Private equity has officially arrived in college athletics.
The University of Utah is on the verge of striking the industry’s first partnership with an equity firm in a marriage that includes a nine-figure capital infusion and the creation and shared ownership of a for-profit entity to operate the athletics business and financial elements outside of the traditional university framework.
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The new venture is expected to generate as much as or more than $500 million in capital – a groundbreaking and innovative move that could pave the way for more schools and conferences to pursue such a concept.
The finalization of the project is expected soon until authorization is given on Tuesday by the Board of Trustees of the University of Utah. The board is giving the university permission to move forward with the deal with Otro Capital, a New York-based sports private equity firm.
Multiple officials with knowledge of the project spoke to Yahoo Sports on condition of anonymity.
The effort with Otro Capital is more than just a nine-figure cash infusion.
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At the center of the project is the creation of a private and independent offshoot of the athletic department – Utah Brands & Entertainment LLC – in a first-of-its-kind partnership between a university athletic department and an equity partner. An executive team from Otro Capital, along with athletics 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 the capital infusion with a team of experienced operators. A president from outside the university will chair the company and report to a board, chaired by Utah athletic director Mark Harlan, with seats for Otro trustees and executives.
The project includes fascinating wrinkles. The university is offering a prominent group of donors the ability to purchase a stake in Utah Brands & Entertainment. Already, university officials have tapped a small donor base to generate millions in buyout deals. 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 many of the components traditionally housed in the university’s athletic department, including many athletic personnel and divisions. However, the fundraising will remain with the school.
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The main objective of the new company is to generate more income in an assortment of areas, including tickets, concessions, corporate sales and sponsorships. Charged with overseeing and operating the revenue-sharing payment system for Utah athletes, the new entity provides the department with more flexibility and freedom considering it will operate separately from a public university.
The move is not completely foreign to college sports. Over the past several months, a number of schools – Kentucky, Michigan State, Clemson – have announced the creation of a private entity that would generate revenue outside of the athletic department as college sports evolve into a more professionalized ecosystem. None of those schools partnered with an equity firm. However, Michigan State announced its own capital infusion in the form of a $401 million donation, part of which will go to its new athletics entity.
As for Utah’s partnership, in exchange for the upfront money, Otro will earn a large percentage of annual revenue generated by Utah Brands & Entertainment as it shares the funds with the university. There is an exit strategy – in five to seven years – and the university has the right to buy the ownership shares of Otro.
The creation of private equity in college sports is a long time coming.
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For the past two years, as university athletic departments face mounting financial strains, dozens of schools have pursued private capital or equity deals, including conferences as a whole — most notably the Big 12 and Big Ten. However, when these projects reached the finish line, they were hampered for various reasons.
For example, Big 12 commissioner Brett Yormark has twice presented such an agreement to his presidential panel. Big Ten officials nearly reached the point of voting on a $2.4 billion capital deal before at least two schools — USC and Michigan — pulled the plug on the project.
Yormark’s pursuit of an equity deal caught the attention of Harlan and Utah administrators, who, more than two years ago, began the process that resulted in 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, all of whom served as senior executives at RedBird Capital Partners, one of the largest sports industry investors in the world.
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Scheiner has a deep background 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 for venues and companies around the world. Stehlik was the former president of OneTeam Partners and worked as chief revenue officer for the Browns.
Otro’s portfolio includes Formula 1 team Alpine Racing, marketing and events 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 his other projects. For example, Otro invested $200 million in Alpine Racing to own 24% of the shares.
According to a 2024 story on buyoutinsider.com, Otro was targeting $500 million for a sports-focused investment fund. The company pitched its college plan to other schools — one specifically 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, charged with the goals of generating income, will have access to the school’s trademark and licensing rights, facilities, sponsorships and university teams. However, decisions regarding coaching staff and player acquisition remain with the university staff.
In fact, the school approved the partnership with NCAA officials. To remain under the NCAA umbrella, Utah’s university president and athletic director must retain the majority of decision-making.