The Money Play: Private Equity’s Looming Impact on College Football

In March of 2022, Russian billionaire oligarch Roman Abramovich took the biggest loss of his life.

As a result of the Russian invasion of Ukraine, the UK government began cracking down on oligarchs in the country. As a result, the government seized a swath of assets across England from several high-profile people, Abramovich being the most prominent.

The seizures included the following, among other things:

As part of the UK-imposed sanctions, Abramovich would also later be forced to sell his most prized asset: West London-based Chelsea Football Club.

Under his 19-year ownership, the Blues’ value grew from an initial £60 million sell price to £4.25 billion, with the club experiencing a remarkable run of success that included 18 major trophies, including two UEFA Champions League titles, two UEFA Europa League titles and five Premier League titles.

With sanctions in place and details changing by the hour, the sale of the West London club happened rather quickly and included several twists and turns. For example, because of the sanctions, Abramovich wasn’t allowed to receive the money from the sale, which meant the money had to go into a neutral bank account and was supposed to be later used for Ukranian relief efforts. As of writing, the money appears to be frozen somewhere and has not made its way to Ukraine.

Fast forward to the end of March, the Raine Group intermediaries widdled down ownership groups and settled on the Clearlake Capital Consortium, led by American Todd Boehly. The Clearlake Capital group now includes Boehly, as well as Behdad Eghboli, Hansjorg Wyss, Jonathan Goldstein, Daniel Finkelstein and Barbara Charone. The same group owns a 20% stake in the famed LA Dodgers and WNBA team LA Sparks.

I’ll touch on the specifics of the Clearlake Capital group and what life has been like under their ownership later. But with the whispers of private equity group influence in college football growing louder, it felt like a relevant topic to explore.

In this piece, I’ll touch on college football’s wandering eye toward private equity, what that future might look like, how it would drastically change the game we all love and how the Clearlake Capital model could give us a glimpse of just how jarring this prospect is to college football.

Private equity interest in sports is not new.

Since the early 2000s, PE companies have been investing in European major sports teams, leagues and organizations. Many firms have made sports a key part of their investment strategy, with a handful of private equity groups possessing ownership stakes in major soccer clubs, international soccer leagues, the Women’s Tennis Association, etc.

Up until five years ago, United States sports league fended off private equity interest. But in 2019, Major League Baseball adjusted its rules to allow for private equity investment and other leagues soon followed. Now leagues like the NHL, NBA and MLS allow for similar levels of involvement. The NFL, however, remains steadfast in not allowing private equity investment, instead maintaining a longstanding tradition of largely family-controlled franchises.

Why are private investment groups interested in sports?

Sports are a huge money-making vehicle, and unlike some other businesses, doesn’t require full ownership status to turn profits. Leagues and teams often have guaranteed levels of profit, which I imagine sounds like a cha-ching cash register sound in the mind of private equity suits.

But the best-kept secret about owning a team is that while you’re almost guaranteed to make money, you have to spend money to be successful. Oftentimes lots of money.

Other areas that I suspect are of interest to private equity groups in sports are things like operational advantages, the opportunity to boost efficiencies, new revenue opportunities and ultimately, enhanced valuations.

Another reason why I suspect private equity groups are getting more involved with American sports is because these groups are made up of people and people love sports. Furthermore, people love the idea of driving influence and making a team great. Think about it, how many times have you and your buddies discussed how you’d run things if you had control over your favorite team?

As a fan of European soccer and college football, I can unequivocally say that college football is the closest thing Americans have to European soccer and vice versa.

From the location-based pageantry and spectacle around the games itself down to the dollar signs associated with being relevant, the comparison fits. And because of the influence that private equity has on European soccer, it’s natural to understand why those wandering eyes would land on college football.

Division I college football is the premier moneymaking vehicle for colleges and universities across the country. The games itself make a lot of money, sure, but it’s more than that. With the games come large crowds, which are the lifeblood of businesses in college towns like Athens and College Station for six Saturdays per year. Schools that win big and/or build recognizable brands also see a rise in enrollment numbers.

So when did the private equity college football whispers start? By my account, the first big splash in the private equity pool came when news leaked regarding the Florida State athletic department’s interest in private equity backing in January. According to a series of emails released by the school, administrators spent part of 2023 effectively shopping the FSU athletic department to two private equity firms, Sixth Street and Arctos Partners.

The high-level view of the proposed project, originally titled “Project Osceola” after the famous Seminole leader and mascot, centers on the idea that the private equity group would create a new company that would house the commercial rights of the school’s athletic department. The financial details of the discussions remain unclear, but you can see where this agreement might’ve been headed.

So why would Florida State Athletics want to get in bed with private equity investors? The answer is complicated but likely lies within another topic of college football conversation: conference realignment.

Florida State is a member of the Atlantic Coast Conference (ACC) and despite being viewed in the same college football luxury box of the Alabamas and Ohio States of the world, receives far less TV money than their counterparts. The ACC is stuck in a Chinese finger trap of their own doing, as the conference is tied to ESPN until 2036, with member schools receiving only a measly $30 million per year payout. In comparison to their SEC counterparts, each SEC member school received over $51 million in 2022-23.

This puts Florida State in a precarious situation. They want need to keep up with the Joneses. Money in college sports goes a long way toward relevancy, so they need that money to afford things like facilities, coaches, and oh yeah, the players. They need lots and lots of money to offer lucrative NIL deals to pay the players. Let’s not forget that part.

College football is so far gone from the days of amateurism and good old-fashioned school pride being the reason recruits go and stay. And rightfully so, the players are finally getting a small cut of the massive college football pie.

But even with the college football arms race at an all-time high, consider me a hard skeptic with private equity sustainability. Inviting a fox into the hen house will lead to unforeseen consequences that I’ll detail later.

In doing research for this newsletter, I’ve learned a lot about how private equity in sports actually works and then have attempted to translate that to college football. I hope you’re learning a lot too.

In the Medium article titled Behind the Game: The Influence of Private Capital in Modern Sports, Ben Guana did an excellent job detailing the why and how of private equity in American sports.

In terms of how this could be of interest to a college athletic department, this line stood out.

For a school and football program like Florida State, a private equity investment group would undoubtedly drastically change how they operate as we know it. There’s no question about it.

Private equity groups are notorious for being obsessed with efficiency and the maximization of their assets. In program-operating terms, I suspect with private equity involvement, football program GMs and head coaches would have to answer serious questions like:

These are just to name a few. Questions would inevitably be raised about every detail of every level of the program. From the support staff and waterboy up to the head coach and head of football operations. No one is safe.

On the player side, I suspect an even more grueling examination process would take place. Loyalty would go out the window if any still remains. Players are evaluated and replaced now, but this would be ramped up under private equity involvement. And just like when private equity groups overtake companies, mass cuts in the name of efficiency and profitability aren’t out of the question. It would be naive to think otherwise.

I fully believe private equity companies would take a line-by-line approach to every detail within a college football program and it would fundamentally disrupt and destroy the fabric of the sport as we know it.

As a Chelsea FC and college football diehard, I feel uniquely positioned to detail the impact that a private equity takeover has on something I love.

And while a professional team in England isn’t the same as an “amateur” team in Tallahassee, there are enough parallels to draw some comparisons.

Chelsea FC under Clearlake Capital

Since the Todd Boehly-led consortium purchased Chelsea FC a little over two years ago, almost every single aspect of the club has largely been a three-ring circus-sized shitshow. It pains me to write and admit this, but it’s true. Perhaps the incompetence and downright messiness have more to do with the group calling the shots and not the concept itself, but it’s not unbelievable that a similar fortune could meet a college football program.

In no particular order, here are some of the lowlights under the Clearlake Capital regime:

If I sound like a sad and bitter fan, well, I am. I cannot beat these allegations.

If all of this sounds bad, well, it largely has been bad. But it’s not all bad. The Clearlake regime cares, even if not about the right things in my opinion. And they have put their money where their mouths are, shelling out an eye-watering amount of money in the search for winning and profitability.

And in a way, there’s a small part of me that thinks they’ve done some things correctly. They’ve found some good talent and this year has been some progress, albeit small, compared to last year. At least that’s what I’m telling myself.

But in recent days, they fired a stable, good manager throwing the club back in disarray. Sigh.

College football has always been about money.

Always has been, always will be. In an ever-growing arms race to acquire the best coaches and players, it requires a lot of money to keep pace. That means as programs continue to max out what’s currently at their disposal, the threat of private equity will only loom larger.

When I think about private equity and its involvement in college football, the biggest losers are, and always will be, the fans. Coaches and players will suffer, sure, but the fans are the ones who can’t and won’t go anywhere. If you live in Baton Rouge, you’re always gonna yell Geaux Tigers! If you’re born in Starkville, you came out of the womb ringing a cowbell.

Despite all of my grievances about Todd Boehly, Behdad Eghbali, Clearlake Capital and BlueCo, perhaps the most frightening, and damning piece of anti-private equity evidence came from the RC Strasbourg ultras, whose home club sits in a beautiful city nestled near the German border.

After the RC Strasbourg takeover by BlueCo, ultras (the European soccer equivalent of diehard fans) took to the stands of a home match earlier this year to voice their displeasure about their home club being a pawn in the private equity game of chess.

With out-stretched arms, Strasbourg ultras held large banners that read “All our fears about the BlueCo project have been confirmed by this transfer window.”

[credit: James Nalton @JDNalton on Twitter/X]

In a stadium full of noise, that banner rang the loudest.

College football will look very different in five or ten years. This much is true.

Let’s hope for all our sakes, we won’t have the misfortune of seeing a similar banner angrily displayed at Jordan-Hare, Doak Campbell or at Kyle Field any time soon.