Kyle Israel understands the stereotype of private equity: Some rich people buy a business, fire employees, chainsaw costs and sell what’s left for a profit.

“That exists, 100 percent,” said Israel, a former UCF quarterback who’s the co-founder of the sports/real estate investment group Momentous Sports. “But that’s not a fair illustration.”

With private equity venturing into college sports through separate deals with Utah and the Big 12, not to mention pitches to restructure all of college football, it’s worth exploring a more complete image than fancy suits slashing and burning athletic departments. Rosier pictures start with desperately needed funding and end with parity and professionalization that stabilize an industry in turmoil.

To be clear, those potential upsides don’t negate the need for answers to legitimate, serious questions. How much long-term revenue are schools losing in exchange for up-front cash? How will students, taxpayers and fans be protected if budget projections fall short? Who makes the final calls when administrators and investors clash?

But those case-by-case questions are hard to answer in the abstract. For now, through conversations with a dozen people involved in one or both spaces, let’s set those valid concerns aside to better understand why PE and college athletics are converging.

How will private equity work in college sports?

In one model, schools/conferences create a new company to share with outside investors. Utah’s pending nine-figure arrangement with Otro Capital will give the private equity group a stake in a new, for-profit arm that will handle Utes business items like ticketing and NIL sales. The Big Ten deal that fell through in November after vocal opposition from Michigan would have given UC Investments a 10 percent slice of a spin-off group, Big Ten Enterprises, in exchange for $2.4 billion.

Some versions are more like loans and don’t involve ownership at all, like the proposed partnership between the Big 12 and RedBird/Weatherford Capital. That’s technically not private equity, but we’re lumping them together for two reasons: Both versions are colloquially called private equity by laypeople, and the differences don’t matter much for today’s focus.

The point is that private equity groups see college sports like their other investments — undervalued assets that can become more profitable with their help. If PE grows the pie enough, the extra money will more than cover what schools/conferences give up in equity or interest payments.

“That’s the bet that athletic departments are making,” said Mark Wilhelm, who has worked on both sides of PE deals as a partner at the law firm Troutman Pepper Locke.

Why athletic departments are turning to private equity

Schools added a new expense July 1 when they started paying players directly through revenue-sharing. That new expense (up to $20.5 million per school this fiscal year) has to come from somewhere. But where?

Many programs don’t have enough deep-pocketed boosters to fund it, and the ones that do are battling donor fatigue. Ticket price hikes can alienate fans. Support from the academic side is trickier as schools fear state/federal funding cuts and an enrollment cliff. Cost-saving options like eliminating sports or becoming less competitive aren’t palatable.

“That’s where private equity comes in — not because it’s the best solution, but because it’s a necessary part of the solution,” said Lindsay Conner, a sports/entertainment consultant who has advised schools on private equity, NIL and conference realignment. “It’s not a cure-all, but it can help colleges build a bridge over very troubled waters to a near-term future that is both competitive and fiscally sound.”

The bridge will probably look different based on who’s building it. Some schools will focus on player payrolls. Others will upgrade facilities, invest in new revenue streams (like premium seating) or bite the buyout bullet to can an embattled coach.

Regardless of the blueprint, the idea is the same. Schools will use the money to remain competitive or, hopefully, improve their standings during the industry’s chaotic transformation. That’s even more critical as we approach another potential wave of conference realignment (super league, anyone?) when major media rights contracts expire from 2030-36.

“Let’s get that cash infusion today,” Wilhelm said, “and then we can use that to be competitive, move up and hopefully grow the (revenue) pie in the future.”

Two more ways private equity can grow the pie

The next argument is best explained through an analogy from Legacy25, a college-focused investment initiative backed by the private equity firm Chiron Sports Group. If college athletics is a raw gold mine, PE groups don’t solely want to invest in miners (schools/conferences). They also want to provide picks and shovels to help the miners do their job better.

Those picks and shovels are management expertise and connections.

Because athletic departments have traditionally focused more on success and player welfare than profit/loss, many of them lack the staffers, experience and know-how needed to maximize every penny in the NIL/revenue-sharing era. Private equity, however, is accomplished in that area, including in sports. Sixth Street (which explored a deal with Florida State) owns parts of the San Antonio Spurs and San Francisco Giants, while the portfolio of expected Big 12 partner RedBird extends to NASCAR, MLB, NHL and European soccer.

“They know the business of sports better than the colleges because they’ve been doing it,” said Will Hall, who has worked with schools, collectives and companies on NIL as a partner at the law firm Jones Walker.

Because private equity firms pride themselves on professionalizing their partners, we could see schools eliminate inefficiencies or explore new revenue streams. Could PE cut costs by centralizing a standard service like travel? What about developing new mixed-use spaces around stadiums so fans stay longer and spend more?

Programs can address some of these issues by themselves, but outside, business-focused eyes can see things current employees might not.

“People that are inside athletic departments and institutions typically operate with a very narrow lens,” said Israel, whose partners at Momentous Sports include John Elway and Tim Tebow. “I think private equity can come in and have a much broader blank-canvas approach to say, ‘Hey, it’s been done this way. Why don’t we think about doing it this way, and here’s the benefit of doing that?’”

If that tool isn’t enough, private equity can also shovel connections to schools. That’s something that helped the sports marketing business Two Circles after it got an investment from Otro — the private equity group working with Utah. Two Circles CEO Gareth Balch said Otro hasn’t merely opened doors to help his UK-based company grow in North America; because Otro’s team has executive experience with NFL, MLB, NBA and NHL teams, the partnership has opened the right doors.

“They’ll take us to the best person in that organization that’s often someone they’ve known for decades that we’d like to get to know today,” Balch said.

Another example: The partners at Legacy25 (including Rob Gronkowski and Kevin Youkilis) have ties to companies in production, sports psychology and ticketing. It’s easy to envision a school using those connections to greenlight a docuseries inspired by “Welcome to Wrexham” or offer its players a mental skills app.

Because different schools and conferences will use those picks and shovels in different ways, some will work better than others. The competing strategies could play out in interesting, if not entertaining, ways.

“It’s kind of like when you watch ‘Shark Tank,’” Hall said. “Some of the people want the money, and some people just want to pick Mark Cuban’s brain.”

Can private equity improve the game itself?

Indiana’s national title run was a refreshing reminder of what happens when an upstart upsets the usual suspects.

“You watch sports for the surprises and the underdog stories,” said Justin Nunez, a senior investment advisor to Legacy25 and former Columbia football player. “You don’t watch to go see Ohio State win the national championship every single year.”

Private equity has the ability to create more Indianas — or at least more Texas Techs. The Red Raiders made the College Football Playoff and won their first outright conference title in 70 years with the backing of big-time booster Cody Campbell. PE provides an opportunity for programs without a Cody Campbell to up their investments and, hopefully, on-field prospects.

The upshot is an ecosystem where more programs compete with the top spenders. If Texas Tech can use donor money to boost its roster and level up on the field, why can’t another mid-tier football program or mid-major basketball team do the same with PE money?

“You’ve got to establish some parity like the NFL does …” said Legacy25 partner Brian Hoyer, who spent 15 seasons as an NFL quarterback. “I think, to me, if it can level the playing field, that has got to be the ultimate goal.”

Private equity can’t put Ohio in the same tier as Ohio State. But the big brands will have company if the pool of contenders deepens because teams 11-30 can invest like the top 10. That scenario will increase regular-season parity and, perhaps, produce a more competitive CFP bracket with fewer blowouts.

Other potential side effects

When Wilhelm thinks through other ramifications, he uses a word fans and administrators would welcome.

Stability.

Here’s one hypothetical: In the business world, PE contracts protect investors through something called covenants — formal guardrails on what their new partner can and can’t do. Could college sports install similar guardrails that restrict conference realignment or provide an NIL framework to retain top players?

Hall suggested another. Tampering and roster transience have thrived in the current, disjointed system. That could change if PE helps restructure and professionalize the industry to protect key parts of groups’ investments (like star quarterbacks).

“Having more a business-like operation on the back end could maybe stop some of the craziness we’re seeing around the transfers, tampering, all of that,” Hall said.

Final thoughts

If the idea of private equity in college sports sounds scary, remember that PE is already a major player in college sports. Learfield works with hundreds of schools in multimedia rights, sponsorships and NIL; it’s backed by private equity firms Fortress and Charlesbank.

“You’re sort of one step removed already,” Learfield CEO Cole Gahagan said.

But it’s a big step, even if you reject the slash-and-burn stereotype. Public schools’ extra layers of oversight and the NCAA’s disjointed ecosystem are hard for outsiders to navigate; if those complications limit how much the revenue pie grows, schools’ bets might not pay off.

Tension between how much control private equity groups demand and how much control schools/conferences are willing to cede will play out with high stakes. Some picks and shovels will strike gold, but the ones that don’t must still find a way to pay investors back.

While it’s true that plenty of schools and conferences have considered deals, few have gotten close to the finish line. That’s because many institutions can secure capital elsewhere at lower costs without the complexities these PE partnerships require.

“I think — I know — it’s extraordinarily challenging,” Gahagan said, “which is why you haven’t seen much success on the equity side.”

But if (when) these agreements are signed, schools can look to the pros for a final dose of optimism. The Los Angeles Dodgers have won back-to-back World Series with PE group Arctos holding a share of the club. In its first full season after an investment from Avenue Sports Fund, Trackhouse Racing won almost as many races in NASCAR’s top Cup Series (six) than the previous four years combined (eight).

The Tampa Bay Lightning were already back-to-back Stanley Cup champions when Arctos first bought part of the franchise four years ago. Jay Recher heard fans’ concerns then as a Tampa radio host about what it might mean for a franchise regarded as one of the best-run in American sports.

Since then, the Cup-contending Lightning have extended their playoff run to eight consecutive years (with No. 9 on the way) while growing the NHL’s longest home sellout streak to more than 400 games.

As for the private equity investment?

“People don’t even bring that up,” Recher said. “I don’t think people even remember it.”