The Big 12 needs cash, and fast. So should it take private equity money?

Countless stadiums, arenas, golf tournaments and bowl games have sponsors in their titles. The world’s most prestigious soccer league was named the Barclays Premier League until 2016. Private equity firms currently hold ownership stakes in more than 60 North American sports franchises, according to Pitchbook, as well as many of the top soccer clubs in Europe.

But when news broke Thursday that the Big 12 is entertaining both a potential title sponsorship deal with insurance giant Allstate and a $1 billion private equity partnership, you could almost hear the collective reaction: “How dare they?!”

Kirk Wakefield, a Baylor University marketing professor, had a much different reaction to the possible title sponsorship.

“You wonder why people haven’t done that already,” said Wakefield, who runs a research firm that studies sponsorship impacts for sports leagues and brands. “It’s such an obvious opportunity.”

USC sports business professor David Carter looks at the plight of the Big 12, which lags hundreds of millions a year in revenue behind the Big Ten and SEC, and sees private equity as a matter of Darwinian survival. To win national championships, Big 12 schools need to be able to spend like their competitors on coaches salaries, recruiting, facilities and, perhaps soon, athletes’ paychecks. That could mean changing the sources of funding and the relationships between universities and their investors.

“You either raise the money one way or another, or you run the real risk of losing relevance,” said Carter. “Some presidents and chancellors may say, ‘This doesn’t feel right.’ Well, what’s the alternative? If you don’t like this, are you OK with your university or conference essentially being relegated?”

Big 12 commissioner Brett Yormark, hired in 2022 from Roc Nation, has a reputation for taking unorthodox approaches to boost his conference’s post-Oklahoma/Texas brand (the schools will play in the SEC this season). Renaming the league to be the “Allstate 12” or selling off 20 percent of the conference to a private equity firm in Belgium certainly fits that approach.

Either or both proposals would surely make college sports traditionalists queasy. In fact, at this moment, it’s not certain his own presidents will approve either or both initiatives.

But from a purely financial standpoint, there’s ample logic behind both scenarios. Simply put, the Big 12’s athletic departments need to raise more cash. Quickly.

The conference’s new deals with ESPN and Fox, to begin in 2025-26, will pay its members an average of $31.7 million a year through 2031. While a coup for the league given the loss of Oklahoma and Texas, it’s still far less than what Big Ten schools (around $65 million annual average) and SEC schools (north of $50 million) will make in the coming years.

Meanwhile, the Big Ten and SEC recently strong-armed their way to a new College Football Playoff contract in which they’ll make nearly twice as much annually ($21 million per school) as the Big 12 ($12 million).

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And perhaps most urgently, a pending settlement in the House v. NCAA antitrust suit would allow schools to share around $22 million a year with their athletes. For Ohio State and Texas, that’s a rounding error. For Kansas State, that’s nearly a quarter of its annual revenue. Its university may have to consider subsidizing athletics — either through direct support, charging student fees or both — much like newer members Cincinnati, UCF and Houston had to for years in the AAC.

“Every institution is looking into private equity,” said one Big 12 athletic director. “You’ve got to at least explore it.”

The sponsorship deal, while awkward, seems less controversial, given that college football teams already play in the Pop-Tarts Bowl and Duke’s Mayo Bowl. Allstate itself is already ubiquitous in the sport, from the Allstate Sugar Bowl to the branded nets behind the goal posts.

No doubt it would be jarring at first for an entire conference to go corporate. But NBA jersey patches were once controversial, too, when introduced in 2017. Now it’s standard practice to see those Rakuten logos on the Golden State Warriors’ jerseys.

And whereas the Big Ten and SEC’s brands date back to 1917 and 1932, respectively, the Big 12’s name is still fairly young, originating when the Big 8 added four Southwest Conference schools in 1996.

“It’s only against our feelings about tradition that make us not want to have it be the Coca-Cola SEC, or whatever it would be,” said Wakefield. “That’s not so true with the Big 12. You’re less tradition-bound in the Big 12.”

Wakefield estimates a deal of that kind would be worth a “multiple” of the $15 million-$30 million a year that NFL stadiums get for naming rights: “The Big 12 is 16 teams, multiple sports throughout the year. If you were to price that out on an exposure level, that’s going to be a really huge number.”

The private equity discussion is far more complicated.

The Big 12’s prospective partner is CVC Capital, a firm that has invested billions in Spain’s top soccer league LaLiga, France’s Ligue 1, the Women’s Tennis Association and several rugby properties. It previously owned F1 before selling it in 2016.

European sports leagues embraced private equity well before North American sporting organizations, but since 2019, when Major League Baseball first allowed institutional investments, equity firms have taken stakes in the Chicago Cubs, Houston Astros, San Antonio Spurs, Tampa Bay Lightning and many more franchises.

It’s no secret why. From 2004-2022, U.S. pro sports franchises yielded significantly higher returns than the S&P 500, according to WealthManagement, which calculated the rise in NBA valuations at 1,079 percent versus 317 percent for the stock index.

One private equity firm would value Michigan football at $1.5 billion. (Photo: Detroit Free Press)

While college football teams do not hold individual valuations, conferences’ TV deals serve as an unofficial proxy. The Big Ten’s value more than doubled from 2017 to 2023. Even the ACC’s much-maligned ESPN deal, valued at $240 million annually, is a 330 percent jump from what the league was making a dozen years ago. Gerry Cardinale, whose firm RedBird Capital recently launched a new fund geared at college sports, told The New York Times in January that Michigan’s football team alone would be valued at $1.5 billion.

But unlike pro sports, a profit-driven industry, college athletics has long been treated as a non-profit extension of larger academic institutions, even as rising television revenues turned it into a multi-billion dollar industry.

The landscape is shifting with direct revenue-sharing with athletes on the horizon, but it’s still new territory.

“Athletic departments have always been about finding ways to spend every dollar they bring in,” said a power-conference administrator familiar with department finances. “Not turning a profit.”

CVC is betting the Big 12 will at least double its six-year, $2.28 billion deal when it comes up again in 2031, which, when coupled with sponsorships and other conference revenue, could net the firm a hefty return. But in doing so, the firm effectively becomes a 17th member with $1 billion worth of influence over the other 16.

“I’m wondering what the catch will be,” said the power-conference administrator. “There’s no way these firms are going to invest hundreds of millions of dollars in a school and not expect a certain degree of influence in return.”

SEC commissioner Greg Sankey expressed similar reservations last month. He brought up Red Lobster, which recently declared bankruptcy a decade after being purchased by Golden Gate Capital, as a “cautionary tale.”  But Sankey’s conference is not facing the same financial challenges as the Big 12.

In 2019, former Pac-12 commissioner Larry Scott, whose league had already fallen far behind the Big Ten and SEC financially, presented his board with a similar private equity opportunity. The presidents had reservations and turned it down. Four years later, the conference imploded — the Big 12 a major poacher of the schools.

A more experienced dealmaker like Yormark, whose previous stops include NASCAR and the Brooklyn Nets, is better equipped to navigate this terrain than presidents and athletic directors. CVC would not be taking a controlling stake in the conference, and, according to a person briefed on the discussions, would be prohibited from involvement in any sports decisions.

Asked at the recent Big 12 spring meetings about private equity’s interest in college sports, Yormark welcomed it.

“In some respects, (interest from) private equity is a validation of where this industry is going and the growth trajectory,” he said. “So I don’t look at it as a bad thing.”

Ultimately, the Big 12’s presidents will need to acknowledge an unwanted but unavoidable reality that their “academic” enterprise is no different than professional sports at this point.

“Before, (college sports) was about return on objective. College sports had this fabric of society stuff, what are our graduation rates and all that,” said Carter. “Now it’s the same as professional sports: How are we driving value to sponsors, how are we keeping our investors happy? Anything goes in terms of trying to generate revenue.”

Yormark has apparently found two potential sources to generate more revenue. His conference may be in no position to turn them down.

(Photo: Ron Jenkins / Getty Images)