Big Ten Discussing $2 Billion Private Capital Deal | Page 3 | Syracusefan.com
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Big Ten Discussing $2 Billion Private Capital Deal

MadNY3 said:
Private Equity is a lump-sum term in anything related to putting in money. Not all investment deals look for a 4-6 year outcome In this case it could be:
  • PE Conglomerate is buying into a partnership and would get 1/20th of distributions
  • It values the Big Ten* at $2 billion post money
  • The play for investors is more of a long-term annuity that pays it back $100M+ annually in perpetuity or extended time
  • I'd suspect it might get points on net new revenue streams until it gets its original investment back
PE knows how to make money. I bet they would find a way to monetize the non-revenue sports (women's volleyball is surging like crazy now) and I'd bet the house you will see "March Madness"-like events across all sports (e.g. Big X Softball Suaree...live from Las Vegas!) that generate new media opportunities and theoretically cut down bulk travel so Iowa doesn't have to fly to Rutgers, then two weeks later go to Maryland.)

This is a VERY RARE asset, that's the draw to investors. This would be a super minority deal with a number of safeguards.

Do I love it? No. Is it the worst thing ever? Nah. It's another damn symptom of the NIL-with-no-true-cap era...
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It just doesn't feel right.
 
If thereā€™s equal $/investment/revenue sharing etc., this is how Rutgers can finally get good unfortunately, no Bueno for us if so
 
To be clear, most of the B1G schools cannot succeed well enough with what they presently earn, so they will mortgage future earnings for a one shot cash infusion. These same schools are not managing what they presently have and everyone expects them to manage the cash infusion properly? Shouldnā€™t they manage their resources properly before giving them money to spend like a drunk sailor on shore for the first time in months?

Then, they pay back the infusion with an ownership stake, which means they earn less for two decades than they would earn without the cash infusion. They can just as easily hire consultants for a fraction of the cost and make more money over time than it will cost them to pay back the cash infusion.

The B1G must believe that the one time infusion will permanently bury the other conferences. This sounds like a the BoTs, presidents/chancellors, and Athletic Directors are breaching their fiduciary duties on bad bet.

Has Maryland or Rutgers proven they can manage money! Does UM, tOSU, PSU, UNL, and Wiscy need a cash infusion? This is more of a payday loan than a serious investment.

Even then, the investors will only receive a 4% ROI on the investment for 20 years. They will not beat the market, they may not beat inflation. Sure, they will have a stake in the B1G but will it be worth that much more in 20 years?

Any tax accountants want to weigh in? Any finance guys want to run the real numbers? Any investors willing to jump on this?
 
HtownOrange said:
To be clear, most of the B1G schools cannot succeed well enough with what they presently earn, so they will mortgage future earnings for a one shot cash infusion. These same schools are not managing what they presently have and everyone expects them to manage the cash infusion properly? Shouldnā€™t they manage their resources properly before giving them money to spend like a drunk sailor on shore for the first time in months?

Then, they pay back the infusion with an ownership stake, which means they earn less for two decades than they would earn without the cash infusion. They can just as easily hire consultants for a fraction of the cost and make more money over time than it will cost them to pay back the cash infusion.

The B1G must believe that the one time infusion will permanently bury the other conferences. This sounds like a the BoTs, presidents/chancellors, and Athletic Directors are breaching their fiduciary duties on bad bet.

Has Maryland or Rutgers proven they can manage money! Does UM, tOSU, PSU, UNL, and Wiscy need a cash infusion? This is more of a payday loan than a serious investment.

Even then, the investors will only receive a 4% ROI on the investment for 20 years. They will not beat the market, they may not beat inflation. Sure, they will have a stake in the B1G but will it be worth that much more in 20 years?

Any tax accountants want to weigh in? Any finance guys want to run the real numbers? Any investors willing to jump on this?
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I think they care about 2 things: being ahead of the SEC (they don't care about the rest), and locking themselves in to prevent the formation of super leagues.
 
If the B1G is creating a for profit asset to sell, will they not have to pay taxes on it?

Even if that answer is no, not every penny is going to the FB teams. The B1G will keep some of that money. The bigger schools will take a bigger share. The schools will keep some of that money for the general fund. The AD will use some of that money for other sports and facilities. By the time this ONE TIME payment gets to the mid to lower level FB programs there won't be a lot of money to make much of a difference. And that difference will be for a year or two.
 
Another (final?) nail in the coffin of college football.
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javadoc said:
Threatening the tax-exempt status of their AD revenues. I love love it! The lemmings are full speed ahead off the cliff. Time for Congress to seize control of the whole thing.
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threatening tax exempt status is a huge thing, and could derail this.
hard to argue that you should be tax exempt if you are taking a for profit investment.
 
CuseFan said:
threatening tax exempt status is a huge thing, and could derail this.
hard to argue that you should be tax exempt if you are taking a for profit investment.
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It's not really a threat, it is a fact. Many schools own property, as do many governments, that make profits and taxes are paid on them. Some schools own businesses, too, and again, taxes are paid. The congressional warning is far more substantive than a threat.

A tax expert can explain this far better, and I defer to a tax expert, my understanding is generally that if the property or business is used for school mission purposes, the the property/business is tax exempt. If the property/business is for profit, the hey are taxed.

Many Agriculture schools sell of their products but the money is plowed back into the school, no profits are actually realized. Meanwhile, they own shopping plazas and collect rents and operate stores, not school related, so they pay taxes.

I assume that one people can profit from the school's Athletics Department, there no longer exists a true altruistic motive. That line is pushed based on salaries, exorbitant travel benefits, and opulent buildings and offices. Removing any doubt by paying profits seems to destroy the tax exempt premise. Again, I defer to tax pros who may wish to correct my over simplification.
 
FloridaCuse said:
Resistance forms, possibly including Michigan & USC. Current terms require unanimity. Two sticking points: 20 year GOR & unequal distributions.

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I am glad some minds are not looking at fast cash online of later rewards. The unequal distribution for am equal share venture seems out of place but then who can justify Rutgers getting a full share when they have been nothing more than a speed bump for the other schools.

The 20 year GOR is long but most of the schools have been together longer than that. I can see where some teams would want to keep their options open.

An off the wall perspective may be that the B1G is planning on expansion, take the money now, the new teams, circa 2036 or sooner, will be that much further behind. Even Rutgers may be able to build something between now and then, probably not sustainable, but, you know, maybe add some portajohns, a food truck, and some plastic wrap for the stadium to hide it's high school feel.
 
"Facing Headwinds". The Yahoo article in post #69 [coincidence] says the terms of the current deal being negotiated with the California retirement find requires unanimous agreement among the 18 B1G schools.

www.espn.com

Sources: USC, U-M question Big Ten capital deal

Trustees at Michigan and USC questioned the Big Ten's proposed $2B-plus private capital deal, with one sticking point during a Tuesday call being it doesn't address the root issue -- soaring costs -- that has made the need for cash so imperative.
www.espn.com www.espn.com
 
A number of posts earlier asked the question whether the entity created by the B1G to manage the media rights and sponsorships, that the investment fund would own 10% of, would be a taxable entity. I am a retired tax expert (both in government and in private practice) but not in this area of the tax law of tax-exempt organizations and unrelated business income of such organizations. I did look at the basic principles of tax law involved in determining that and on first look there does not apā·pear to be a clear answer. (Not untypical of the tax law.) By way of background, the concept of taxing unrelated business income of tax-exempt organizations goes back to the 1950s when New York University owned the Mueller Macaroni Company. It was thought by Congress that it was unfair for a private business enterprise to be tax free when its competitors had to pay income tax. One sticking point in the present B1G case might be would the new B1G entity be in business competition with a taxable enterprise.

I'll do more research on this when I have an opportunity. If this deal goes forward.
 
FloridaCuse said:
A number of posts earlier asked the question whether the entity created by the B1G to manage the media rights and sponsorships, that the investment fund would own 10% of, would be a taxable entity. I am a retired tax expert (both in government and in private practice) but not in this area of the tax law of tax-exempt organizations and unrelated business income of such organizations. I did look at the basic principles of tax law involved in determining that and on first look there does not apā·pear to be a clear answer. (Not untypical of the tax law.) By way of background, the concept of taxing unrelated business income of tax-exempt organizations goes back to the 1950s when New York University owned the Mueller Macaroni Company. It was thought by Congress that it was unfair for a private business enterprise to be tax free when its competitors had to pay income tax. One sticking point in the present B1G case might be would the new B1G entity be in business competition with a taxable enterprise.

I'll do more research on this when I have an opportunity. If this deal goes forward.
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Thanks. Please keep us posted. This could be a hidden cost making the proposal that much more expensive than the leaked news.
 

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