FSU consults with JPMorgan to seek private equity boost

by | Aug 7, 2023



  • Florida State University (FSU) is in talks with JPMorgan to explore raising funds from institutional investors, potentially through private equity, amid the changing landscape of college sports and the importance of media rights deals for revenue generation.
  • The focus of the funding has not been explicitly disclosed, but it is speculated to be directed toward FSU’s athletic department or other university areas.
  • FSU faces challenges, including complexities in the structure of involvement, contractual obligations with the Atlantic Coast Conference, and potential disparities in revenue distribution.

Florida State University (FSU) has engaged with JPMorgan as its investment banker in a bid to explore opportunities for raising funds from institutional investors, potentially through private equity channels.

The discussions, reportedly underway for several months, have seen interest from Sixth Street Partners, a prominent private equity firm. While the focus of the funding has not been explicitly disclosed by university officials, it is speculated that it will be directed toward FSU’s athletic department or other areas of the university.

The primary driver behind FSU’s pursuit of additional funding lies in the shifting landscape of college sports. Media rights deals have emerged as a crucial revenue stream for teams and leagues in both professional and collegiate sports.

The Atlantic Coast Conference (ACC) revenue distribution model has recently changed to favor schools with successful football and basketball programs. However, FSU has advocated for a more equitable model that rewards schools generating higher TV revenue.

This move towards private equity funding is unusual for public universities, which typically rely on other sources of funding. The Pac-12 athletic conference had previously shown interest in selling a stake in its media rights to private equity firms, but the idea didn’t materialize. Similar challenges may arise for FSU, as private investors might seek quick and predictable returns, while the university could face a prolonged process to renegotiate existing media deals with the ACC or another conference.

While discussions with institutional investors continue, questions remain about the structure and specific entity within FSU that would be most involved in the process. Florida law permits public universities to organize their athletic departments as separate nonprofits, leading to complexities in establishing a clear framework.

FSU’s potential departure from the ACC would necessitate addressing contractual obligations, as the conference’s media rights agreement with ESPN is in effect until 2036. Resolving the Grant of Rights issue, which grants the conference members media rights for the duration of the TV deal, would be essential for any early exit by FSU.

The issue was brought to the forefront by FSU President Richard McCullough during a recent Board of Trustees meeting last week, where he described the situation as an “existential crisis” for the university.

The distribution of revenue among athletic conferences heavily relies on media deals struck between the conferences and broadcasting networks for airing games. McCullough highlighted the significance of FSU’s football program and Clemson University’s role in driving the value of media rights for the 14 schools within the ACC. He emphasized that FSU’s football games have an average viewership of 3.2 million, making the team one of the best in terms of media value in the United States.

Despite the challenges posed by the ACC’s revenue distribution model, the Board of Trustees did not take any immediate action during the meeting. Instead, they engaged in a discussion to address the difficulties faced by the university due to the current revenue distribution framework.

McCullough drew attention to the substantial media deals secured by other conferences, such as the Big Ten and Southeastern Conference. These deals have created a financial disparity, with FSU projecting to fall significantly behind, trailing by approximately $30 million per school annually in conference distribution.

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