Weekly Column: Private Equity Investment in College Sports

In his capacity as a Columnist for California Sports Lawyer®, Founder and Managing Attorney Jeremy Evans has written a column about the potential upside and downfall of private equity investment in college athletic programs in America.

You can read the full column below.

Let us begin with two questions. Should private equity investments be allowed in college athletic programs? If yes, what are the rules, regulations, oversight, and consequences?

The House v. NCAA settlement is likely to usher in private equity investment in college athletic programs across the United States of America. Private equity investment comes on the heels of a settlement that will allow payment to college athletes to get paid damages, payments for playing through a split of revenues, which is beyond name, image, and likeness (NIL) contracts and payments. Private equity investment has the potential to add wins to athletic programs and academic institutions and may create a new division for programs that accept such investments.

Should private equity investments be allowed in college athletic programs?

On the one hand, some colleges and their athletic departments need an influx of cash to get better on and off the field. On the other hand, should private equity investment be in and around college sports and academics? The investment could create a terrific competitive environment for schools to invest more. However, the downside cost could be great.

At risk is the potential of destroying college sports and academics by inserting a third party entity with the potential for control over decision-making or withholding funding after reliance. Furthermore, private equity contractually demands the paying back of investment dollars through revenues or mandatory scheduled payments. It is not free money. The difference with private equity in professional versus college sports is that an academic institution, particularly a public one, cannot be sold to the highest bidder and will not experience an increase in traditional “franchise value”. Return of investment will simply come from performance on the field by the athletes and any contracts and payments connected to the university through advertising, apparel, sponsorships, and television/streaming, etc. The question must be asked: is the continued professionalization of college sports good thing?

What are the rules, regulations, oversight, and consequences of private equity investment in college athletic programs?

First, if private equity investment is allowed within college programs, the scope and authority has to be determined. Is there a limitation on how much can be invested or who can invest? Is there is a limit or mandatory disclosure of investors? Do investors have an decision-making authority, influence, or will such activity forbidden? Will there be individual school, conference, and NCAA restrictions?

Second, who is responsible when something goes wrong? The academic institution mostly likely, but these matters would need to ironed out before going public, pun intended. If private equity investment in college athletic programs is allowed, a strict regulatory scheme will help, but it will not prevent issues with betting, influence, and bad actors. In many ways, it invites more issues into college sports compliance with an added benefit of financial stability for investment in facilities, academics, and talent. Like analytics in baseball, or artificial intelligence in business, using something like private equity investment as a tool can be helpful, but as a crutch will only invite potential loss and destruction. In other words, player development and character still matter.

About Jeremy M. Evans:

Jeremy M. Evans is the Chief Entrepreneur Officer, Founder & Managing Attorney at California Sports Lawyer®, representing entertainment, media, and sports clients in contractual, intellectual property, and dealmaking matters. Evans is an award-winning attorney and industry leader based in Los Angeles and Newport Beach, California. He can be reached at Jeremy@CSLlegal.com. www.CSLlegal.com.