Big 12 Considering $1B in Private Equity

[Nor'MidWester]

I also see this as showing teams in the ACC that the big 12 isn't f***ing around and we're not content with sitting by while the big 2 run away with college football. I think it shows that the Big 12 is a shark and they better jump on board or get out of the way. So in that way the money helps and maybe the conference uses it as a monetary incentive as well.

I'm unsure that a PE would invest just to give all the schools more money without an overall plan for the conference to "innovate" and "evolve".

 

[BWRhasnoAC]

Did anyone else hear blind speculation and uneducated opinions? Probably.

HEY! I resemble that remark.

 

[Mr.G.Spot]

I also see this as showing teams in the ACC that the big 12 isn't f***ing around and we're not content with sitting by while the big 2 run away with college football. I think it shows that the Big 12 is a shark and they better jump on board or get out of the way. So in that way the money helps and maybe the conference uses it as a monetary incentive as well.

I'm unsure that a PE would invest just to give all the schools more money without an overall plan for the conference to "innovate" and "evolve".

There is a tremendous amount of additional revenue that BY will tap into. Why? Because he is good at this stuff.

 

[BWRhasnoAC]

I also see this as showing teams in the ACC that the big 12 isn't f***ing around and we're not content with sitting by while the big 2 run away with college football. I think it shows that the Big 12 is a shark and they better jump on board or get out of the way. So in that way the money helps and maybe the conference uses it as a monetary incentive as well.

I'm unsure that a PE would invest just to give all the schools more money without an overall plan for the conference to "innovate" and "evolve".

I see this as the scene in Braveheart where he's going to talk with the general before the battle and says, 'I'm going to pick a fight.'

 

[2122]

Sounds like the days of college jocks 'working' part-time for local car dealers has passed. The money is now sloshing all around.

Having attended ISU 40 years ago, the concept of a billion dollars being invested in ISU's athletic conference is one item in the long list of things I never saw coming...

 

[CascadeClone]

Sorry if already discussed... My hawk friends say the new Big12 members won't go for this because they don't want to be locked into this conference. Anyone else hear this?

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

 

[Cloneon]

Well that wasn’t the point I was making. Whether they’re monopolies now has nothing to do with this convo. They used PE to grow their business and eventually became market leaders. The Big 12 currently is battling a duopoly in a market that has never had PE infusion before.

All that said, I agree, I’m really concerned on the Big 12 taking PE investment. The Big 12 isn’t going to use those dollars for innovative R&D or adding resources or scaling production, or things that would eventually make more money over time. I guess you could argue the cash would get better players, which could lead to better performance, which could lead to bigger media revenue next TV contract. But that’s a stretch.

In my view, it would basically be a one-time loan with insurmountable interest.

I am sorry. I don't think the PE is monopolistic (although it might be the first step). I do, however, think the B1G and SEC are exhibiting monopolistic practices.

 

[Cydwinder]

Counting down the days until "PornHub Big XXX Conference"

It’s been said a few times here but the Allstate Big 12 would be fine with me or Big 12 presented by Allstate but the Allstate 12 isn’t doing it for me. Literally could be rebranded at the end of every sponsorship deal which will ultimately decrease the brand value long term.

 

[Jeffrey Scott]

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

Classic hok troll stuff.

 

[Cyballzz]

Sorry if already discussed... My hawk friends say the new Big12 members won't go for this because they don't want to be locked into this conference. Anyone else hear this?

I would get a smarter friend.

 

[Nor'MidWester]

It’s been said a few times here but the Allstate Big 12 would be fine with me or Big 12 presented by Allstate but the Allstate 12 isn’t doing it for me. Literally could be rebranded at the end of every sponsorship deal which will ultimately decrease the brand value long term.

Agreed the Big 12 doesn't have a huge brand but there is still a brand there so I have a hard time getting onboard with completely changing the name. But certainly not the first league to do this Barclay's Premier League etc...

 

[LLCoolCY]

Sorry if already discussed... My hawk friends say the new Big12 members won't go for this because they don't want to be locked into this conference. Anyone else hear this?

In the article it mentions that the PE firm would want stability with their purchase thus probably an new extended GoR. Considering the PR reporting from multiple outlet implying it is a done deal the Presidents are aware of it and probably indicated they plan to sign when finalized.

"The CVC investment would likely require the Big 12 to stay together long term. 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."

Big 12 considering private equity investment of up to $1 billion for as much as 20% of conference

The proposed deal with a Luxembourg-based firm would bring a massive influx of cash to the league

www.cbssports.com

 

[Nor'MidWester]

Wonder how Pollard feels about PEE? Doesn't seem like him to jump onboard something with as many unknowns or risks as this (that we know of so far), I would guess he's one of the hold outs of this happening.

And Utah, I feel like they are cocky enough to think they have a Big Ten invite waiting for them even though there was every chance for that to happen the last couple years.

 

[Cyballzz]

Wonder how Pollard feels about PEE? Doesn't seem like him to jump onboard something with as many unknowns or risks as this (that we know of so far), I would guess he's one of the hold outs of this happening.

And Utah, I feel like they are cocky enough to think they have a Big Ten invite waiting for them even though there was every chance for that to happen the last couple years.

I hope he keeps that to himself.

 

[cycloneworld]

Lots of opinions here from without a lot of facts. I do not claim to have a thorough understanding of this PE transaction. Apparently a lot of you do.

If they are acquiring only 20% then they are looking for a long-term play and are along for a ride. Usually, PE firms buy majority, control the Board and strategy, and the selling shareholders are receiving a cash payment and another bite at the apple within 5 years.

At 20%, these guys are along for a ride and they know that. Why? My guess is they are going to make between a 4-7% safe and annual yield off the top on their billion dollar investment. They will not have put rights.

At a 6% return, they recoup their money (exclusive of the the time value of money) in 12 years and own 20% of a viable long-term play.

What will out TV revenue be in 2036? Let's say it goes up by 50% so their return is now 9% after recouping their investment. This doesn't include extra revenue to be brought in by naming rights and whatever else Yormark can do in the next 5-10 years.

It appears to me to be brilliant for them and us. They get a stable long-term return without much risk. We split a billion dollars today plus naming rights to get us thru the next 3-4 years.

Because they are buying a minority without put rights, they are along for the ride.

At first blush, this looks outstanding. All u negative nannies need to relax unless you want to double your ticket prices and double your donations, if u make any at all.

Relax.

You do not know private equity if you think they are in it for 4-7% returns. They can get that in the bond market now. They can get 7-12% returns in the stock market. PE wants MULTIPLES of their investment back. If they invest $1 billion, they’ll likely want $2-$4 billion back over their time horizon (5-10 years typically).

And then they’ll sell their 20% share to who in 5-10 years? Likely another PE investor since it’s highly unlikely the Big 12 IPOs.

I know you have a history of thinking you know everything about everything but if you think this looks “outstanding” you aren’t considering the long term impacts. And maybe Yormark doesn’t care either - someone else will have to clean up the mess in 5-10 years.

 

[cycloneworld]

I guess the idea is that the conference is undervalued and that in 2031 when rights are negotiated we'll all profit? But only as long as we keep up in the meantime. Not saying I agree but that seems to be their philosophy.

Also I'm dumb but how does 1 billion divided by 16 over x number of years equal anywhere close to the big ten media rights money?

I’m with you. Getting a cash infusion of $1 billion sounds amazing but that is $62 mil per school. That can put the Big 12 on par with the Big 10 and SEC for 2-3 years. Then what? Sell off another 20%?

 

[Cydkar]

Sorry if already discussed... My hawk friends say the new Big12 members won't go for this because they don't want to be locked into this conference. Anyone else hear this?

They would know...because they are really smart.

 

[cykadelic2]

I’m with you. Getting a cash infusion of $1 billion sounds amazing but that is $62 mil per school. That can put the Big 12 on par with the Big 10 and SEC for 2-3 years. Then what? Sell off another 20%?

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.

 

[MountainManHawk]

Lots of opinions here from without a lot of facts. I do not claim to have a thorough understanding of this PE transaction. Apparently a lot of you do.

If they are acquiring only 20% then they are looking for a long-term play and are along for a ride. Usually, PE firms buy majority, control the Board and strategy, and the selling shareholders are receiving a cash payment and another bite at the apple within 5 years.

At 20%, these guys are along for a ride and they know that. Why? My guess is they are going to make between a 4-7% safe and annual yield off the top on their billion dollar investment. They will not have put rights.

At a 6% return, they recoup their money (exclusive of the the time value of money) in 12 years and own 20% of a viable long-term play.

What will out TV revenue be in 2036? Let's say it goes up by 50% so their return is now 9% after recouping their investment. This doesn't include extra revenue to be brought in by naming rights and whatever else Yormark can do in the next 5-10 years.

It appears to me to be brilliant for them and us. They get a stable long-term return without much risk. We split a billion dollars today plus naming rights to get us thru the next 3-4 years.

Because they are buying a minority without put rights, they are along for the ride.

At first blush, this looks outstanding. All u negative nannies need to relax unless you want to double your ticket prices and double your donations, if u make any at all.

Relax.

I agree with some of this in the sense that I agree a minority investor can only exert so much control and the PE firms so far haven’t shown to be a big problem in any of the other sports leagues they have invested in (even the NFL is considering allowing PE to buy minority stakes). Also I believe the league will retain the ability to veto any future sale if they don’t like the entity the PE firm wants to sell their stake to in the future.

From what I have been reading, the “cost” of this won’t come until 2031 when the new contract is signed. With the obvious caveat that we don’t have any details yet so it’s all speculation. But this Athletic article says the PE firm will want a cut of the new media rights deal signed in 2031. Here’s the quote.

The initial sense is that CVC would collect its stake as an annual distribution in the future under a new media deal, similar to member schools, but those are all details that would be worked out if a partnership is pursued.
https://www.nytimes.com/athletic/55...ity-naming-rights/?source=user_shared_articleBig 12 discussing private equity investment, sale of naming rights to Allstate: Sources


So in terms of the “Con” of this, it’s that the per team distribution of the next media rights deal will get diluted because the PE firm will want a cut of it so there will be less to distribute to teams.

And the “Pro” of this is the immediate cash infusion that will help make the league look like a good landing place for ACC schools looking for a new home if/when that league implodes.

Obviously there is so much uncertainty right now that it probably looks pretty attractive to Yormark to just make sure they get to that next contract in a good place and any cost that is incurred in 2031 and beyond probably looks well worth it right now.

 

[Jer]

You do not know private equity if you think they are in it for 4-7% returns. They can get that in the bond market now. They can get 7-12% returns in the stock market. PE wants MULTIPLES of their investment back. If they invest $1 billion, they’ll likely want $2-$4 billion back over their time horizon (5-10 years typically).

And then they’ll sell their 20% share to who in 5-10 years? Likely another PE investor since it’s highly unlikely the Big 12 IPOs.

I know you have a history of thinking you know everything about everything but if you think this looks “outstanding” you aren’t considering the long term impacts. And maybe Yormark doesn’t care either - someone else will have to clean up the mess in 5-10 years.

This is exactly true. That's why I call PE's business-level cash advance loans. They provide immediate cash but long-term pain. The schools don't need $60mil for 2-3 years, they need $30-40mil every year without somebody else getting all of the increased value of the league over time and in the next rounds of media deals.

Likely scenario - You take the PE now, but when you double your league value by the next media negotiation, you've signed up for somebody else to get that increased value. So instead of us then getting say $60mil every year, we stay at 30-40. You screw yourself out of seeing any of that new value.