Private Equity

[Canes Legacy]

Can someone explain how a deal with a PE helps Miami get an invite to the B10 or SEC?

It doesn’t. ESPN has an article about it and the way it would be structured makes expansion “unlikely”.

 

[RozayCane]

 

[caneingville]

Once this happens, expect immediate lawsuits to be filed challenging student-athlete status. This pretty much guarantees the courts will now find them to be employees and allow them to unionize.

 

[rascon]

It doesn’t. ESPN has an article about it and the way it would be structured makes expansion “unlikely”.

Thanks. I kinda feel like PE deal would basically be the proverbial nail in the coffin against expansion for the forseeable future. Especially if the schools get a chunk upfront.

 

[Canes Legacy]

Thanks. I kinda feel like PE deal would basically be the proverbial nail in the coffin against expansion for the forseeable future. Especially if the schools get a chunk upfront.

Here’s the article. Has some good info.

Sources: USC, U-M question Big Ten capital deal

Trustees at Michigan and USC questioned the Big Ten's proposed $2 billion-plus private capital deal, with one sticking point being it doesn't address the root issue -- soaring costs -- that has made the need for cash so imperative.

www.espn.com

 

[PalyCane]

However it would be structured, the investor's expectation would likely be a pref level or opportunistic level of return. That means the money will be expensive. Let's say the money is priced to return 8% compounded annual over the term. (This is a low range assumption, but I'll use it to give the BIG schools every benefit of the doubt.)

The 10% that the investor receives (apparently for a piece of the media rights) would otherwise be paid to the schools over 15-20 yrs. So it's just an advance against a 15-20 yr revenue stream that comes at a high cost of capital to the schools.

Most entities take PE capital in order to create greater entity value. I don't see how PE capital creates meaningfully greater entity value for the schools. Especially because most are assuming the money will be used to fund operating expenses. Will OSU or Michigan getting $100M of PE money attract more paying fans to their already sold out stadiums? Will more people tune into a Mich St vs USC game because both schools now have $100M in their pockets?

So what the schools will likely be left with is an immediate $100M each that will be used to fund operating expenses and player compensation for a few years, while the PE money takes 10% over 15-20 yrs and at an 8% cumulative pref on $100M that amounts to $294M over 15 yrs paid to the PE investor that the school would have otherwise kept. Over 20 yrs it's $431M. Per school. If the cost of capital is higher than the 8% it's even worse. Like I said above, it's expensive money. (And yes, presuming the investor is getting some current annual return that would offset these amounts to a degree.)

Bottom line this seems colossally dumb. Everybody well knows that payday loans are terrible deals. This is like payday loan math only with extra zeros on the end.

 

[Pearson704]

The new leadership is committed to making sure the []__[] remains competitive.

 

[Tony4Canes]

 

[PalyCane]

However it would be structured, the investor's expectation would likely be a pref level or opportunistic level of return. That means the money will be expensive. Let's say the money is priced to return 8% compounded annual over the term. (This is a low range assumption, but I'll use it to give the BIG schools every benefit of the doubt.)

The 10% that the investor receives (apparently for a piece of the media rights) would otherwise be paid to the schools over 15-20 yrs. So it's just an advance against a 15-20 yr revenue stream that comes at a high cost of capital to the schools.

Most entities take PE capital in order to create greater entity value. I don't see how PE capital creates meaningfully greater entity value for the schools. Especially because most are assuming the money will be used to fund operating expenses. Will OSU or Michigan getting $100M of PE money attract more paying fans to their already sold out stadiums? Will more people tune into a Mich St vs USC game because both schools now have $100M in their pockets?

So what the schools will likely be left with is an immediate $100M each that will be used to fund operating expenses and player compensation for a few years, while the PE money takes 10% over 15-20 yrs and at an 8% cumulative pref on $100M that amounts to $294M over 15 yrs paid to the PE investor that the school would have otherwise kept. Over 20 yrs it's $431M. Per school. If the cost of capital is higher than the 8% it's even worse. Like I said above, it's expensive money. (And yes, presuming the investor is getting some current annual return that would offset these amounts to a degree.)

Bottom line this seems colossally dumb. Everybody well knows that payday loans are terrible deals. This is like payday loan math only with extra zeros on the end.

Like I said, at the heart of the deal this was nothing more than a dumbass payday loan

 

[Empirical Cane]

D-If the big ten gets that 2B private equity deal, is that going to set us back in terms of money to overcome?

Significantly

Unless Bezos and/or Saudis get involved.

 

[TemplarCane]

I’m not a fan of private equity investment in college sports. The TV money has been corrupting enough.

 

[Astcloud11]

Let the Saudis buy the ACC and make it even

 

[Empirical Cane]

However it would be structured, the investor's expectation would likely be a pref level or opportunistic level of return. That means the money will be expensive. Let's say the money is priced to return 8% compounded annual over the term. (This is a low range assumption, but I'll use it to give the BIG schools every benefit of the doubt.)

The 10% that the investor receives (apparently for a piece of the media rights) would otherwise be paid to the schools over 15-20 yrs. So it's just an advance against a 15-20 yr revenue stream that comes at a high cost of capital to the schools.

Most entities take PE capital in order to create greater entity value. I don't see how PE capital creates meaningfully greater entity value for the schools. Especially because most are assuming the money will be used to fund operating expenses. Will OSU or Michigan getting $100M of PE money attract more paying fans to their already sold out stadiums? Will more people tune into a Mich St vs USC game because both schools now have $100M in their pockets?

So what the schools will likely be left with is an immediate $100M each that will be used to fund operating expenses and player compensation for a few years, while the PE money takes 10% over 15-20 yrs and at an 8% cumulative pref on $100M that amounts to $294M over 15 yrs paid to the PE investor that the school would have otherwise kept. Over 20 yrs it's $431M. Per school. If the cost of capital is higher than the 8% it's even worse. Like I said above, it's expensive money. (And yes, presuming the investor is getting some current annual return that would offset these amounts to a degree.)

Bottom line this seems colossally dumb. Everybody well knows that payday loans are terrible deals. This is like payday loan math only with extra zeros on the end.

I'm thinking Meeesheeeghan's vote is a big one for the internal politics of B1G??