As a treasury person, that's also just not how debt works. The IPO was done with full knowledge of the current debt obligations of Dunkin, so investors were paying for the company *and* the debt. So it's not like investors considered the debt load unreasonable at the time of IPO. Also, they didn't struggle to complete significant buyback programs. They weren't struggling with the debt at all. It makes sense as a company to be levered to some extent, so still having debt on the balance sheet doesn't mean they were burdened or that BCG unnecessarily loaded them up with debt. At the time of their sale, they were still generating significant FCF. Also, Dunkin more than doubled the debt load they IPO'd with by the time they were bought by Inspire. Hardly BCG's fault.
Why can't they just not do the asshole thing then and stick to doing good in the shadows?
What's the asshole thing? You mean the stripping for parts? Sometimes that's what makes the most sense in terms of market efficiency, and that's why there's profit in doing it. If you have a business that makes $1 million per year, but the real estate you use for that business could make $2 million per year by itself, your business is effectively losing a million a year. It'd be more efficient for everyone to just use the real estate for something else. Someone buying your business, shutting it down, and then selling/utilizing the real estate better would reap those rewards.
People who buy up a business, set it up to fail, loot it then sell their shares and move on without a second thought are the worst of society. I don't care if they make money. The stereotype of PE's being a bunch parasites exists for a reason. Corporate raiders are corporate raiders and it's all "just doing business" until it's *your* job that gets liquidated for the shareholders. >It'd be more efficient for everyone to just use the real estate for something else. That stuff just sits in a portfolio and you know it.
>until it's your job that gets liquidated for the shareholders. Buddy, it's happened to me several times. My first job out of college was cut when my JV got sold off. My last team at VMware was laid off entirely with the Broadcom acquisition literally this year. I would've loved to continue working at VMware - it was a great place to work. But ultimately, the economy functions much better when assets and companies are utilized efficiently, and that leads to higher salaries and better jobs for people in the long run. Inefficiency for the sake of saving jobs is not a good thing. >That stuff just sits in a portfolio and you know it. Then it wouldn't be making money as a more productive asset. If the real estate from a business is worth more than the business itself, it gets rented out or sold to a business that can better use it, and that company is better off and can hire more people to expand and be more competitive. It doesn't just sit and collect dust, it gets used better. Otherwise there wouldn't be any money in separating it from its current use.
> It doesn't just sit and collect dust, it gets used better. As someone who drives by old industrial areas that are now no longer in business pretty much every day I beg to differ. There's a paper factory in town that sits derelict and unused since the day they closed the doors for good. Still owned by the company that ultimately shuttered the place. Any attempt to get them to sell or use the land for something else is always met with either a simple "No." or "We want a match on cleanup costs and grant money". It'll sit there and get passed around shell corporations for tax purposes but that land is never going to be used again unless they can get the taxpayer to pay for the privilege. I've gone through it twice now too and it fucking sucks. I'm so tired of my life being completely uprooted because some shareholder got scared of a bad quarter and decided the best course of action was the burn it all down and sell it and when I mention this I get "It's all part of the business cycle man, just accept it." PE's are a "Fuck you, I got mine" kind of business and it is not necessary
Getting PE investment doesn’t mean they’ll change day-to-day operations. They’re not buying a majority stake in any program lol
This is how it works most often.
Only 1 in 10 has to work out in their minds. The rest? Ehh, we got our money
Everyone is making jokes, but he just said exactly what every single person in the original announcement thread was warning about.
Typical for any discussion about the sec on /r/cfb
Oh my god, am I Greg Sankey? This job is easy!
Greg Sankey: Fuck conferences, get money.
Can’t wait for his book to come out Greg Sankey: The Art of the Steal what the futbol Super League tried to do but get away with it because money money money
As the warrior poet Biggie smalls once said, “they gon want they money rain, sleet, hail, snow”. - Ten Crack Commandments
ESPN investors wants a return on their ownership of the SEC conference? What?
I guess that's what I don't understand about the proposal. Say some firm gives the Big 12 a billion dollars in exchange for like a 25% stake in the league. After that initial billion is distributed and spent, wouldn't the BXII schools be making less money annually because now a quarter of their revenue goes to the private equity firm?
He are smrt!
How long till they blame Techs' fat little girlfriends for eating all the shrimp?
That’s been the source of all the problems the BigXII has ever had tbh
I miss the Big 12. I don't know if they would have added a permanent x division rival to keep the Oklahoma rivalry alive, if that would have kept it from failing or not. Just seems like one of the many stupid blunders that doomed the conference. I almost want Congress to step in and send shit back to how it was. Edit - if a separation by sec and big 10 is inevitable, then get congress involved. Blow every conference up and start from scratch while trying to maintain big program matchups with some regionality and historic rivalries I still care far more for Oklahoma state and Kansas state, than fucking Indiana, Illinois, Purdue, Rutgers and Maryland combined
Congress has much bigger things on their plates than the allocation of money in college sports (especially now the players can get paid with NIL)
Where you even gonna get shrimp in Lubbock???
Red Lobster of course.
They're lucky the Lubbock location wasn't on the chopping block this round.
It never will as long as the fat little girlfriends keep playing their part!
All you can eat?
Nowhere fresh
They can source local crabs
Endangered species due to habitat loss w/ clear cutting
Underrated comment
Jazz Louisiana Kitchen. The fried shrimp are done in hushpuppy batter; they were so good when hungover
That was my group's pregame spot before basketball games circa 2007-2011 and you just brought back so many memories.
Lonestar Oyster Bar. Absolute dive that doesn't feel like it should exist, but I've never regretted going.
Sysco truck.
The death of Red Lobster is somehow tied up in this isn't it
I’d be pretty pissed if someone ate all my shrimp to. Js.
I’m confused what the PE exit strategy is here - is this really a 3-7 year investment?
No it’s a much longer one, is hard to see how it pays off though if it’s $1bn for 20%. Would need everything to stay in place til at least 2040 to see a positive return on investment
The fund must have some serious dry powder to hold that long
CVC has it, and they didn’t get rich not making money so who knows maybe it does work
Dry powder has been at historic highs for a while now across the PE industry, so wouldn't suprise me if that were the case for B12 suitors too
Perhaps they think they can lobby to have the feds pass laws that strong arm a football league that the Big 12 is a part of, therefore drastically increasing the league's value?
Which is why it is so weird. Most PE forms need an exit at max around 10 years. I just don’t see how this happens
Wrong. They are gambling the value of the media deal will increase significantly by 2031. At that point they can sell their stake at a higher valuation. All while collecting some dividends over that six year period.
And theoretically who would they sell it to?
Saudi’s, GIS, some other PE fund, IPO, SEC (lol). I’m not saying there is a high likely hood buyer right now, but I bet CVC thinks there will be by 2031. And the fact that CVC is showing interest means there are probably other potential buyers out there already.
It doesn’t have to be a longer one with the way sports franchises are valued
No one really knows for sure what the end goal is, how the money would be used, or what the terms are.
Use: Big 12 execs swim in gold coins. Whatever gets stuck in their swim trunks gets passed along to the school. Terms: The souls of all mascots.
I’m not sure Kansas State’s half man half cat demon spawn ever had one to begin with
CVC invested in the Formula 1 Group in 2005 and exited in 2016 by selling their stake to a media company, Liberty Media. Basically they commercialized as much as possible and upgraded the media infrastructure, then brought in new ownership that they thought could leverage their improvements to greater growth. They seem to have a holding period of 6-15 years. Their exit was cash and ownership stake in the new buyer.
Working out pretty well for them considering F1’s boom
According to the Dodd article, they think we’re undervalued and that given the direction of media rights deals have trended, they believe we’ll be substantially more valuable after the next contract cycle. Buy in now, sell their stake for a profit later
So they are basically betting against the media rights wall that many expect the sport to hit next cycle.
Who outside of Reddit expects there to be a wall?
There will be no wall. If there is a tiny wall (Cable Viewership); Sports plow through it.
No one. It’s almost entirely confined to weird little pockets on Reddit and based on a combination of the gut feelings of people who don’t work in the industry, plus Disney being vaguely interested in potentially off-loading ESPN. The former is worse than useless. The latter is just normal business.
It’s not even gut feelings, it’s wishful thinking by people that somehow all the largest media companies will fail and somehow college sports will survive that and they can go back to the old local conferences somehow lol
This is a much better way to put it. Something like wishing for apocalypse. You see it a lot in soccer too.
Right on. You see it in politics too
Depends on what you think a wall is. There will always be money for sports, but can we continue to expect media rights to double every cycle? Maybe they only increase 25%.
Pretty much, agree or disagree but CVC is apparently willing to bet a billion on that wall not hitting
People have been predicting a media rights wall for 20 years. Only the ACC got hit by it by having their contract coming up the worst time in the last 75 years.
You could argue the Pac12 hit one.
Did they hit a wall, or were they just managed poorly with out of touch expectations and your most valuable brands flirting with other conferences?
All the above most likely. Still, ESPN offered ~$32M a year and when that was pulled, no other offer came close. It's just a single data point obviously, gonna be a while before we can see if there's a trend.
Which would have been an increase even after USC and UCLA left? I may have that wrong. Edit that yes ESPN offered the Pac 12 a little more money without USC and UCLA than the Big 12 with Texas and Oklahoma. The Pac 12 did not hit a wall, it was actually not worth as much anymore.
The Pac 10 was offered a media deal higher then their previous one and higher than the B12s. And even still they had an Apple deal that could have paid them their own insane valuation if they hit performance benchmarks.
Pac's problem was poor leadership that had no idea what it was trying to do. There is zero chance Washington/Oregon didn't already have a decent idea what they would have to accept to join the Big Ten very soon after the USC/UCLA announcement. The only question for them was what could the Pac 10 get on their own and how could they use that to negotiate with the Big Ten. Incredibly shitty strategic management as well as Washington/Oregon waiting for an excuse to leave doomed the Pac.
Hell, the NBA saw a ratings decline, yet they 2.5 times their money in their new contract over the last one
Plus a guaranteed minimum return each year. Maybe even enough to cover the cost of capital until they can flip it.
>they think we’re undervalued and that given the direction of media rights deals have trended, they believe we’ll be substantially more valuable after the next contract cycle.
i think we're looking at more of a pref equity type of investment, buy down the equity stake with cash generated by the media rights or something
Allow about 6 more teams in for a huge payout, crank of on field sponsorships, partner and take a cut of NIL, etc - exit in 5 years taking all the extra money as profit walking away with 5x
This is more accurate than people think. The only return that boosters want is wins/championships.
If they took the money in order to generate consistent and more money in the future, then maybe not a bad deal. If they take the money just for the sake of money, then it’s a terrible idea
How do they make more money? Say we are talking about MLS or the NWSL. You take in $100 millions of investment to build stadiums, improve training infrastructure, buy better players, increase advertising, and create new franchises. You aren’t making back that money thru advertising and concessions. You make it back when you sell the team to someone who purchases it for 5x what you bought it for. But how do you do that in College Athletics? You have all the built in infrastructure. You can’t sell the college. College basketball could be bigger but outside of undervalued media rights deals, where is there increased revenue that could pay back these dividends? Merchandising? Surely not.
Appearances in the playoff bring in more money. If you're a middle-of-the-road or struggling program, winning will attract more fans, or bring back disengaged fans. Everyone is just speculating though. No one knows for sure yet what the terms are or what the plans are. Tentatively, I don't think it's a great idea, but I don't think anyone has enough information yet to form an opinion past "PE bad," which it usually is.
I don't care if I'm Ohio State, Georgia, whoever, there's no way I tie my ability to pay back private equity investors to wins and losses.
> You can’t sell the college. Why not?
Better players, coaches, facilities, marketing = more winning and more eyeballs = more valuable media rights deal = increased value of the conference = return for the PE fund
For one, there are absolutely revenue streams that arent being utilized. Are the naming rights to stadiums being sold? Are there a dozen corporate logos on your jerseys? The CCG trophy is sponsored by who exactly? What billboard is the side of your stadium doubling as?
You don’t need PE to utilize those revenue streams
They’re giving up equity, it’s a shit deal regardless given their leverage is going to be minimal This isn’t one team getting a billion, it’s a dozen teams getting a paltry 80
I think the idea is they take the money, get better, and get a higher TV contract due to better teams next round hahah
B1G/SEC: “Why are you the way you are?” ACC/Big 12: “You did this to us! If we’re not proactive, you’re gonna kill us like the Pac.”
The ACC should of thought about that before they murdered the Big East.
Dog eats dog world
Doggie dog world.
The only team from the original big east that got left behind was temple, but they were only an associate member and were kicked out for being so bad
Look, I'm not going to say that the B1G doesn't have some responsibilty here (I mean, what did we even do to the PAC), but the PAC12 kind of just killed itself.
That's so obvious it's almost ominous to say it like that. Is he suggesting that there's going to be a point where the Big 12 simply isn't going to be able to recover the $1 billion to pay it back? Is this a warning to the private equity investors about the future?
They aren't ever going to have to pay the $1B back. PE buys 20% equity for that amount. They'll simply forgo 20% of future earnings, which will pay back the PE firm in about 10-12 years.
I am aware that it's not just a loan, but is the implication that a 20% ownership stake in the Big 12 going to continue to devalue to the point where they may never even recover their principal investment of 1 billion?
I don’t think he is speaking out of concern for PE.
Oh I don't think he gives two shits about the PE. I'm just speculating if this is a tactic to scare away the PE because of the "implication".
No, the implication is that the PE firm expects a certain return on their investment. They’ll do whatever it takes to get those returns, usually at the detriment to the company (the Big 12 in this case). PE is notorious for this
It's not "not just a loan." It's not a loan in any way, shape, or form. It's a purchase of equity, just like you forking over cash for dinner. Only the PE firm is buying something which will return to them a guaranteed cash flow, instead of something to eat.
How is the Big 12 going to generate $5 billion in the next 10-12 years just to have PE break even?
? If PE takes 20% of all revenues for 10-12 years, they will have earned their money back and will be in the black from that point on. If we figure 20% of those distributions is somewhere around $100M per year, 10 years sounds about right. Not sure where you came up with $5B, since the reports have only been $1B.
I think the implication is that if the Big-12 can't pay back their PE investors then they'll get the "red lobster" treatment, liquidated for their assets.
Yes but Red Lobster was put in that position by their successive string of owners looking to extract profit. PE investors made RL sell the land the restaurants were on then lease it back so they could charge rent. Then RL got sold to a fishing company that forced RL to use them as a supplier and jacked up the prices they charged. This can end disastrously for the Big-12 but unless they sign the land rights to their stadiums over to PE, idk where they’d get fucked as hard as Red Lobster did.
You think it’s obvious. And yet private equity is still buying up everything including daycare centers and ruining them in the name of profits.
It's not hard to find a business owner who no longer wants to own their business and it's harder than ever to find an average person who has capital to buy out something like a daycare.
Ehh, maybe your experience has been different, but there's a lot to be said for corporate ownership of daycares. Daycare centers have very strong founder effect issues. The 1 person that had the crazy to build it out from nothing and knows all the compliance rules and how to do all the paperwork for the 10+ different state/federal programs they need funding from to break even and puts in all the hours for love of the kids is great. Then they want to retire... Who's going to buy it? The job pays sweet fuck all, the profit margins are crap and your compliance costs (if you have to pay hourly staff to do it) are insane and your fixed costs are probably damn high as well. They can sell on a private loan to a trusted employee, but the payback is 30+ years or never (if the person ends up sucking). No normie can finance it and the banks won't give you a loan at economically viable rates for 1-3 centers. So you amortize out the compliance costs across 5-10 buildings and make sure that the paperwork is actually done correctly and one on time. You have 1 head (but the person heads up 5-10 buildings so it's much lower cost/child) and there's actually enough profit to make keeping them all in existence worthwhile. Maybe you run a few in economically disadvantaged areas b/c it brings your overall costs to a level where you can get grant money. If you can't combine 5-10 of them, you probably close and re-open in the richest area you can afford and never even bother with a marginal area. Source: 2 kids in private daycare. The owner is great, but if/when she retires their plan seems to be "demolish the amazing building and sell the land to a developer". My kids will be long gone, but it'll be a damn sad day.
There's something distasteful to me about taking a conference's biggest brands and then punching down on it when it's trying to go outside of the box to continue competing (because it really has no other choice)
Yeah, I agree, and the fact that it’s such a mind-numbingly obvious take. It would still be a little distasteful, but it would be different if he gave an insightful answer. As is, it’s like putting someone who you’ve loaned money to in a position where they have to go to a payday loan place, and then saying “you know, the problem with payday loans are that they charge really high interest.”
My younger brother isn't much of a scholar but I'm still not going to recommend he enroll in DeVry just so he can get a degree like his older sibilings.
Did you steal his scholarliness? Just to complete this metaphor.
Tell him to go to a vocational school at a community college. There's a million grants you can get to pay for that stuff to make it cheap or basically free. And you'll pretty much be guaranteed to get an actual job instead of whatever devry or University of Phoenix can give you.
Probably knocked him in the head a few times growing up if I know anything about older siblings.
“Private equity” aka banks controlling CFB would ruin the sport for me once and for all. I’m tapping out if that happens. Investment bankers will ruin CFB. Full stop.
Trying to be too clever, signing away 20% of their media revenue, in perpetuity, in exchange for $1 billion up front. It's even worse than signing a 20-year media rights deal for your conference.
Who said they are signing away 20% of their revenue? 1) while many companies pay dividends to equity owners, they aren’t required to unless it is specified by the original investment parameter (eg share class) 2) if this deal does specify a dividend or yearly payment to the owners of the 20% stake, it doesn’t need to be 20%, they can set it at how ever much they want. I’m sure for this particular deal there will be some annual disbursement, but I doubt it will be 20% of revenue. 3. Also, disbursements are usually based on earnings, not revenue before operating expenses are paid. I’m sure the deal could specify revenue though since the conference cash flows would be minimal after paying the schools. So forget this point. 4. Back of the napkin math says that if CVC thinks the B12 can 2x the media deal by 2031, through the right investment and management, then CVC can earn 12.5%/yr return over 6 years unlevered. Thats before any dividends or revenue share from the B12. Now add in the high possibility CVC would finance this with debt, and say CVC will ask for 4-5% of revenue annually from the B12, then you get to a nice 25%/yr levered.
Almost a second rights deal which presumably would be far more iron clad if written by a PE firm.
Oh and here I thought that they were just handing out money. No shit, any financial institution expects to be paid back, is expecting some form of ROI/E, and will have terms on collateral.
I thought they were buying a stake in the conference? In which case, it's not a loan, doesn't need to be paid back, and there is no collateral. What it does mean is there will be a reduction in revenues for each member in perpetuity unless the conference collapses, or they buy back whatever they sold.
Why would Greg Sankey give a putz like Wilner the time of day?
He's not wrong, but also: stfu Greg Sanktimonius
Obviously easy to scoff at the idea when the SEC and Big Ten are the ones commanding 70%+ of all revenue generated in college football. It truly sucks for the Big 12 to give away 20% of their conference just for a quick cash infusion. But I don't see a choice unless they just accept that they're not going to keep up and just bow out of the race.
Pretty sure some of the Big XII schools are scoffing at the idea too. Keep up with whom? The SEC and B1G? Even with the money they are not going to keep up. The B12 is likely going to be firmly the third place conference with a large gap between 2 and 3. That is keeping up.....the AAC and MWC and Sun Belt are the ones not keeping up
That gap between 2 and 3 is only going to grow, and unless drastic action is taken it’s going to become bigger than the gap between 3 and 6.
I fail to see how a one time investment closes that gap
> But I don't see a choice unless they just accept that they're not going to keep up and just bow out of the race. I rather just do that. We don't need to keep up with the Jones. Just be happy being 3rd or 4th and let it be.
The problem the Big 12 and ACC have is they have some members that are just happy to be in any power conference and others that aren't going to be happy unless they're in the Big Ten or SEC. That makes long term decision making tough.
The difference is the Big 12 is comprised of schools that are somewhat left behind -- none of the brands outside of the ex-P12 members are large enough that they would get any traction from the B1G. There's also the whole AAU status thing to get into the B1G. None of them will make it into the SEC lol. The Big 12 should be the ones sitting pat and waiting for things to play out, ensuring that their universities continue to invest in their programs and remain as competitive as they can through traditional means. The ACC is the one that should be looking at out-of-the-box solutions as the conference that is already destined to somewhat implode.
The ACC and Big 12 have slightly different issues with what you're saying though. The cavern that exists between the top and bottom of the ACC is much larger and more consistent than the Big 12. I'm sure there are plenty of programs that are happy to be included in both (especially the new members of each conference), but the parity in the Big 12, and type of competition, is much different than that of the ACC.
That's why I think the "Magnificent 7" idea last year had some legs. It wouldn't be the worst thing in the world if the public/football-first schools split from the private/basketball-first schools like what happened with the Big East.
It’s gonna be hilarious and sad in three years or so when the other two power conferences get greedy and do the same thing.
This is why I think the FBS could still survive being ACC and B12 being the top dogs and having the G5 tag along. 14 team playoff with all 7 champs and 7 at large. Top 2 champs get a bye the other 5 champs host home playoff games. With 7 at large spots pretty much EVERYONE in the restructured FBS would have 2 legit chances of making the playoff. Win your conference or schedule a tough non con and win your games and hope to get in as a at large. When the B1G and SEC start to consolidate those teams can join the FBS and play for a natty.
The race is done over man. The Big 12 essentially talking about taking payday loans to keep paying the mortgage on a house in a neighborhood they can no longer afford to live in
Payday loan to pay the mortgage is a perfect analogy
I'm not saying the Big 12 should just roll over and die either but the naming rights, and Big 12 Mexico while cringe to me is the type of stuff that atleast isn't destined have a negative bottom line impact.
Agreed. PE is a horrible idea. The others are more creative or cringe than they are bad.
going off topic here, but it’s so bad that this financial move is way more common than it should ever be
Growth at any cost mixed with the infinite growth myth is dangerous as all hell.
Nothing getting past this guy
The college football community: “the big 12 has to be ahead of the curve or they’ll get eaten by the Big 10/SEC and several teams will be left out.” Also the college football community: “the big 12 needs to stop trying out all these new things and play like everyone else.” Fucking pick one.
I think its some of us have personal experience with PE , and none of them good.
They want to be able to preach about how they play out of conference P4 games without those games actually being competitive.
The next thing they’ll do is stop playing other P4 teams completely except in the playoffs. They’ll play FCS or G5 teams and use the strength of their conference schedule to get 2 or 3 loss teams in the at-large bids. Eventually it’ll be used as an excuse to push us out of the playoff completely. The sub feed has been covered in teams cancelling OOC P4 games. Looking at this as the SEC/Big 10 aiming to create a super conference, it makes sense that they’d essentially cut the other conferences out of any opportunities to earn money/prestige from playing even their lower level teams in playoff and bowl games. They want the “average” sports viewer to only watch games from their conference and not even bother watching other conference games. Eventually this would strangle the Big 12 and ACC (if it still exists) and force them to consolidate. And if we do that, a lot of teams would get left out in the dark. My own included.
Super bleak, but an honest assessment. The problem is the two conferences (and the network masters) are driving the bus and have a ton of levers to pull. We all got a small preview with the Seminoles last year how quickly the narrative can be controlled through client media.
It is all starting in the preseason rankings too. Is there any reason that a last season 8-5 USC will be ranked in the pre season while a 9-4 West Virginia won’t be? Not really, and that preseason ranking will carry them and their conference opponents the rest of the year. This will only compound more if/when the B10/SEC start ducking B12 OOC matchups.
Lol exactly SEC/B1G fans want the Big 12 to just accept its place in society. Sounds to me like they're feeling threatened a little by Mr. Yormark...
He really said this in the dumbest way possible but he's right. Private Equity just spells trouble, they are trying to extract the most money out of your company in the short term. Does not bode well for the future of this conference imo
He says that but man I cannot fucking wait to watch The Big 12 Presented by Allstate. Money talks and we already know how everyone feels about that.
Why is this guy such a gaping asshole?
Greg Sankey: Surprisingly anti-Saudi
i feel like webmasters that work for content companies that want 100% of their content paywalled, but allow the product to be crawled by archive(dot)is or similar should be fired. I'm not going to subscribe to an out of state paper for 1 article, though i do subscribe to several that i regularly read - but it shouldnt be one or the other with subscribe or dont read the article (unless you go to archivedotis).
Haha hey everyone let’s point and laugh!
The SEC knows all about private equity.
[Here is a non-paywalled gift link](https://www.mercurynews.com/2024/06/18/why-the-big-12-should-consider-private-equity-winning-football-can-counteract-the-enrollment-apocalypse/?share=cromwnesh8cu0moog4hs). I surely do not want college sports to join this league of companies ruined by private equity: * Toys R Us, or practically any company bought by [Bain Capital](https://en.wikipedia.org/wiki/Bain_Capital). * Any newspaper now owned by [Alden Global Capital](https://web.archive.org/web/20211103031950/https://www.theatlantic.com/magazine/archive/2021/11/alden-global-capital-killing-americas-newspapers/620171/) (this includes the *Mercury News*). * [Yahoo](https://www.theverge.com/2021/9/2/22653652/yahoo-aol-acquired-apollo-global-management-private-equity) * [Twitter](https://techcrunch.com/2020/03/09/twitter-elliott-silver-lake/)
Those not involved in private equity also want to be paid back when investing in something. That’s more of a “human being” thing. I’ve yet to hear one person who puts their money in a 401(k) say “man, I hope I don’t get this money back.”
Thanks for the incredible insight Greg. I’m skeptical, but not entirely opposed depending on what the deal itself looks like and how we plan to use those funds. I don’t want us to have to take this route, but our options are try and find some way to grow our revenue or just resign ourselves to being financially uncompetitive. If we had the mentality of the later, this conference wouldn’t even exist today. Damned if we do, damned if we don’t, would rather we try and attempt to stay in the game than just roll over and wait for death.
as i saw in this thread, we shouldn’t be taking out payday loans (PE) just to have a mortgage in a neighborhood we can’t afford
An equity stake ≠ a loan
In a non liquid market it functionally is.
I read this as Sankey being opposed to the SEC following the Big 12’s lead. Be wary of my reading skills, I did go to an SEC school.
[Here is a comparison of FSU's recent capital raise to USF's showing the increased costs of private capital.](https://billfarley.substack.com/p/private-capital-stings-the-university). Private Equity is notoriously aggressive in pursuing a high rate of return for investors without regard for the underlying business.
And honestly the Big 12 would not be something I would want to invest in. It’s looking more and more likely that the bigger teams will leave.
Didn't we all just learn that the conference media deals are not a sure thing anymore and the value in them are not necessarily going to increase?
So do the people signing those media checks Greg, but you don't seem to give a shit what the consequences are when the check is made out to your conference.
Private equity is going to be shit. But the people who now want everyone outside the SEC/B1G to all become FCS schools are also shit. There are no winners here because a bunch of gatekeeping assholes are making sure they are the only winners.
Of course they want to be paid back. It is already on record that the Swiss entity says they expect increased valuation to be their reward when they are ready to sell. Nothing unusual in this.