Big Ten Conference closes in on Private Equity funding
In the ever changing world of college athletics the Big Ten Conference is closing in on acquiring private equity funding. The vote for a private equity deal will be happening soon according to sources. The deal would infuse $2 billion dollars into the league’s institutions.
The deal has gained steam to get done in the very near future with the structure of the deal coming together quickly.
What does this all mean?
The framework of the deal would create a new division within the conference, called Big Ten Enterprises. Big Ten Enterprises would hold all the conference media rights as well as all conference sponsorship contracts. These shares of this new investment will be divided up between the conference schools, conference office, and the capital group. The capital group, as reported by Yahoo Sports, is connected with the University of California pension system.
This UC pension fund is not a private equity firm. The UC fund valuation turned out to be much higher than anticipated. The 18 teams in the Big Ten Conference have been wanting to see this type of valuation.
According to people that are close to the situation there is momentum to get this deal done relatively soon. However, the conference schools are still working with conference leadership to make the final decision.
What each school would receive in equity is still being worked out with the conference. There is expected to be a slight difference in the Big Ten’s bigger brands with the equity percentage. The difference in equity is expected to be less than percentage point though.
Money, Money, Money
It has been reported that the initial allocation between the conference schools will be a tiered system. The payout for each conference school will be in the nine-figure range.
One of the more interesting parts to this deal is that it would extend the league’s Grant of Rights until 2046. This extension would create stability within the conference. It would also minimize the chance of further expansion. Plus, it would also decrease the chance of any conference teams from leaving and forming some “super conference”.
This infusion of money is greatly needed by some Big Ten Conference schools that are having some debt laden issues. Debt is climbing with the lower brand schools in the conference due to new construction, rising operational costs, the cost of providing more scholarships and direct revenue. That direct revenue is currently sitting at $20 million and is expected to rise over the next few years.
“Think of it this way — the conference is not selling a piece of the conference,” a league source told ESPN last week. “Traditional conference functions would remain 100 percent with the conference office — scheduling, officiating and championships. The new entity being created would focus on business development, and it would include an outside investor with a small financial stake.” (New York Times)
The Detractors of the deal
Not everyone in the Big Ten Conference or outside the conference is on board with this potential deal. Ohio State and Michigan, arguably the two biggest brands in the conference have shared some concerns. The two wealthiest schools in the conference have been lobbied pretty hard about coming to agreement with this deal. The lobbying has come from the league offices as well as individual institutions from the Big Ten.
Other detractors have been some politicians from Washington D.C.
Washington State Senator, Maria Cantwell, stated “You’re going to let someone take and monetize what is really a public resource? …That’s a real problem.” (ESPN)
Cantwell followed up last week by sending a letter to each Big Ten president warning that any deal involving private equity could invite review, including impacting the schools’ tax-exempt status.
At the end of the day, this deal will happen at some point. It’s just a question of when.
Michael J. Wilson-The Daily Waiver
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