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Florida Entertainment and Sports Law Review

Abstract

This Note discusses the funding crunch that universities are facing and why private equity capital can be the answer. The House v. NCAA settlement has introduced a $20.5 million yearly expense that universities must pay in order to compete for top-level talent in revenue-generating sports such as college football and basketball. However, declining enrollment and unequal TV rights distributions have left some universities scrambling to figure out how to stay competitive in this new revenue-sharing era. Enter private equity. This Note explains how universities can tap private equity investment to fund revenue-sharing obligations instead of slashing operating budgets and cutting non-revenue-generating sports.

The first part of this Note explains why private equity investment in college sports is not as revolutionary as many people believe. Private equity firms have already entered college athletics indirectly through private-equity-backed companies that help universities grow their multimedia rights and increase NIL opportunities for their student-athletes. Additionally, private equity investment in professional sports has laid a blueprint for how private equity firms can be utilized at the college level. The second part of this Note uses Florida State as a case study and explains why Florida State’s proposed private equity investment model would work for many universities even outside the state of Florida. Specifically, this part of the Note dives into the tax consequences of Florida State’s proposed private equity model and explains why a private equity investment at the university level is feasible without endangering a public university’s tax-exempt status or the tax-exempt status of its support organizations. The final part of this Note discusses possible funding alternatives to Florida State’s proposed private equity investment model, such as university bond issuance, private credit, and private equity investment at the conference level. Whether it be through Florida State’s proposed private equity model, private credit, or private equity investment at the conference level, universities should take advantage of private equity capital in this new era of college athletics.

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