TCU & Baylor aligned on Big 12’s new private equity partner & cash infusion
The Big 12’s future health and stability hinges on its ability to find new partners who believe in the product and want to be affiliated with one of America’s highest-profile college athletic conferences.
There is quiet frustration growing among league members that the conference has not landed more lucrative deals to be disbursed among the Big 12 members and adding to their bottom lines.
In lieu of those types of potential deals, the league partnered with RedBird Capital to help with cash flow. Yahoo Sports reported on May 1 that the deal provides $12.5 million to the league, and includes a provision where the member schools can receive a credit line of $30 million.
TCU director of athletics Mike Buddie said the university’s athletic department has declined the offer, as has Baylor.
“(Baylor is) is supportive of the RedBird partnership and excited about its benefits for the Big 12, but as of now (we) do not have plans to participate in the school-level capital option,” Baylor athletic director Doug McNamee told the Star-Telegram.
According to reports from news organizations that cover the schools in local Big 12 markets from Florida to Utah, nearly all of the universities are rejecting this line of credit. They are passing for two reasons.
1. If a member school’s athletic department desperately needs a line of credit, the university can arrange a more favorable one.
2. They don’t want another voice in the room helping to manage the budget in a … cough-cough … “partnership.”
The invitation of private equity illustrates the cash challenge that most of the universities that participate in the highest level of major NCAA athletics are juggling like a litter of hungry dogs. The for-pay student athlete model with no cost certainty has created an environment of spiraling costs that even the schools in TheBigSEC10 struggle to cover.
Everyone involved in this process, save for the student athletes and their agents, is praying that a more rigid structure that provides cost certainty will be implemented within the next year.
Until then, private equity is the solution that lurks as a threat. If the borrower defaults on the loan, or is in virtual default, the private equity firm could sue, and accept equity rather than cash.
This private equity deal with the Big 12 is the first of its kind with a conference, but not the first in the league. Last year, the University of Utah’s athletic department announced it had reached an agreement with Otro Capital where the new “Utah Brands & Entertainment” will manage its NIL, sponsorships and ticketing.
The Big 10 considered a $2.4 billion private equity deal with UC Investments last year, but the University of Michigan and USC both strongly opposed it, and the plan came to naught.
RedBird Capital, based in Dallas and New York, lists clients from the world of sports and entertainment. The list includes UFL, Paramount, the YES Network, the French soccer club Toulouse FC, India’s Rajasthan Royals cricket team, Front Office Sports, Fenway Sports Group, and the Formula 1 Alpine Racing team.
In the world of private equity, RedBird is not one of the monster hitters.
A potential private equity deal provides cash just long enough for the people who arranged the agreement to get theirs, and not worry about it when their own contract expires. By that time, they’re already set, and whoever replaces them in either the AD or conference commissioner’s chair will have to deal with problems that they didn’t create.
Private equity is creeping into sports because the firms are convinced they can net a 20 percent return on their investment based on their ability to run a company — or in this case an athletic department — more efficiently.
What this usually means is an aggressive reduction in expenses; in the case of a college athletic department, that would likely mean the potential elimination of entire programs, staff positions, and a cutback on various budgets.
Those budgets are constantly being modified to direct money to the student-athletes in the revenue sports.
As a result, according to a report by the EdCircuit.com, “more than 415 collegiate Olympic sports programs have been cut, merged or reclassified since May 2024.”
Arkansas recently announced it would drop men’s and women’s tennis programs; Illinois State, North Dakota, Gardner-Webb and the University of St. Louis made similar announcements. On May 6, Wichita State University announced that it was dropping its men’s and women’s golf teams.
As major college athletics continues to shift into for-profit, these types of sad measures are expected to continue, and private equity will continue to creep in.
