CU has rejoined the Big 12 and broken college football - talking out asses continues

[skibum]

Who is paying more than they would be willing accept? Are you talking about the B1G and SEC paying more for their coaches than they’d actually accept? Again, I don’t follow your analogy here and think that there is some conflating of a traditional PE acquisition and a PE cash infusion (with almost certainly no decision making authority).

I'm just going to save us both time and point you back to this post:

CU has rejoined the Big 12 and broken college football - talking out asses continues

Sounds like the B1G needs to add 2-4 MTZ teams and have a pod scheduling system

allbuffs.com

 

[Creebuzz]

Who is paying more than they would be willing accept? Are you talking about the B1G and SEC paying more for their coaches than they’d actually accept? Again, I don’t follow your analogy here and think that there is some conflating of a traditional PE acquisition and a PE cash infusion (with almost certainly no decision making authority).

PE guys are smart and evil. You can sit down and think of the hundred ways they’ll potentially screw you. And you can write things in the contract that will protect you from those hundred things. The PE guys will have either thought of that 101st thing to screw you, or they won’t execute the contract.

 

[The Alabaster Yak]

I'm just going to save us both time and point you back to this post:

CU has rejoined the Big 12 and broken college football - talking out asses continues

Sounds like the B1G needs to add 2-4 MTZ teams and have a pod scheduling system

allbuffs.com

I mean, if you don’t want to have a conversation or explain your analogy, that’s fine. I guess I see a PE investment like this being one that is about growing the brands and profitability of the conference while taking a piece of that growth over time. You and others are acting like this would be a full blown PE acquisition of the Big 12.

Any investment from the endowment would also come with taking a piece of the growth.

 

[skibum]

I mean, if you don’t want to have a conversation or explain your analogy, that’s fine. I guess I see a PE investment like this being one that is about growing the brands and profitability of the conference while taking a piece of that growth over time. You and others are acting like this would be a full blown PE acquisition of the Big 12.

Any investment from the endowment would also come with taking a piece of the growth.

I feel like you are using words like "growth equity," "PE cash infusion," etc without really understanding what they mean and how they play out in the real world.

Cree gave you the short version, I'm not going to give the long version.

Over the 1980's the most profitable franchise in the NFL was the Tampa Bay Buccaneers. They were also the worst on field team in the NFL during that time span.

PE money, in ANY form, will always prioritize profits over everything else - I don't give a shït what's written in the contracts (see Cree's point).

This entire evolution will not work out well for college football, because once the other schools see the PROFITS to be had by following the model, they'll all jump in.

There is no first mover advantage in this situation (except for the PE firms), the sport as a whole will be worse off, and the first schools in will be the ones watching the largest parts of their profits get siphoned away - aka, they'll finish in the back seat right where they started.

 

[The Alabaster Yak]

I feel like you are using words like "growth equity," "PE cash infusion," etc without really understanding what they mean and how they play out in the real world.

Cree gave you the short version, I'm not going to give the long version.

Over the 1980's the most profitable franchise in the NFL was the Tampa Bay Buccaneers. They were also the worst on field team in the NFL during that time span.

PE money, in ANY form, will always prioritize profits over everything else - I don't give a shït what's written in the contracts (see Cree's point).

This entire evolution will not work out well for college football, because once the other schools see the PROFITS to be had by following the model, they'll all jump in.

There is no first mover advantage in this situation (except for the PE firms), the sport as a whole will be worse off, and the first schools in will be the ones watching the largest parts of their profits get siphoned away - aka, they'll finish in the back seat right where they started.

Dude. I’ve asked you very specific questions about your analogies and how they apply to CFB in order to learn and understand what you’re saying and you refuse to answer. “PE is evil” and “they will screw you in every way”are not answers. Instead, you are mostly just being condescending, pointing out irrelevant things like the Tampa Bay Buccaneers in the 80’s and completely avoiding basic explanations.

Again, if you don’t want to engage on the subject then stop responding to me because what you’re responding with isn’t helpful

 

[Buffnik]

Basic PE model, as I understand it and can explain it in basic terms, is that they buy to sell. It's a short-term strategy to leverage debt to quickly accelerate revenue, market share and brand equity while finding cost cutting opportunities to increase profitability.

It doesn't mesh well, imo, with a selling partner whose goals extend beyond achieving a windfall within the next 3-7 years and DGAF what state the organization is in or what happens to it after that window. The goal is to sell at a peak valuation multiple and move on. Importantly, here, the growth rates achieved during the PE window are unsustainable after because leveraged debt and cash infusion are a stimulus while efficiencies often result in a weaker organizational foundation and lack of long-term investments.

As an illustration, PE may step in and stimulate a business to grow at 25% when industry norms are an 8% annual growth rate and do so while raising the EBITDA to show increased profitability realization from the new revenues. That's awesome for the PE firm and other stakeholders because they make a very nice return during the window and then get a windfall at the end when they sell. The eventual buyer doesn't necessarily get screwed, but the stimulated growth rates achieved during the window are unsustainable and new investments will be made in long-term projects and operational infrastructure. For this reason, the happiest buyer of a PE asset is usually going to be a company that can fold the asset into its existing infrastructure of personnel, manufacturing, distribution networks, etc.

Does this model really work for a university's athletic department or football program seeking the right investor? I don't believe so. I worry that too many people are feeling high anxiety over budget concerns and their ability to keep up with competitors, so they're being blinded by PE offering the most money the fastest as compared to other types of potential financial partners.

 

[Creebuzz]

Basic PE model, as I understand it and can explain it in basic terms, is that they buy to sell. It's a short-term strategy to leverage debt to quickly accelerate revenue, market share and brand equity while finding cost cutting opportunities to increase profitability.

It doesn't mesh well, imo, with a selling partner whose goals extend beyond achieving a windfall within the next 3-7 years and DGAF what state the organization is in or what happens to it after that window. The goal is to sell at a peak valuation multiple and move on. Importantly, here, the growth rates achieved during the PE window are unsustainable after because leveraged debt and cash infusion are a stimulus while efficiencies often result in a weaker organizational foundation and lack of long-term investments.

As an illustration, PE may step in and stimulate a business to grow at 25% when industry norms are an 8% annual growth rate and do so while raising the EBITDA to show increased profitability realization from the new revenues. That's awesome for the PE firm and other stakeholders because they make a very nice return during the window and then get a windfall at the end when they sell. The eventual buyer doesn't necessarily get screwed, but the stimulated growth rates achieved during the window are unsustainable and new investments will be made in long-term projects and operational infrastructure. For this reason, the happiest buyer of a PE asset is usually going to be a company that can fold the asset into its existing infrastructure of personnel, manufacturing, distribution networks, etc.

Does this model really work for a university's athletic department or football program seeking the right investor? I don't believe so. I worry that too many people are feeling high anxiety over budget concerns and their ability to keep up with competitors, so they're being blinded by PE offering the most money the fastest as compared to other types of potential financial partners.

This is correct for most PE, but I think the investment concept here would be LTPC (long term private capital).

Nevertheless, everyone can enjoy the meeting with the guys at BlackRock (for example). They’re fvcking peaches.

 

[Big Jim]

This is correct for most PE, but I think the investment concept here would be LTPC (long term private capital).

Nevertheless, everyone can enjoy the meeting with the guys at BlackRock (for example). They’re fvcking peaches.

PE would be great for Rick George. He could get a gob of cash to spend on facilties and paying more to Coach Prime. George is nearing retirement so the mid to long term effect of on him personally is nil but the CU athletic department would be crushed in a few years. The idea of selling equity to build facilities that do not generate a positive cash flow or surpass a hurdle ROI level is a marriege built on disaster.

 

[The Alabaster Yak]

Basic PE model, as I understand it and can explain it in basic terms, is that they buy to sell. It's a short-term strategy to leverage debt to quickly accelerate revenue, market share and brand equity while finding cost cutting opportunities to increase profitability.

It doesn't mesh well, imo, with a selling partner whose goals extend beyond achieving a windfall within the next 3-7 years and DGAF what state the organization is in or what happens to it after that window. The goal is to sell at a peak valuation multiple and move on. Importantly, here, the growth rates achieved during the PE window are unsustainable after because leveraged debt and cash infusion are a stimulus while efficiencies often result in a weaker organizational foundation and lack of long-term investments.

As an illustration, PE may step in and stimulate a business to grow at 25% when industry norms are an 8% annual growth rate and do so while raising the EBITDA to show increased profitability realization from the new revenues. That's awesome for the PE firm and other stakeholders because they make a very nice return during the window and then get a windfall at the end when they sell. The eventual buyer doesn't necessarily get screwed, but the stimulated growth rates achieved during the window are unsustainable and new investments will be made in long-term projects and operational infrastructure. For this reason, the happiest buyer of a PE asset is usually going to be a company that can fold the asset into its existing infrastructure of personnel, manufacturing, distribution networks, etc.

Does this model really work for a university's athletic department or football program seeking the right investor? I don't believe so. I worry that too many people are feeling high anxiety over budget concerns and their ability to keep up with competitors, so they're being blinded by PE offering the most money the fastest as compared to other types of potential financial partners.

I’ll come at this from a different angle. The public company I’ve worked for the past 11 years was just acquired and taken private by one of the largest PE firms in the world. I understand and have no doubt the goal is to get our company to the point they can sell it at a profit and they will attempt to get there by doing all the things you, ski and cree (among others) have said.

This explanation from you comes from the same or similar POV as the deal my company and this PE firm entered into; a full acquisition, which is entirely different than what is being discussed with PE entering CFB. As Cree just mentioned, this feels like a deal would be for an immediate cash infusion with a stated % of revenue going back to said PE company over a longer time horizon. From the Big 12’s perspective, the upside is investing in the programs and various infrastructure to build the brands and increase revenues where the PE company gets their agreed upon ROI and the Big 12 gets more profitable and better media deals.

Is that a reasonable assessment of the thought process here, or what am I missing?

 

[skibum]

Is that a reasonable assessment of the thought process here, or what am I missing?

The down side.

 

[4BienemyTDs]

I do not think the Big12 and ACC are worth enough by themselves because of dead wood that no matter what are just not good brands.

Combining the best brands even in a skinny league of say 10 teams would be more valuable than a larger league, because if all 10 teams are exciting there is all good inventory.

If an institutional investor wanted to help that small group organize, that would be great.

Florida State
Miami
Clemson
North Carolina
Georgia Tech
Colorado
Kansas
BYU
Arizona State
TCU

 

[Not Sure]

I’m struggling with how PE receives a return on the proposed investment. It feels like there is a step missing somewhere.

PE makes massive investments in college athletic programs (without gaining ownership in those programs, because “college”)
Athletic programs spend that money on NIL, facilities, etc.
…
Profit?

 

[Jens1893]

I’m struggling with how PE receives a return on the proposed investment. It feels like there is a step missing somewhere.

PE makes massive investments in college athletic programs (without gaining ownership in those programs, because “college”)
Athletic programs spend that money on NIL, facilities, etc.
…
Profit?

They get x% of some/all future revenues

 

[Bison]

I haven't paid much attention to this PE thing because state legislatures and possibly the federal legislation would have to get involved one way or the other so PE implementation probably will take some time.

I'm ready to read about winter conditioning and spring football. One week away from February and then signing day on the 5th.

 

[4BienemyTDs]

They run the league and plus up on national tv and sponsors. Program package producers. Like making a hit movie as cheap as possible and making it a commercial success

I realize my in program ideas are institutional or a personal passion project

 

[The Alabaster Yak]

The down side.

Which is what for the conference? Giving up future revenue? What else?

 

[The Alabaster Yak]

I do not think the Big12 and ACC are worth enough by themselves because of dead wood that no matter what are just not good brands.

Combining the best brands even in a skinny league of say 10 teams would be more valuable than a larger league, because if all 10 teams are exciting there is all good inventory.

If an institutional investor wanted to help that small group organize, that would be great.

Florida State
Miami
Clemson
North Carolina
Georgia Tech
Colorado
Kansas
BYU
Arizona State
TCU

Inventory is also part of the equation of conference valuation for media rights and 10 isn’t enough unless it’s a single bidder like Amazon or Netflix and they’re willing to pay $500m/year or more

 

[4BienemyTDs]

Inventory is also part of the equation of conference valuation for media rights and 10 isn’t enough unless it’s a single bidder like Amazon or Netflix and they’re willing to pay $500m/year or more

But lets say we really want $80M

10 = $800M
12 = $960M

13 or More than that seems diminishing in driving matchups.

The Big12 and ACC have useless programs that just do not drive eyeballs

 

[LesGrossman]

Which is what for the conference? Giving up future revenue? What else?

I still don’t understand how the quasi-public standing of the school and PE interests would be balanced. The schools would have far too many sacred cows for PE and I think a budgeting process would be really ugly

 

[The Alabaster Yak]

But lets say we really want $80M

10 = $800M
12 = $960M

13 or More than that seems diminishing in driving matchups.

The Big12 and ACC have useless programs that just do not drive eyeballs

I mean, sure. Why not $100m? $200m? Why not ask for $1B per school?

 

[4BienemyTDs]

I mean, sure. Why not $100m? $200m? Why not ask for $1B per school?

Yak, it is all in the numbers of Viewers, correct?
Match up the averages of the top schools and it could correlate to the B1G and SEC
The best thing that those leagues do is keep their dead weight and thus their average viewership is not out of this world, but if that lean league could do 3M-4M viewers per game, then it is worth $80M per team
the lower halves of the ACC and Big12 are barely at 800K to 1.2M which is why it is stuck much lower