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Big12 Considering 1 Billion From Private Equity Investment Firm

InTheBuff

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www.cbssports.com

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 www.cbssports.com

This is a huge story- Here are the main bullet points.

On the table is a possible cash infusion of $800 million to $1 billion from Luxembourg-based CVC Capital Partners in exchange for a 15% to 20% stake in the league, those sources said. A portion of the money would go directly to the 16 conference members, and the partnership would give the conference access to CVC's investment services and clients.

Big 12 teams are currently earning $31.7 million each with Fox and ESPN in a media rights deal that ends in 2031. Add in the cash infusion from private equity, and the two revenue streams would combine to move the Big 12 "much closer" to the Big Ten media rights deal, according to a person with intimate knowledge of the proposal.

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.

Those inside the Big 12 continue to be impressed by Yormark's aggressive approach. His move to get the latest media rights deal done in October 2022 -- ahead of the Pac-12 -- eventually led to the collapse of the latter conference.
"He's throwing punches," one Big 12 source said. "The dude is bold. He's all about it. He's bullish."
 
I can’t think of a better partner than CVC tbh. Very prestigious group with deep commercialization experience in sports

Now that the real sport is value creation, they’d do a bang up job vs the bureaucrats and academic administrators
 
the biggest question is how would this move help to narrow the gap between the b12 and the sec/b10. both now and in the next round...

it is probably a good move from the standpoint of the b12 but i am far less sure about it for CU.

the price of the money is going to be quite high and very restrictive.

a "good" example of PE helping in sports is guggenheim partners buying the Dodgers. basically, it allowed them to take a longer term view because cash reserves are no longer an issue. you can make 1.4B in contract bets in a single off season. i am a bit skeptical that a similar benefit accrues to the b12. how do they make the cash infusion work to build value?

what a ****ing world.
 
Make It Rain Money GIF by Crash Adams
 
Liver said:
the biggest question is how would this move help to narrow the gap between the b12 and the sec/b10. both now and in the next round...

it is probably a good move from the standpoint of the b12 but i am far less sure about it for CU.

the price of the money is going to be quite high and very restrictive.

a "good" example of PE helping in sports is guggenheim partners buying the Dodgers. basically, it allowed them to take a longer term view because cash reserves are no longer an issue. you can make 1.4B in contract bets in a single off season. i am a bit skeptical that a similar benefit accrues to the b12. how do they make the cash infusion work to build value?

what a ****ing world.
Click to expand...
the conference currently makes 500 units per year, investor gives them 1000 units in exchange for 20% of any future income

THEN

the conference uses the 1000 units to improve its product and make it more attractive + bridge the gap where it only makes 400 units a year AND/OR investor uses its expertise, relationships and network to help the conference market itself and its product

THEN

the conference, thanks to the improved product and the network of the investor, makes 700 units a year, of which a 140 go to the investor, but the conference still makes 560 units instead of 500 -> investor and conference win

thats the best case scenarion ... i personally wouldnt sell a flat 20% of the conference, but at the very least limit it to X% of any tv income over X amount of years.
 
Honestly, need more details. If the total investment is $1B between now and 2031, that would be $62.5m/school over the 7 year period (assuming this isn't imminent and comes into play for 2025). So that is an extra $9m/year per school, which increases the per school payouts from $31.7m to $40.7m. That's also assuming it's actually $1B total and that the schools get 100% of it, which doesn't seem likely.

Each B1G program is making $75m/year from media rights (Oregon and Washington not withstanding), so I'm curious about how this is going to get the conference much closer to the B1G.
 
The Alabaster Yak said:
If the entire point for the Big 12 is remaining financially competitive with the SEC and B1G, I'm having a hard time seeing the downside to something like this.
Click to expand...
IMO, the conference that has gone first with new contracts and deals like this, has historically been shown to undersell the deal once B1G and SEC do the same. That would be my concern here. Of course, the alternative is that this is so new of a deal structure, that we set the market and other conferences have a hard time matching value/price
 
The Alabaster Yak said:
Honestly, need more details. If the total investment is $1B between now and 2031, that would be $62.5m/school over the 7 year period (assuming this isn't imminent and comes into play for 2025). So that is an extra $9m/year per school, which increases the per school payouts from $31.7m to $40.7m. That's also assuming it's actually $1B total and that the schools get 100% of it, which doesn't seem likely.

Each B1G program is making $75m/year from media rights (Oregon and Washington not withstanding), so I'm curious about how this is going to get the conference much closer to the B1G.
Click to expand...

Way I read this, and from my experience, the B12 would be selling a flat 20% of the conference. A conference that generates approx 500m a year isn't getting 1bn for 20% over 7 years.
 
Jens1893 said:
Way I read this, and from my experience, the B12 would be selling a flat 20% of the conference. A conference that generates approx 500m a year isn't getting 1bn for 20% over 7 years.
Click to expand...
Obviously we are all speculating on how this would work, but part of the article says this
One of the motivating factors for CVC is the considerable upside in the Big 12's value and media rights, according to sources who saw the presentation. The Big 12's current rights deal is worth $2.3 billion total. The league is currently fourth in average annual value for its schools among the Power Four behind the Big Ten, SEC and ACC. A doubling of the Big 12 media rights would put the total value of the league at approximately $5 billion in its next negotiation. A 100% increase in value was deemed as reasonable by a media industry source contacted by CBS Sports. Media rights revenues for all FBS conferences have increased steadily in each of their recent negotiations.
Click to expand...
Typically, private equity firms such as CVC invest for the long term in companies with a growth profile. They make their money when their investment grows and they sell their stake. The industry term is called "exiting the investment."
Click to expand...
 
Jens1893 said:
the conference currently makes 500 units per year, investor gives them 1000 units in exchange for 20% of any future income

THEN

the conference uses the 1000 units to improve its product and make it more attractive + bridge the gap where it only makes 400 units a year AND/OR investor uses its expertise, relationships and network to help the conference market itself and its product

THEN

the conference, thanks to the improved product and the network of the investor, makes 700 units a year, of which a 140 go to the investor, but the conference still makes 560 units instead of 500 -> investor and conference win

thats the best case scenarion ... i personally wouldnt sell a flat 20% of the conference, but at the very least limit it to X% of any tv income over X amount of years.
Click to expand...
Good example would be the B1G selling 50% of BTN. The partner was Fox. Conference got short term cash, with a good bit invested in building out on-campus studios & other infrastructure. Fox was able to muscle into much higher rates of distribution and carriage fees. That was a great deal.

If it's a deal with comparable qualities which significantly grow the future pie, then the Big 12 should jump at it. If it's a deal which does nothing more than borrow against future revenue to fix short-term revenue gap & budget issues, the Big 12 members will eventually regret it.
 
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