College athletic programs seem to be tapping every source of cash they can find to help recruit and retain top players. They are squeezing alumni for more donations, raising ticket prices and selling stadium naming rights.
But so far the schools are proceeding with caution with at least one funding option: money from private equity firms.
Private equity sees the colleges’ cash crunch as an opportunity to profit from some of the world’s most valuable sports brands. While some schools have done deals, others are wary of forming partnerships with investment firms whose investors demand big returns in a short amount of time.
The private equity firms RedBird Capital and Weatherford Capital are investing $12.5 million to help develop commercial ventures such as sponsorships and media deals at the Big 12 Conference, and a credit line of up to $30 million for each of its 16 schools, which include Texas Tech and Iowa State.
The firms will receive a $1.25 million management fee annually for five years, and their investment will be paid back over that same period at a fixed interest rate.
So far, no university has borrowed from the credit line. It carries a 10 percent interest rate, which many schools find too expensive, according to two people with knowledge of the matter.
“Private equity has approached us. They have approached everyone in college athletics,” said Aaron Horvath, deputy athletic director at the University of Notre Dame. “No matter if you’re in the Big Four conference or the Group of Six” conferences.
Mr. Horvath said Notre Dame was not interested in private equity partnerships, though it is finding new ways to fund its sports programs, including a recent deal to place advertising patches on football uniforms.
“Our goal is to work for the betterment of student-athletes, and to have others that are only bottom-line driven or focused on the bottom line changes the mission of Notre Dame,” he said.
The U.S. Supreme Court’s 2021 ruling that student-athletes could not be denied compensation for their play transformed the college sports world. Colleges pivoted their sports programs into full-fledged entertainment businesses with stars who demand high salaries and often have the option to go to another school for more money.
College athletes across the United States are expected to earn a total of $3.78 billion for the 2026-27 school year. For college football, which kicked off this weekend, a team roster can cost up to $50 million, according to Opendorse, an athlete marketplace and technology company.
Not only do colleges need more money to pay star players, many lack the expertise to land marketing deals and sponsorships or maximize ticket revenue.
The University of Utah sees private equity as helpful in these endeavors. It recently completed a deal with Otro Capital that created an entity to oversee many of the commercial operations of its athletic program.
The venture, Crimson Brand Partners, will manage events at stadiums and arenas; branding, licensing and sponsorships; ticketing; and digital media. It also will seek additional deals for individual players beyond the school’s annual $20.5 million payroll for all its athletes. The university remains in charge of coaching hires, recruiting, student-athlete support and private fund-raising.
Utah hopes the arrangement will modernize how it builds and funds its 19 athletics programs. Crimson Brand Partners will be led by executives from the professional sports ranks; its chief executive is Matt Webb, who worked with the New Orleans Saints and New Orleans Pelicans.
University of Utah officials acknowledged that creating the venture was a gamble. Since December, the school’s lawyers, administrators and board members discussed ways to ensure that the university was protected and that the deal would not run afoul of tax laws.
The entity will operate separately from the university and begin with an investment of about $200 million in cash for its operations from Otro Capital, according to a person who is familiar with the deal but not authorized to speak about it.
Otro can earn a return on its investment by receiving dividends from the Crimson Brand venture or selling its stake.
University of Utah officials said any risks posed by a private equity deal’s going awry were outweighed by the long-term financial challenges of trying to compete in the big-money era of college sports.
“I would argue that there’s more risks of not doing anything based on the climate that we’re in,” said the university’s athletic director, Mark Harlan.
In the Big 12, Commissioner Brett Yormark has emphasized that RedBird and Weatherford would not have any ownership stake in the conference under its $12.5 million deal. He also said the $30 million line of credit was considered a secondary benefit, available to members if needed. In all, RedBird and Weatherford are committing $500 million to the deal.
Among the companies in RedBird’s portfolio are a Formula 1 team and the Italian football team AC Milan. RedBird is also an investor in Paramount, the owner of CBS, and some observers have suggested that the relationship with RedBird could help the Big 12 with its media deals.
“It’s all about growing the conference and taking advantage of their ecosystem,” Mr. Yormark said at a recent news conference.
A spokesman for RedBird declined to comment.
Others worry about opening the door to private equity. Val Ackerman, the commissioner of the Big East Conference, said she was skeptical of private equity investments. She noted that the high rate of return commanded from the firms’ investors could conflict with the core mission of helping student-athletes.
More broadly, she said, the pay-to-play system in college sports needs a long-term fix, as schools scramble for funding.
“It’s hard not to worry where this is headed,” Ms. Ackerman said.
