Was discussed on the radio in Raleigh. The understanding is that equity firm provides some amount of capital - $50M to $200M to a University athletic department or the University. In return the University is required to pay back an annual percentage starting at 20% of athletic revenue in the first year. This percentage slowly reduces until 100% of initial investment is paid back. After that, the equity firm is guaranteed 2% of all sports revenue for the University in perpetuity - i.e., forever. I do not know where the percentages come from, but the key discussion point was in perpetuity. The argument was that regardless of what happens in the future, it is anticipated that revenue will continue to increase over the next century and beyond. In general, the discussion was that no state or public entity could legally (or wisely) promise a portion of their revenues for perpetuity. It was discussed it would only be helpful in the case of a major one time expense (such as a stadium upgrade OR buying out of a conference). It was also discussed that inevitably the government and politicians would be involved and that it is likely even illegal in many states to allow any agreement in perpetuity. In terms of long term agreements, even the British lease on Hong Kong and our base on Guantanamo Bay were limited to 99 or 100 year terms (my observation, not on the radio). The related discussion was that a much more traditional and well established path for these large expenses is a loan - which universities can get and have gotten with very favorable terms as a public entity ultimately backed by the state. All this said, if I was the private equity firm, I can think of no school that may be a higher risk in this scenario than Florida State. They have proven that they will do everything in the power to get out of a 25 year GOR agreement let alone providing a portion of their revenue in perpetuity. All of this said, I have no idea as to the source of the numbers, etc, but it did provide some insights into how private equity would likely work. At the base is that the private equity firm's legal obligation is maximizing their return on investment for the shareholders. ** Edited by mjfhokie at 5/22/2024, 10:46:27 PM ** Edited by mjfhokie at 5/22/2024, 10:52:13 PM ** Edited by mjfhokie at 5/22/2024, 10:54:22 PM

They could simply invest $100 million or whatever in fairly safe securities and do better in perpetuity. And there's zero *big* upside, unlike a more typical deal involving equity in something with huge growth potential. Sure, athletics revenue may grow, but is it going to grow beyond inflation? or beyond what they could make with the aforemetioned simple market investment?

plus they would get 2% of REVENUE of the establishment after their principle and interest is returned. Sign me up for that if I'm PE. Here's the scenario if I'm understanding it correctly. LOAN $100M RETURNS $140M (let's say it gets paid back in 3 years... averaging a return of 10%) PLUS, let's say the athletic department brings in $200M per year in revenue... that means $4M a year in residual income with all your principle already paid back. That's a great deal for a PE firm, and a terrible deal for any school. It would disturb me greatly if if a public institution that was funded with tax payers dollars ended up with this financial structure.

A loan with interest, it was simply "until initial investment is paid back." And I don't think $4 million/year is really all that attractive to a firm laying out $100 million. Making 4%? Again, they could just throw that money in a market index fund and easily do better in the long run with less hassle. Sure, add exorbitant interest and it becomes attractive to PE, but what university is agreeing to that deal?

Maybe I am misunderstanding, but it appears the model is akin to me lending you $1,000... asking you to pay me the principle back in full and the interest goes down from 20% as you pay the note down... BUT, then even after my loan and interest is paid back in full, I keep my hand in the cookie jar and get a piece of your income forever. I believe the reason why you think it's a bad deal for PE is because you're doing the math as if the note isn't repaid. Sure, it's not a great deal... but if they get their $100M back, with interest, they can invest it in whatever they want, all while having that perpetual income for the few years the money was lent out. Crazy. ** Edited by jesuisvtguy at 5/23/2024, 12:22:44 PM

The 20% quoted in the scenario I originally responded to is not interest, it is a % of AD revenue used to pay back the initial investment...decreasing over time until initial investment is recouped. So it takes years just to break even and after that, the several million per year is kinda paltry relative to the initial investment, even in perpetuity. Again, of course any (particularly exorbitant like 20%) interest changes the calculus, but that's not what was presented. And my response has pretty much nothing to do with a university defaulting on the investment/loan payback

ripe for swindling programs that have little or no financial expertise in their admin.

Let's ask "fans" of the product to donate (without equity), so that they can enjoy some perks and an improved product. We'll also look at taking PE, where they don't really care much about the product but instead care about the potential monetary upside.

Step down from the Florida State Trustees as his fund will make a ton of $ from whatever schools they sign up

I'm not seeing it. ** Edited by Pylons at 5/22/2024, 6:54:32 PM

I'm having trouble seeing how they achieve the ROI they'd want... thus the question

to be some pause to the wild-wild west environment surrounding college athletics... Listening to Josh Pate/outkick, he mentioned how undervalued college is vs. nfl. Who knows, maybe college sports will transform to an unrestricted business model. But Universities need to protect/insulate themselves (3rd party for sports?) for a black-swan event (or PE lawsuit) to avoid harming core institutional purpose.

How are schools going to react when private equity pressures them to cancel sport teams that are not making a profit. When you become for-profit, that which is not making a profit needs to be cut.

decisions. What coaches to hire/fire, who to recruit, ticket prices, ... the whole shebang. It's disgusting how bad this has all become

I don't see how PE involvement makes sense for either side

(and weak getting weaker).

was your statement heavy sarcasm? If so, well played sir. Not for profit college athletics ended a long time ago no matter how they have continued to couch it.

go much deeper than that. How much does one need to donate annually to get the good seats at Lane? It's $5000++ per seat annually for some seats in Allen field House for basketball. When those donations become taxable events, and there is no deduction for the "fan", those donations will dry up. It will be devastating for the schools that do not have high end media contracts, and amateur athletics will be gone.

will happen actually happens it will be devastating for EVERYBODY regardless of high end media contracts. I also suspect that schools, their fundraisers and other admin will adapt with a workaround. College athletics is a life size game of whack-a-mole. An issue is identified, a regulation designed and implemented, the issue goes away only to reappear in new and better packaging and the process begins again.

There is too much economic impact for local and state economies tied to college sports. State and federal governments won’t risk that (especially if they want to get re-elected). A path forward will be found before it all burns down.

recruiting kids for an education becomes the way for success on the field. Victory to the highest bidder, or a monopoly on revenue is destroying what made this game so successful.

schools are separate entities from the University. They might be able to keep their tax exempt status if that changes. The Universities will not want to even flirt with giving up their tax exempt status, even for their football team. I project that congress will get involved at some point, but it won't be before this NCAA settlement.

get involved I am very skeptical that they can provide a solution for a variety of reasons. Because this situation has been allowed to run for so long instead of addressing issues as they initially arose any solutions now would seem to be extremely complex and involve a myriad of issues with stakeholders with varying objectives. To explain further you have employer/employee issues, Title IX considerations, you have antitrust issues, you have state and/or local government issues, you have fairly significant public and private debt and infrastructure issues, etc.. Any of these matters might be complex on their own, all thrown together is an entirely different matter. Thinking about these items in combination is what leads me to the idea that it may just be easier to blow it all up and start over. Although, I will say the thought of network execs, PE guys, legislators and academics all butting heads might be entertaining.

are so many donations for a Lady's softball facility, tennis courts, and other non rev sports, that is should be a grave concern for the institutions. Unless football is separated, and made a professional league (basketball too ?), then so many kids, on so many levels, will get the shaft.

taxpayer dollars being directed to support the mess that is college athletics as well as to support the bloated inefficient inept bureaucracy that is in place at most colleges.

dollars can be used to fund collegiate athletic capital projects. Now VA isn't one of those states, but things could get really interesting in states that have those laws.

taxpayers. Would VT exist if they had to go private? (rhetorical)