Why Private Equity Is Still Hesitant to Invest in College Sports
There’s “plenty of money for the taking,” says Tim Pernetti.
Private equity investment in college sports is still hesitant due to the lack of clear rules and a predictable governance structure, according to an expert panel at the University of Michigan Sport Business Conference. Private equity views college sports as a multibillion-dollar opportunity, but the unpredictable nature of college athletics and uncertain legal battles make it challenging for investors.
While some deals have been made, like the investment by Otro Capital and the University of Utah, and a conference-level agreement between the Big 12 and RedBird Capital Partners, other potential transactions have stalled, such as the Big Ten deal. Experts believe that private credit deals, structured as loans with a focus on revenue streams, are easier for private equity firms to navigate compared to traditional private equity investment.
The challenge lies in the fact that college sports operates under a "not-for-profit umbrella" with no established investors demanding a return on investment. The uncertainty around conference realignment, legal fights, and the potential treatment of athletes as employees further complicates the situation for potential private equity investors.
A bipartisan bill, the Protect College Sports Act (PCSA), has been approved in the Senate but needs to pass in the House of Representatives to address issues like revenue sharing, NIL deals, and conference realignment.
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