On paper, North Carolina is the prototypical athletic department that should want private equity’s paper: a national brand, with a strong tradition and demanding booster base, but stuck in a second-fiddle power conference.
UNC athletic director Bubba Cunningham, however, says he isn’t interested in this form of financing—at least not now. He recently told Sportico that despite conversations with a half-dozen firms dating back to last fall, the school will not be taking money from (or selling equity to) any institutional groups in the foreseeable future.
In a phone interview last week, Cunningham offered extensive insights on the subject of private capital’s role in college sports. As part of that discussion, Cunningham also spoke about a future where programs like his increasingly look to consolidate their business functions, relying less on third parties to handle jobs such as selling media rights.
“We have been approached numerous times about different private equity options, but nothing was appealing enough for us to pursue any further,” Cunningham said. “The cost of capital for us is fairly low. They’ve got some good ideas and thoughts about some other uses of the capital, but we’re not there yet.”
The school may soon need that cheaper capital. Its $139 million athletics budget pales in comparison to even league rival Florida State ($172 million), which has spent the last two years in active talks with institutional firms about an influx of money. The Tar Heels are also exploring a costly plan to renovate or replace their renowned basketball arena, the 21,750-seat Dean E. Smith Center, having already retained the architectural firm Populous and several other consultants for the project. In a press conference last week, UNC’s newly promoted chancellor Lee Roberts openly worried about how the Tar Heels would be able to remain competitive financially in the dawning era of college athlete revenue sharing.
Cunningham said, in general, the private equity firms he spoke to tried to “soft sell” the idea that they would be willing to see their returns from the deal materialize over a longer time horizon.
“But you know, in reality they’re going to want greater returns more quickly,” he added, echoing the skepticism Texas athletic director Chris Del Conte expressed in an episode of Sporticast in March.
Such doubts are going to be a challenge for the many firms looking to invest directly into athletic departments. Conversations have been ongoing for more than two years in some cases, yet not a single deal has been publicly announced. This, despite one firm saying in May that it was in “deep conversations” with a “handful” of schools. The financial angst in college sports is real, but schools have so far proven immune to institutional capital’s charms. Cunningham says the hesitancy could be indicative of a wider debate in top-tier college sports—whether to keep outsourcing significant chunks of an athletic department’s operations, or to begin the arduous process of bringing that in house.
Though not necessarily “serious” about their offers, at least not now, Cunningham has found the conversations with PE firms useful, as he tries to quickly study up on a subject he has limited familiarity with.
“It’s part of the reason I take all the calls,” said Cunningham, 62, who previously served as AD at Tulsa and Ball State. “If I can learn something from somebody that has an expertise in a different industry—or even in finance, which is something that we lack—I’m all ears.”
Cunningham declined to name the PE firms he had spoken to, but public records obtained by Sportico revealed a couple of his contacts.
One was a UNC alumnus, Newman Delany, the son of former Big Ten commissioner Jim Delany, who now serves as senior vice president of Collegiate Athletic Solutions (CAS), a college sports investment vehicle formed by RedBird Capital and Weatherford Capital.
In February, three months before the CAS joint venture would be publicly unveiled, Newman Delany sent Cunningham an email. According to Delany’s email, Mitchell Ziets, a stadium financing consultant who had been retained by UNC, had already “reached out to RedBird to see how we might fit into and benefit the capital stack.”
Delany proposed that he and some of his CAS cohorts “come down to Chapel Hill” for a “broader conversation.” (Ziets did not respond to a request for comment.)
A few weeks later, Cunningham received a note from Casey Schwab, CEO of Altius Sports Partners, the NIL consultancy, connecting the athletic director to Niraj Shah, co-founder of Otro Capital, which was launched out of RedBird last year.
“Because you both are thinking about the future of college athletics at an extremely high level, I am making this introduction so you can potentially find time to chat,” Schwab wrote.
Cunningham ended up connecting with Otro Capital in April, following the NCAA basketball tournament, but the talks effectively ceased after that.
In May, Delany again wrote to Cunningham, saying that CAS would “engage at the appropriate time” about providing financing to the Dean Dome renovation project.
“Separately, as mentioned, one benefit of our solution is it does not need to be tethered to hard assets (nor does it impact a university’s normal course financing),” Delany wrote. “We would be happy to spend the time to pull together a UNC-specific analysis. It is a helpful tool for universities as they survey capital options given all the unknowns around realignment and revenue sharing.”
For now, institutional firms pitching college administrators have taken the approach that private capital, which is more akin to lending, is the most appealing deal structure. CAS’ pitch to schools, as told through an investor deck viewed by Sportico, centers around the fact that the money doesn’t sit on the university balance sheet. Cunningham said he thought traditional private equity—where returns are captured primarily via asset appreciation as opposed to revenue sharing—might ultimately prove more appealing to people in his position.
“Building something together where you share in the upside going out, I do think is something that’s likely to happen in the future,” he said. “I think we still have a couple more years to work through what it’s going to look like, and media rights will be a part of it.”
Private equity is already in college sports to a degree. Learfield and Playfly, which manage the multimedia rights for the vast majority of top-tier college athletic departments, both have private equity backers. Their deals with partner schools are structurally quite similar to what’s being offered by groups like CAS; they often give up-front guarantees for the right to share in revenue generated.
Athletic departments have a choice in front of them with the private capital offers: Continue to outsource business expertise and operations, or push to do more internally, a process that would present financial and personnel challenges, at least at the outset. Cunningham said he thinks the top of the industry is headed for a shift toward internalizing operations, similar to what’s done in major pro leagues.
Asked if this dynamic has made him rethink his school’s MMR approach, rights currently held by Learfield through 2029, Cunningham answered: “Absolutely…college sports is going to look very different between now and 2029.”