CNBC: Private Equity Firms May Buy College Athletic Programs – Like Cal

Cal’s athletic department ranks among the nation’s top 75 athletic programs in valuation, but not by much

Cal celebrates the victory over Stanford / Darren Yamashita-Imagn Images

CNBC recently compiled a list of the country’s top 75 college athletic programs in terms of financial valuation, and Cal was one of them. But CNBC then reported that private equity firms may be interested in buying a part of college athletic programs, which raised some eyebrows.

Would Cal be interested in this kind of outside for-profit investment to help pay for the spiraling costs of operating an athletic program? Would a private equity firm be interested in investing in Cal, whose athletic department valuation ranks only 62nd in the country, which is about one-third of the valuation of college athletic programs at the top of the list.  And what kind of concessions would Cal have to make to bring in private equity investments? Would Cal have to drop some of its sports that do not generate revenue?

It’s all just speculation now, but CNBC provided some information on what such a deal might look like.  One thing seems certain: It would make college athletic programs operate like pro sports teams.  Of course, some people claim they already do.

“I think it’s phenomenal opportunity,” Marc Lasry, CEO of Avenue Capital Management, told CNBC. “I think what you are going to see is a number of schools selling their teams.”

To whom, the interviewer asked.

“To folks like me,” Lasry said. “We’re bidding on a couple of teams. We’d buy 51% of the team.”

Further conversation among CNBC experts suggests that private equity companies would buy a minority stake in an athletic program, not 51%, and claimed those firms would buy a stake in the entire athletic program, not a specific team.

In any case, the mind wanders as to what such a private investment would mean.  Would the firms be investing to reap profits, or would they be taking revenue that would otherwise go toward academics at a given college.

Cal would not be the most attractive athletic program based on the list of the top 75 college athletic department valuations.

Cal comes in at No. 62, with a valuation of $386 million and revenue of $126 million. That valuation pales in comparison to the teams at the top of the list. Four schools – Ohio State, Texas, Texas A&M and Michigan – have valuations that top $1 billion, with Ohio State on top at $1.32 billion, more than three times that of Cal.

Every school in the top 15 is in the Big Ten or SEC with the exception of Notre Dame, which is an independent in football. The highest valuation of an ACC school belongs to Clemson, which is 16th overall at $800 million, still more than twice Cal’s valuation.

It’s not a coincidence that these rankings correlate strongly with the rankings of the schools’ football programs.

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