Private Equity in College Athletics?

Professional sport team owners have been wealthy individuals or families for much of professional sports history. It is not uncommon for owners to be public figures, both within the sport and in other industries. In the swimming world, an example we commonly see is Jon Ledecky, uncle of Katie Ledecky. Jon founded a multi-million-dollar office supply company before becoming the partial owner of NHL team New York Islanders.

In the last five years, however, people like Jon Ledecky have begun to share ownership with private equity institutions. Private equity firms typically invest in or buy companies that are not publicly traded. They then work to restructure the company’s management, operations, and finances to raise the company’s value. After the value rises, the firm typically sells its stake in the company.

Private equity firms first invested in sports in the mid-2000s, buying ownership in European football clubs. No American professional sport league followed suit until an MLB vote in 2019. The baseball league voted to open up their teams to financial institution investment, capping institutional investment at 30% per team. The NHL, MLB, and just last month the NFL all followed suit, each with its own sets of limitations. Private equity also began deals with some American golf and tennis organizations. Publicly available information about the effects of private equity ownership on major American sports leagues is limited thus far.

The NCAA remains one of the last major American sports organizations untouched by private equity investment. However, there’s reason to believe that this won’t last much longer.

This summer, new American Athletic Conference commissioner Tim Pernetti said that he would be open to collaborating with private equity institutions to grow the conference.

“(Private equity can) provide both a financial boost and operational expertise on the business side,” Pernetti said to San Antonio Express News.

Additionally, CNBC reported that last year, Florida State University worked with investment bank JPMorgan to explore raising funds from private equity investors. Florida State’s president said it would consider leaving the Atlantic Coastal Conference if the conference did not change its revenue distribution model. Further, Howard University’s men’s basketball coach reportedly began pitching ownership in his team to private equity investors.

The NCAA and its member institutions are undergoing a lot of financial changes due to conference shifts and new NIL policies, and they’re looking for new ways to raise capital. For example, the University of Tennessee started charging a 10% “talent fee” on all football tickets to help pay their athletes. Therefore, it is not a surprise that some of these institutions are looking for more ways to increase capital.

Naysayers within college athletics, according to Sports Business Journal, are hesitant to give control to an institution with a strictly profit motive. The NCAA is considered a nonprofit organization.

For private equity, college athletics might be seen as profitable because of the steady revenue, loyal consumers, and the potential to improve operational efficiency. For reference, the valuation of teams in the major American sports leagues outpaced the S&P 500 throughout the 2010s.

It is not clear how private equity would affect swimming & diving within the NCAA.

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