Bridging the Gap: Will Private Equity Shape the Future of Struggling D-I Athletic Departments?

In 2009, during my freshman year at The University of Georgia , I wrote a research paper on the impact that the Georgia Football program and the UGA Athletic Department had on the university. Having recently arrived in the South, the influence of these SEC programs far surpassed those I grew up watching at 美国哈佛大学 , Dartmouth College , College of the Holy Cross , and Boston College . This realization sparked my interest in understanding the broader impact of college football and athletic departments on the economy and how these organizations act more as businesses than they do departments of non-profits.

Interviews within the UGA Athletic Department, including one with Rhonda Kilpatrick , revealed that, for the 2008 fiscal year, only 美国德克萨斯大学奥斯汀分校 had a larger operating budget than UGA. Nearly two-thirds of that budget was allocated for football, surpassing $80 million. Remarkably, the program not only sustained itself but generated a profit during a nationwide recession. In essence, I quickly recognized that the leadership within the UGA Athletic Department was exceptional, adept at running what was essentially a ~$100 million business disguised as an amateur athletic program.

Fast forward to 2022, where under the leadership of Josh Brooks , the University of Georgia oversaw an operating revenue of $203,048,566, in addition to boasting an impressive surplus north of $34M, as per the 2022 NCAA Financial Report. This figure positioned Georgia 5th behind 美国俄亥俄州立大学 ($251,615,345), 美国德克萨斯大学奥斯汀分校 ($239,290,648), The University of Alabama ($214,365,357), and the 密西根大学 ($210,652,287). While this mirrors the hallmark of well-run Power-5 athletic departments - each school carrying a substantial surplus - we have also witnessed the other side of the coin, where well-known universities with rich athletic histories and poor financial profiles have struggled. This leads me to believe that Private Equity is poised to play a major role in College Athletics, particularly by targeting poorly run athletic programs with strong brands and a history of athletic success in revenue-generating sports, like Football and Basketball.

In a recent ESPN article, Pete Thamel discusses this possibility, citing an example as Florida State’s legal battle with the NCAA over the grant of rights. Florida State University ’s dramatic overreaction to a bad deal with ESPN and the Atlantic Coast Conference suggests they are one of the schools with poorly managed athletic departments, struggling to balance a budget, based on recent data citing a $2.3M deficit for the '23 fiscal year. Compare that to their ACC counterpart Clemson University , who has taken a more reserved stance against the ACC, despite being tied to the same Grant of Rights contract. In fact, as I have highlighted in recent weeks, Clemson has invested in areas beyond football, including women’s sports, which signals they are operating from a position of financial strength. The contrast in their reactions between these ACC Powers might be attributed to their financial books and an inability to align donors with the athletic department’s priorities. This is where Private Equity may pivot in the coming years, identifying vulnerable athletic departments to invest funds that were once reserved for donors to get the entire department back on the path to profitability.

We've witnessed similar trends in professional sports, where 'ownership groups' come together to buy or take a controlling interest in different professional sports teams. Fenway Sports Group , led by John Henry, is a notable example, starting with the Red Sox and expanding its portfolio to include the Pittsburgh Penguins, Liverpool, and others. It won't be surprising when a firm like Fenway Sports Group approaches Division-I universities with rich traditions and a history of winning, like 美国加州大学洛杉矶分校 or Florida State, providing them with an off-ramp from their financial troubles.

While I don’t foresee every major athletic program being completely owned by Private Equity Groups in the next 50 years, I do believe that post-Covid, poorly managed programs across the country have left their athletic teams vulnerable. One eye-popping example can be found in the City of Angels, where UCLA, home to Troy Aikman, John Wooden, Russell Westbrook, and Kareem Abdul-Jabbar, carried a deficit of $36.6M in 2023. This is well-documented, and as a result, donors may not be willing or able to foot the bill to keep a storied program, like UCLA, competitive, especially with their pending move to the Big Ten Conference . This is where Private Equity will make its move, and as someone who has played college and professional football and now works in Private Equity, I see this as an opportunity to grow college athletics and help historic athletic programs steer their ships in the right direction.

Fortunately, the athletic departments around the country, which have successfully operated their programs like companies, enter this era from a position of strength where they won’t need to seek outside investment. If they entertain such an investment, it will be from a position of strength and will be given favorable terms if they choose to go down that path. Unfortunately, some schools that have not had the same good fortune of being well-run may have to entertain such investments out of necessity. This is where PE firms can make a significant impact early and often.

Regardless of your opinion on the matter, this era of college sports will be fascinating and will continue to change each year as NIL, conference realignment, and TV contracts continue to boost revenues and change the way college athletic programs operate. Similar to business, the programs that are nimble, willing to adapt to the changing landscape, and resilient will thrive, while others who fail to recognize their past mistakes and look for a TV contract or some other financial lifeboat to save them will be susceptible to outside investments. Either way, there will be an opportunity for a whole host of new parties to enter the world of college sports to take a piece of the ever-growing pie that comes from these institutions.