Is Private Equity Needed to Survive in Today’s College Athletics? | ACC

Paul Catalina and Craig Smoak discuss their thoughts on private equity in college athletics, their thoughts on the potential of private equity joining college athletics, is this the future of college athletics, and more.

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um first off the bat today Craig uh private equity and College athletics is something we’ve been talking about a lot and it often ve into the live college uh Saudi Arabia conversation but that’s not really what is uh present at the time for College athletics Drew Weatherford Who’s On The Board of Trustees at FSU and a former FSU quarterback and this is Ross Dinger story who Ross is just killing it he is absolutely killing it right now but this story is Drew Weatherford has gone to upwards of 50 schools and had clandestin meetings about them taking on private Capital private Equity uh into their apartments and the key thing is um is this what you need to survive and ads one ad said yes and he also said that no school has given him a flat no you know there are some I’m sure that are more reticent than others but the door is opening and his company just merged with redb bird Capital which is this gigantic you know private Equity company that has stake in multiple professional franchises AC Milan Liverpool the Red Sox Formula 1 a lot of stuff they’ve got they’ve got their hands in a lot of pots across a lot of Industries overall company valuation of10 billion and so his college athletic Solutions has merged and this is this is coming one way or the other because you know college leaders will not say no to money and there are good things with this and there are potentially dangerous things with this the good things are that your team might get an influx of cash to put into their athletic department and and make a lot of things better and and and fill the gaps that they’re going to lose with Revenue sharing uh the bad thing is is that you could wind up like Red Lobster you know where you know you get kind of pushed something and then you kind of go down that direction and it winds up good for you so you got to be careful the bed Fells you keep when’s the last time we heard from Drew weather that was like Florida State realignment related when he was kind of rounding the troops up uh he’s very ambitious young man uh although he’s not that young anymore at this point I guess is he’s probably like 38 years old but in my head he’s still the Florida State quarterback just like two years ago but yeah he’s uh he’s been uh involved in a couple of different stories we talked about over the last I guess year or two and uh obviously at the Forefront of trying to make sure that FSU is uh as uh well set up for the future as possible and uh you know I think they’re they’re obviously a school that’s being very calculated about their future and and and trying to position themselves right I think this is a god- awful idea I think that the people who stand to benefit from it will help spin this as something that could be beneficial for schools and try to position it that way I think this is just let’s hit fast forward on trying to ruin college sports if we start to get private uh Investments involved and uh I think that on the surface yes you can spot some athletic departments that are that are running with a deficit I know that one that gets brought up a lot because of their numbers was UCLA right like how much in in you know many millions that uh that they owed uh but we’ve heard also about you know in Arizona like we’ve heard about schools and money issues but we haven’t like really done deep Dives on this I don’t for one effing second believe that there’s any football program out there that needs to sit there and bother themselves with this I just can’t imagine the scenario because uh I don’t know that the ones that are small enough that perhaps they would need this to compete at the highest level will ever find a way to turn that money around to the people who invested in them and make it worth their while so it seems to me like you’re basically just be at you’re you’re you’re fast forwarding the the death of your Athletic program to accept money because there’s no way you’re going to be able to return that investment and then then what are you giving up you’re basically giving yourself up right because you’re not going to be able to turn a major profit uh based on what I know about it I I just I find it hard to believe that a that a TCU or someone like that’s going to get some massive influx and then turn that around and make it worth the while of the investors and then walk away unscathed and just like regular old TCU uh so I you know and they may not need any money but certainly there are others that are that’s why this conversation is here this s story to me more than anything is just makes it crystal clear the vultures may have already arrived but now there’s more of them and they are swarming and swirling and flying over college sports right now just ready to pick apart the bones of whatever is is there to pick apart and right now there’s a lot of things that you could see uh offered up like athletic programs potentially wanting to invest and I’ve seen some of the reaction to this and there’s you know Financial people that are like this is the worst idea ever for college sports as we know it um this is a terrible idea for schools I’ve seen others who probably would benefit from this surprise surprise Drew retherford maybe that are like this is what’s going to be needed moving forward I think this is awful uh on the surface I think it’s an awful idea to to get in bed with private investment um and your athletic department would really have to either have the brightest of Futures that you know you’re going to have some like significant return to make it worth the while or you are so desperate for money that you have no other choice and in that case you might as well just sign your own death C far as I’m concerned I just I don’t know where this makes sense for for college sports and this going way too far down attracted I don’t know if there’s any return for them I’m not trying to be like really hyperbolic here and like overly dramatic about it but I started seeing private investment I know others refer to private Equity there’s like slight differences there but I just think if you’re sitting there asking outside investors to basically come run you like it’s Walmart or something I don’t know how many times I’ve ever seen that turn for the better do you no uh look and look I just did this on triple option so if you heard me give this example again I’m sorry but it’s a really good one we’re seeing it happen with Red Lobster right now right so file for bankruptcy recently yeah Red Lobster fil for bankruptcy and what caused them to go to that so quickly was that the company that has the largest stake in them is um a fish company like a Seafood Company uh that is in Asia I believe it’s in Singapore okay so this and I could be wrong there or Thailand correct me if I’m wrong if you yeah so it’s but it’s it’s it’s in Asia Cambodia so this company I can name them all baby this company has so much shrimp they’re like hey you know what would be a great deal where we could offload all this shrimp that we have would you say it’s a lot of Shri would say is it endless shrimp yes they they do they say you know what we even have endless shrimp so as opposed to endless shrimp being a promotion that went on in like September whenever they did it um they had endless shrimp for a month that it was a thing that they would do they put endless shrimp on the menu 365 days a year and what um I guessed Asia like didn’t quite think about was we Americans when given an all you can eat opportunity we’ll do that we we absolutely will and ran them into bankruptcy because they weren’t making as much money and they were you know endless shrimp put them into bankruptcy and where it’s scary is there’s an endless shrimp out there for College athletics right so one of these companies will come in and say Hey you know what’s a really good idea endless shrimp and then that the school would be like uh you we we we do that but it’s just a little bit of time they’re like no no no every day endless shrimp and they’re going to be like well we kind of have to because you’re you’re the money so then you do your endless shrimp and then you’re in a real a real pickle you know and so that’s that’s where this gets complicated now Drew weatherford’s uh plan is a little bit different uh in that you know he he says it doesn’t work the same way and it’s more about investing and like kind of being like yeah I I I I agree with you and look let’s just pretend that he’s altruistic and has this great idea the thing is is that for every one of him there’s 10 that aren’t so even if he is truly altruistic in this and trying to save College athletics and maybe he believes that well I mean there’s other vultures out there that look red bird Capital can’t invest in all 300 programs right but you know there’s plenty of people who can and when you start going you know what would make this better if we just had this money that could close the gap and who can we get it from and then somebody else said there like I got money you know and then but then you wind up in your endless shrimp yeah yeah I mean and I think that I read about Red Lobster the day and it’s not quite exactly the way you put it because it’s really not the shrimp’s fault it was more like leases started piling up and just expenses started piling up and they they changed hands like a couple of different times and eventually this the debt was piling up to the point of like yeah you you reached a point of uh no return and uh you know after you know handoff here and you’re handed off here and finally you get to the point where there’s no more handing off to be done and you are a sinking ship and and that’s basically what we see with Red Lobster bunch of people have seen though like I’ve seen articles clarify it’s not because of all the shrimp like it wasn’t all that it was more like you couldn’t pay your rent and then all a sudden you got a bunch of leases and there’s a bunch of money do and you’re not making money and and and there was like maybe I think early on like the initial influx a little bit of success for the other chains restaurants that were owned by this same group but Red Lobster still never like really turned around and so it was just it was It was kind of dead in the water endless shrimp was the last the straw like broke it yeah I think that’s more or less like a a fun joke to talk about but yeah I guess like maybe that was the final thing but it wasn’t like the cause of why they eventually went down it was just any number of other things that were were bigger deals but yeah like you know with uh with this I just I I can see where there could be some athletic departments I guess with maybe not strong enough leadership that feel they need a quick fix and and this is the way to do that and based on the information they’re given or the information spit out and what they uh you know go over they can see a way where they can turn you know this money around perhaps but I I don’t know man I just don’t see it this just seems like it would be the death nail for some athletic programs because suddenly you’re relinquishing your power to outside investors and they’re expecting a a turn on profit and don’t you have enough problems already than to sit there and and and put yourself in that situation where now you have these uh these you know investment firms uh that you suddenly have to answer to and we know how that goes too they don’t invest Paul and then like build out and hire a bunch of new people they do the exact opposite they start cut cost cut cost cut cost cut cost how can we slim this thing down how do we how do we streamline this uh let’s cut cut cut as much as we can and then that way we we make more profit and that looks good and then so on and so forth and so how does that work with a college athletic department like do you come in you start like we’re chop volleyball like with with Title 9 even I I don’t know how you could cut Sports I mean what other Alternatives would you have I don’t know I’m not a big business Wall Street guy but just reading the stories I’ve read in the past about private investment and kind of how that typically works I just don’t see where for a college athletic department it makes any dadgum sense whatsoever unless you have a situation where it’s like Florida State for example can sit there and guarantee that if you pay our tab to get out of the ACC like we we know that we can pay you back whatever that that Financial figure would be right to that you know to to counteract your investment um and and here’s the thing it’s not like just I ow I loan you this money uh and and you pay me back in full and then we’re Square is’t it pretty much like Hey we’re going to pay this money and we want our money back and then we want this much return on top of that right so I don’t know who can guarantee that who would want to be in a a situation that binding uh and that puts you at so much risk I mean if you’re already at risk when it comes to to money I I can understand wanting to to you know find a a way to close that gap for schools that aren’t in Ohio State or a Texas or you know whoever that can just cut checks um but this seems like you’re just putting weights around your ankles in the swimming pool and and still trying to uh you know swim I just feel like it puts you even further uh into problem territory and the better idea is to do what you’ve always done and go to your boosters I mean if you need money that badly go to your boosters if it’s a if it’s a situation where your program’s in real trouble wouldn’t you rather go to your boosters who aren’t going to be like all right and I better get a 25% return by 20 27 or you know we’re going to own half the athletic department I mean that that to me just it seems like it’s dangerous uh shaky territory and I don’t know that just seems like a bad idea from from the outside looking in now I’m sure there’s probably a more Nuance detailed like well actually this this is how it could operate and if I saw something like that that made sense then I I’m I’m open-minded enough to hear it out but on the surface this just seems like a bunch of greedy people who see a really weak system and a in a hole to run through uh at a moment of vulnerability with some smooth words to convince so and so A&M that hey if we give you $200 million uh based on this that and the other like you can pay us back and we’ll give you this cash in luux and it all be great and Rosy it just it smells like trouble to me U and so I would be very weary if I was College athletic departments universities and and dabbling in this for the sake of our our Athletics I I just think that’s dangerous territory and it’s much better to go the private route uh with your your big boosters and look if you don’t have those guys Paul then maybe you just shouldn’t be in the business of big- time College athletics like can we ever get to that point where just not everybody maybe does have a seat and I’m not trying to kill program but if you can’t afford to play at this next level I don’t think the answer is to go and go get private Investments and then you know tank it even further I think it’s like well maybe you just look in the mirror and say all right this sucks we’d rather be here but we’re going to have to look for other alternatives to maybe get back there one day but for right now we’re here and we’ve got to be the best that we are here and then hopefully formulate a plan to maybe if we’re successful get up here again but I don’t think that’s getting like $200 million from some dude in New York and then you know then all of a sudden you’re at their Mercy uh and and further tied up uh financially I I just yeah I know there’s experts out there that maybe could spin it a different way but that’s how I read it and I just don’t think that’s that’s a good thing for College athletics as we know it no on the chat room go