The Big 12’s five-year, multimillion-dollar private equity deal with RedBird Capital and Weatherford Capital is a major development in the economic landscape of college sports—and its legal ramifications could reset the relationship between athletes, schools, conferences, the NCAA and now PE companies.
The deal is called a strategic partnership and was first reported by Yahoo Sports. It is the first of its kind with a major Division I conference. The partnership will provide $12.5 million to the Big 12 and allow conference schools to opt into an arrangement where they receive a capital credit line of $30 million.
The partnership doesn’t involve either the Big 12 or individual conference members selling equity, which was likely helpful.
Of the 16 universities in the Big 12, 13 are public. The prospect of a public university selling equity to a private entity would raise complications with university charters, enabling statutes and other documents that make clear the university belongs to the state and its people—not private businesses.
That said, the University of Utah, a public university, has negotiated a partnership with Otro Capital. Instead of that deal involving equity transfer, Utah and Otro have agreed to form a separate, private entity that is expected to boost revenue streams.
Colleges need money for sports and education more than ever
Private equity companies are attracted to college sports because of the perception that media rights deals could, and should, be more lucrative. The Big 12’s current deal with ESPN and Fox is worth $2.28 billion and will expire in 2031. Likewise, private equity companies can facilitate the distribution, licensing and marketing of the intellectual property of conferences, schools and athletes. It stands to reason the partnership could help the Big 12 compete with the SEC and Big Ten, both of which generate more revenue.
College sports, and colleges more broadly, are also in need of financial help these days.
The House settlement means colleges can directly pay athletes a share of up to 22% of the average power conference athletic media, ticket and sponsorship revenue. That money is on top of money spent on athletic scholarships—which cover tuition, housing, health resources and other benefits—payroll for coaches and athletics staff, and the construction and maintenance of facilities. If colleges want to recruit and retain the best athletes, they’ll need to pay them and pay for resources to attract them.
The problematic economics of college sports aren’t limited to athletics. The reality is that many universities face severe financial worries about their prospects over the next decade. This has nothing to do with sports.
The enrollment cliff has arrived, and it will mean about 15% fewer Americans of typical college age enrolling in universities from 2025 to 2039. The cliff reflects a decline in U.S. birth rates that started during the Great Recession in 2008. Fewer students not only means fewer tuition dollars but also reduced revenue from dormitories and meal plans. Schools will compete more aggressively for a smaller pool of applicants, which will mean offering more generous financial aid packages and, as a result, less revenue.
Schools can’t rely on international students to fill the revenue gap. The Trump administration has placed barriers on student visas and taken other measures making it more difficult for schools to attract and enroll students from other countries.
The Trump administration has also reduced and placed tighter restrictions on government-funded grants, which will have economic repercussions. Some might suggest universities spend more of their endowments, which can be in the billions of dollars, as a way to address financial problems, but that approach has significant limitations. Gifts are often restricted to certain types of uses authorized by the donor and in some cases can be spent in limited amounts over a set period of years.
The disruptive force of college sports law in business deals
Private equity deals providing millions of dollars to universities at a time of need are economically rational. There could also be untapped opportunities in maximizing the value of IP rights.
But lurking in the background is the law, a concept the NCAA and its members are all too familiar with.
Private equity partnerships sound like something from pro sports, where leagues now allow PE firms to buy stakes in teams.
College sports, however, aren’t structured like pro leagues, which are joint ventures with owners as management and players as labor. Management and labor negotiate collective bargaining agreements that govern wages and working conditions and are immune from antitrust scrutiny. While that dynamic can lead to problems, as evidenced by the NFL and NBA lockouts of 2011 and a likely MLB lockout beginning this December, those problems are temporary and end with two sides cutting a deal.
From a legal standpoint, the current state of college sports is a mess, something PE groups should take seriously.
There are more than 70 antitrust lawsuits across the country involving athletes whose NCAA eligibility has ended but who argue they should be able to keep playing. Their basic argument is member schools would compete for them by offering NIL, revenue share and other benefits, but those schools and the NCAA have joined hands to not compete for their services.
Central to those cases is the idea that college athletes, at least football players at the power conference level, are a labor market that sells services and that the NCAA permitting colleges to directly pay athletes is consistent with a pro league and teams that buy athlete services. The NCAA has thus far won most of these cases. But it has lost others, and it needs to win all of them, or some member schools gain a competitive benefit by playing athletes who would be ineligible at other programs.
Back to private equity. Athletes suing to keep playing are sure to argue that if a school and conference have partnered with a private equity company to boost revenue, there is an even more persuasive argument that these athletes are selling services in a pro sports-style market.
College athlete employment and general litigation concerns
There is also the real possibility of college athletes being recognized as employees, with the schools seen as employers and the conferences as joint employers—a status that could be extended to the NCAA and, possibly, PE backers.
Johnson v. NCAA, which argues that college athletes are student employees within the meaning of the Fair Labor Standards Act and accompanying state labor laws, has thus far succeeded in court.
While Dartmouth College men’s basketball players withdrew their petition to unionize following the 2024 presidential election, it’s notable that in the one legal order in that effort, the players won. NLRB regional director Laura Sacks found the players were employees within the meaning of the National Labor Relations Act, because they performed work in exchange for compensation (including priority admissions into an elite university, per diem and gear). Dartmouth, through coaching and athletics officials, had the right to control that work.
It stands to reason another group of college athletes, including those at a public university—where labor and employment are governed by state law—in a labor-friendly state, might seek employment recognition and unionization. Private equity companies are probably not thinking of the prospect of being designed joint employers of college athletes, but they should.Â
There are many other legal risks associated with college sports: Title IX lawsuits against schools for allegedly failing to meet gender equity requirements; fired coaches who sue for breach of contract, defamation or wrongful discrimination; former staff who sue over sexual harassment and race or disability discrimination; and personal injury cases brought by injured spectators. That’s just a sampling.Â
It’s possible that private equity agreements with college athletics contain indemnity and waiver clauses to minimize the financial risk, as might insurance policies. But universities are targets of litigation, and plaintiffs who eye broader recovery might add deep-pocketed PE companies as co-defendants.
Lastly, there’s the prospect of conflict between a conference or athletics program and a private equity company. What happens if the company is unhappy with a team’s play and demands a coaching change? Or the company prefers one recruit to another, or a different starting quarterback? Or wants to clean house in the athletic department? When parties agree to a deal, usually everyone is happy at first, but when times go bad, changes are typically demanded. Who gets to decide what those changes are and when they happen?
On balance, the Big 12 PE partnership makes sense for schools and investors who want a foothold in what’s thought to be a lucrative industry. But investors are taking a chance in tying their money to college sports at a time when there are unresolved and potentially transformative legal battles, with outcomes hinging less on economics than on judicial decrees.