Private equity has officially arrived in college athletics.
The University of Utah is on the verge of forming the industry’s first partnership with an equity firm in a marriage that includes a nine-figure capital infusion and the creation and joint ownership of a for-profit entity to operate athletics business and financial elements outside the traditional university setting.
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The new venture is expected to raise up to $500 million or more in capital—a groundbreaking and innovative move that could pave the way for more schools and conferences to pursue such a concept.
Completion of the project is expected soon, pending Tuesday’s approval from the University of Utah Board of Trustees. The board gives the university permission to move forward with the deal with Otro Capital, a New York-based sports private equity firm.
Several officials with knowledge of the project spoke to Yahoo Sports on condition of anonymity.
The effort with Otro Capital is more than a nine-figure cash infusion.
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At the heart of the project is the creation of a private, independent arm of the athletic department – Utah Brands & Entertainment LLC – in a premier partnership between a university athletic department and an equity partner. An executive team from Otro Capital, along with athletic department staff, will lead the creation and operation of the new company, which will reside within the university’s foundation.
The University retains majority ownership and decision-making authority of Utah Brands & Entertainment. Otro marries capital infusion with a team of experienced operators. A non-university president will preside over the company and report to a board, chaired by Utah athletics director Mark Harlan, with seats for Otro administrators and executives.
The project includes a fascinating wrinkle. The university is offering a prominent group of donors the opportunity to purchase a stake in Utah Brands & Entertainment. Already, university officials have assembled a small base of donors to generate millions in purchase contracts. The capital figure of more than $500 million includes both the nine-figure cash infusion from Otro and those capital commitments from donors.
Utah Brands & Entertainment will house most of the components traditionally held within the university’s athletic department, including many athletic staff and divisions. However, fundraising will remain the responsibility of the school.
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The main goal of the new company is to generate more revenue in an assortment of areas, including tickets, concessions, corporate sales and sponsorships. Charged with overseeing and operating the revenue share payment system for Utah athletes, the new entity gives the department more flexibility and freedom given that it will operate separately from a public university.
The movement is not completely foreign to college sports. In the past few months, a slew of schools — Kentucky, Michigan State, Clemson — have announced the creation of a private, revenue-generating entity outside the athletic department as college sports evolve into a more professionalized ecosystem. None of these schools have partnered with an equity firm. However, Michigan State announced its own capital infusion in the form of a $401 million donation, a portion of which will go toward its new athletics entity.
As for the partnership with Utah, in exchange for the upfront money, Otro will earn a large percentage of the annual revenue generated by Utah Brands & Entertainment as it splits the funds with the university. An exit strategy – in five to seven years – is in place, and the university has the right to buy Otro’s ownership stake.
The advent of private equity in college sports has been a long time coming.
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Over the past two years, as university athletic departments face mounting financial stressors, dozens of schools have pursued private equity or equity deals, including conferences as a whole — especially the Big 12 and Big Ten. However, when these projects reached the finish line, they were stalled for various reasons.
For example, Big 12 commissioner Brett Yormark has twice brought such a deal to his presidential council. Big Ten officials nearly reached the point of voting on a $2.4 billion capital deal before at least two schools — USC and Michigan — killed the project.
Yormark’s pursuit of an equity deal caught the attention of Harlan and Utah trustees, who more than two years ago began the process leading to the potential deal with Otro.
According to its website, Otro seeks to invest in “sports teams, leagues and ecosystem businesses with strong intellectual property.” The company was founded in 2023 by partners Alec Scheiner, Niraj Shah, Brent Stehlik and Isaac Halyard, who all served as senior executives at RedBird Capital Partners, one of the world’s largest sports investors.
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Scheiner has deep experience as a sports investor and team executive, spending time as president of the Cleveland Browns and senior vice president of the Dallas Cowboys. He was the point man for Legends Hospitality, a corporation that provides food, merchandise, retail and stadium operations to venues and companies around the world. Stehlik was previously president of OneTeam Partners and served as chief revenue officer for the Browns.
Otro’s portfolio includes Formula 1 team Alpine Racing, events and marketing company FlexWork Sports and Two Circles, a fan and data analytics platform. Otro will own a large share – but not a majority share – of Utah Brands & Entertainment, similar to its other ventures. For example, Otro invested $200 million in Alpine Racing to take a 24% stake.
According to a 2024 article on buyoutinsider.com, Otro was targeting $500 million for a sports-focused investment fund. The company pitched its college plan to other schools — one in particular in the Big Ten — before Utah expressed serious interest.
It is unclear whether Otro has plans to execute similar agreements with other schools.
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In Salt Lake City, Otro executives tasked with revenue-generating goals will have access to the school’s trademarks and licensing rights, facilities, sponsorships and university teams. However, decisions regarding coaching staff and player acquisitions remain with the university staff.
In fact, the school approved the partnership with NCAA officials. In order to remain under the NCAA umbrella, the University of Utah’s president and director of athletics must retain most of the decisions.