Mark Wilhelm | Source | Partner at Troutman Pepper

“It’s no secret that colleges and universities are facing financial pressures, whether from potential changes in governmental funding programs or the changing landscape of schools beginning to pay compensation directly to players,” said Mark Wilhelm, a Philadelphia-based partner at the legal firm Troutman Pepper Locke, who represents private equity firms as well as colleges and universities.

“Even before these pressures, it was widely known that the vast majority of major college athletic programs operate at an annual deficit,” Wilhelm said. “So, for Big Ten schools, a private equity investment could provide much needed near-term funding in an uncertain environment.”

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And while schools in the Big Ten are perhaps best known for their football and basketball teams, Wilhelm said the conference currently sponsors 28 official sports, 14 for men and 14 for women.

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“Generally speaking, conferences enter into rights agreements with a television partner,” Wilhelm said. “Those agreements are treated as highly confidential, and it is rare that anything other than the headline revenue number and length of the agreements is made public. But suffice to say that television partners will pay the conference a large amount to televise some agreed number of the conference’s athletic contests.”

Which sports and games are televised varies, but generally speaking football and men’s basketball account for a significant portion of the revenue, he said.

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From a business perspective, Wilhelm explained, a private equity investment in an individual school’s athletics programs would present concentration risk for the private equity fund, making the fund’s return tied to a single program’s revenues.

“The investment in an individual school’s athletics program also faces legal hurdles because many states have laws prohibiting private investment in governmental entities and many athletics programs are deemed to be governmental entities,” he elaborated. “These challenges (would be) largely solved or at least mitigated by an investment at the conference level.”

Finance structure

While it remains unclear what kind of structure private equity firms will use to invest in college athletics conferences, Wilhelm said “it would not surprise me to see a royalty finance structure similar to what is used in other industries.”

In a royalty finance structure, a private equity fund could invest a lump sum of money today in exchange for some percentage of the conference’s revenues in the future, Wilhelm explained. “Those revenues are largely a function of revenues from television rights, which are more or less known for the duration of the existing rights agreement and would have to be predicted for the next rights agreement,” he added. “The conference would then distribute the lump sum payment to its member schools in whatever proportion is agreed to in the conference’s governing documents.”

In such a scenario, Wilhelm would expect extensive diligence and negotiations around how present payments from a private equity fund would translate into a percentage of revenues in the future.

...

Under the current settlement plan, Wilhelm explained, such payments will vary by year and are capped at an aggregate $22 million in 2025, an amount that is expected to grow to more than $32 million within 10 years.

“The (House vs. NCAA) settlement has created a situation where colleges and universities are expecting to directly fund revenue-sharing payments to student-athletes,” Wilhelm explained. “Under previous rules, those payments were impermissible and therefore not budgeted for by schools.”

Now, assuming the settlement receives final approval, in order to remain competitive, top athletic programs are trying to find ways to fund that new expense, Wilhelm said.

“A private equity investment is one source that is being explored for that funding,” he said.

Pensions & Investments
March 12, 2025

“It’s no secret that colleges and universities are facing financial pressures, whether from potential changes in governmental funding programs or the changing landscape of schools beginning to pay compensation directly to players,” said Mark Wilhelm, a Philadelphia-based partner at the legal firm Troutman Pepper Locke, who represents private equity firms as well as colleges and universities.

“Even before these pressures, it was widely known that the vast majority of major college athletic programs operate at an annual deficit,” Wilhelm said. “So, for Big Ten schools, a private equity investment could provide much needed near-term funding in an uncertain environment.”

...

And while schools in the Big Ten are perhaps best known for their football and basketball teams, Wilhelm said the conference currently sponsors 28 official sports, 14 for men and 14 for women.

...

“Generally speaking, conferences enter into rights agreements with a television partner,” Wilhelm said. “Those agreements are treated as highly confidential, and it is rare that anything other than the headline revenue number and length of the agreements is made public. But suffice to say that television partners will pay the conference a large amount to televise some agreed number of the conference’s athletic contests.”

Which sports and games are televised varies, but generally speaking football and men’s basketball account for a significant portion of the revenue, he said.

...

From a business perspective, Wilhelm explained, a private equity investment in an individual school’s athletics programs would present concentration risk for the private equity fund, making the fund’s return tied to a single program’s revenues.

“The investment in an individual school’s athletics program also faces legal hurdles because many states have laws prohibiting private investment in governmental entities and many athletics programs are deemed to be governmental entities,” he elaborated. “These challenges (would be) largely solved or at least mitigated by an investment at the conference level.”

Finance structure

While it remains unclear what kind of structure private equity firms will use to invest in college athletics conferences, Wilhelm said “it would not surprise me to see a royalty finance structure similar to what is used in other industries.”

In a royalty finance structure, a private equity fund could invest a lump sum of money today in exchange for some percentage of the conference’s revenues in the future, Wilhelm explained. “Those revenues are largely a function of revenues from television rights, which are more or less known for the duration of the existing rights agreement and would have to be predicted for the next rights agreement,” he added. “The conference would then distribute the lump sum payment to its member schools in whatever proportion is agreed to in the conference’s governing documents.”

In such a scenario, Wilhelm would expect extensive diligence and negotiations around how present payments from a private equity fund would translate into a percentage of revenues in the future.

...

Under the current settlement plan, Wilhelm explained, such payments will vary by year and are capped at an aggregate $22 million in 2025, an amount that is expected to grow to more than $32 million within 10 years.

“The (House vs. NCAA) settlement has created a situation where colleges and universities are expecting to directly fund revenue-sharing payments to student-athletes,” Wilhelm explained. “Under previous rules, those payments were impermissible and therefore not budgeted for by schools.”

Now, assuming the settlement receives final approval, in order to remain competitive, top athletic programs are trying to find ways to fund that new expense, Wilhelm said.

“A private equity investment is one source that is being explored for that funding,” he said.

Crain's Chicago Business
March 13, 2025

The advisors whose breakaway moves from brokerages are driving the record volume of RIAs must “position themselves from the beginning for the most efficient way” to file as a business entity and “resist the urge to simply take a document that they found online or something that they’ve used before and use it again” to start a company, said Mark Wilhelm, a partner at the Troutman Pepper Hamilton Sanders law firm who works with RIAs. In some cases, advisors are more likely to fixate on retaining and building a client base or other aspects of opening an RIA.

“Any time that someone is starting a new business, they are really focused on the operations of their business,” Wilhelm said in an interview. “It’s not so exciting for an advisor to think about whether they themselves want to be formed as an LLC or corporation or how their entity is formed.”

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While the choice of business entity is “super-dependant” on individual factors, Wilhelm also said he would “suggest to any given person that forming as an LLC is probably the more efficient thing for them to do.” Since the parties structure most industry M&A deals as asset purchases, prospective RIA sellers ought to be considering the implications of their type of business entity in any transaction. The taxes paid by C-corporations as part of any M&A deal pose “a situation that owners should know about and be concerned about,” he noted.

“The buyer of that business is going to pay the company whatever the deal price is,” Wilhelm said, citing the example of a $50 million transaction. “At that point the owner of the company wants the cash, because they want to get the $50 million. It’s ultimately going to flow up to the owners. What the owners should be thinking about is, what’s the most tax-efficient way to get the money from the entity to themselves. … If they have a c-corporation in particular, then that’s where that double taxation comes into play.”

Wilhelm compared the question of whether to file as a corporation or an LLC to that of a retirement saver weighing the merits of an individual retirement account against those of a company-sponsored 401(k) plan.

While it’s “not to say one is worse than the other,” but rather that “one provides a lot more flexibility” in the sense that 401(k) plan participants use the menu of investment options curated by their sponsor while IRA holders can invest in “most anything,” Wilhelm said. Similarly, filing as a corporation carries requirements such as appointing a board of directors and company officers.

“There are a limited number of things that LLCs must do. It’s significantly smaller than corporations,” Wilhelm said. “It allows you to change it down the road much easier if you’d like to, because you’re not stuck with that big book of rules for corporations.”

Financial Planning
September 20, 2024