Private equity has officially entered college sports.
The University of Utah is closing in on an industry-first partnership with an equity firm, a tie-up that will feature a nine-figure infusion of capital and the creation and shared ownership of a for-profit entity to run athletics outside of the university.
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The new venture is expected to generate as much or more than $500 million in capital — a groundbreaking innovation that could pave the way for more schools and conferences to pursue the concept.
The project is expected to be completed soon, pending authorization from the University of Utah Board of Trustees on Tuesday. The Board of Trustees is approving the university to move forward with an agreement with New York sports private equity firm Otro Capital.
Multiple officials with knowledge of the project spoke to Yahoo Sports on condition of anonymity.
Otro Capital’s effort goes beyond a nine-figure cash infusion.
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The centerpiece of the project is the creation of Utah Brands & Entertainment LLC, a private, independent arm of the athletic department through a first-of-its-kind collaboration between a university athletic department and an equity partner. Otro Capital’s executive team will lead the creation and operations of the new company, along with its sports division personnel.
The university retains majority ownership and decision-making rights for Utah Brands & Entertainment. Otro combines an infusion of capital with an experienced operating team. A president from outside the university will chair the company and report to the board of directors, which is chaired by Utah State athletic director Mark Harlan and includes trustees and Otro executives.
There is a fascinating problem with this project. The university is offering a group of high-profile donors the opportunity to buy shares of Utah Brands & Entertainment. University officials have selected a small group of donors to reach the multimillion-dollar purchase deal. The capital figure of more than $500 million includes a nine-figure cash infusion from Otro as well as capital commitments from donors.
Utah Brands & Entertainment will house most of the components traditionally handled by university athletic departments, including many athletic staff and departments. However, fundraising activities will still be undertaken by the school.
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The main goal of the new company is to generate more revenue in various areas such as ticketing, concessions, corporate sales and sponsorships. The new entity oversees and operates the revenue-share payment system for Utah athletes, providing the department with greater flexibility and freedom given that it will operate independently of public universities.
The move isn’t entirely new to college sports. Over the past few months, as college sports evolve into a more professional ecosystem, schools such as Kentucky, Michigan State, Clemson State and many others have announced the creation of a private revenue-generating entity outside of their athletic departments. None of these schools are partnered with equity firms. However, MSU announced its own capital infusion in the form of a $401 million donation, part of which will be used for its new athletic entity.
As for the University of Utah partnership, in exchange for an upfront cash payment, Otro will earn a significant portion of the annual revenue generated by Utah Brands & Entertainment when it splits the funds with the university. An exit strategy exists within five to seven years, with the university having the option to purchase ownership of Otero.
Private equity has a long history in college sports.
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Over the past two years, as college athletic departments have faced mounting financial pressure, dozens of schools have sought private capital or equity deals, including across conferences — most notably the Big 12 and Big Ten. However, when these projects reached their final destination, they were blocked for various reasons.
Big 12 commissioner Brett Yormark, for example, twice proposed such an agreement to his presidential committee. Big Ten officials were close to voting on a $2.4 billion capital deal, but at least two schools — USC and Michigan — scuttled the project.
Yormark’s pursuit of a capital deal caught the attention of Haaland and Utah State officials, who began the process of a potential deal with Otero more than two years ago.
Otro seeks to invest in “sports teams, leagues and ecosystem businesses with strong intellectual property,” according to its website. The firm was founded in 2023 by partners Alec Scheiner, Niraj Shah, Brent Stehlik and Isaac Halyard, all of whom previously served as senior executives at RedBird Capital Partners, one of the world’s largest sports industry investors.
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Scheiner has a strong background as a sports investor and team executive, having served as president of the Cleveland Browns and senior vice president of the Dallas Cowboys. He is at the heart of Legends Hospitality, which provides food, merchandise, retail and stadium operations services to venues and companies around the world. Stehlik is the former president of OneTeam Partners and serves as chief revenue officer for the Browns.
Otro’s portfolio includes Formula One alpine racing team, FlexWork sports marketing and events company and fan and data analytics platform Two Circles. Similar to other projects, Otro will own a majority stake (but not a majority stake) in Utah Brands & Entertainment. For example, Otro invested $200 million in Alpine Racing for a 24% stake.
Otro aims to raise $500 million for a sports-focused investment fund, according to a 2024 report on buyoutinsider.com. The company had pitched its college plans to other schools, specifically one in the Big Ten, before Utah expressed serious interest.
It’s unclear whether Otero plans to sign similar agreements with other schools.
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In Salt Lake City, Otro executives responsible for revenue-generating goals will have access to the school’s trademark and licensing rights, facilities, sponsorships and varsity teams. However, decisions regarding coaching staff and player recruitment remain up to university personnel.
In fact, the school has terminated its partnership with NCAA officials. In order to remain under the NCAA’s umbrella, the University of Utah’s president and athletic director must retain most of the decision-making authority.
