Sources: University of Utah nearing landmark private equity deal expected to generate $500 million
Private equity has officially arrived in college athletics.
The University of Utah is on the verge of forming the industry’s first partnership with a capital firm, a marriage that includes a nine-figure capital transfer and the creation and joint ownership of a nonprofit that will operate athletics outside the university.
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The new venture is expected to generate as much as $500 million or more in capital; This is a groundbreaking and innovative move that could pave the way for more schools and conferences to pursue such a concept.
The project is expected to be completed soon following approval from the University of Utah Board of Regents on Tuesday. 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.
Our effort with Otro Capital is more than a nine-figure cash flow.
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The centerpiece of the project is the creation of a dedicated, independent branch of the athletics department (Utah Brands & Entertainment LLC) in a first-of-its-kind partnership between a university athletics 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.
The university retains majority ownership and decision-making authority of Utah Brands & Entertainment. Otro combines capital transfer with a team of experienced operators. A president outside the university will head the company and report to a board that includes trustees and Otro executives, chaired by Utah athletic director Mark Harlan.
The project contains a fascinating wrinkle. The university is offering a group of prominent donors the opportunity to purchase shares in Utah Brands & Entertainment. Already, university officials have devoted a small donor base to generate millions from acquisition deals. The capital figure, which exceeds $500 million, includes both Otro’s nine-figure cash flow and capital commitments from donors.
Utah Brands & Entertainment will house many of the components traditionally held within the university’s athletics department, including many athletic personnel and departments. But fundraising will remain at the school.
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The new company’s primary goal is to generate more revenue in a variety of areas, including ticketing, concessions, corporate sales and sponsorships. The new entity charged with overseeing and operating the revenue share payment system for Utah athletes provides the department with greater flexibility and freedom given that it will operate separately from a public university.
This movement is not entirely foreign to college sports. Over the past few months, several schools — Kentucky, Michigan State, Clemson — have announced the creation of a private, revenue-generating organization outside the athletic department as college sports transition into a more professional ecosystem. None of these schools have partnered with a capital company. However, Michigan State announced its own capital infusion in the form of a $401 million donation, some of which will go to the new athletics unit.
As for Utah’s partnership, in exchange for upfront cash, Otro will earn a large percentage of annual revenue from Utah Brands & Entertainment while splitting funds with the university. An exit strategy is in place within five to seven years, and the university retains the right to purchase an ownership stake in Otro.
It will be a long time before private capital emerges in college sports.
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Over the past two years, as college athletic departments have faced increasing financial stressors, dozens of schools have pursued private equity or equity deals, including with conferences as a whole — most notably the Big 12 and Big Ten. However, these projects were blocked for various reasons when they reached the finish line.
For example, Big 12 commissioner Brett Yormark has twice presented such a deal before the board. Big Ten officials nearly reached the point of voting on a $2.4 billion capital deal before at least two schools (USC and Michigan) canceled the project.
Yormark’s pursuit of a capital deal caught the attention of Harlan and Utah executives, who began the process that led to the potential deal with Otro more than two years ago.
Otro aims to invest in “sports teams, leagues and ecosystem businesses with strong intellectual property,” according to its website. The company was founded in 2023 by partners Alec Scheiner, Niraj Shah, Brent Stehlik and Isaac Halyard, who serve as senior executives at RedBird Capital Partners, one of the world’s largest sports industry investors.
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Scheiner has a deep background as a sports investor and team manager; He spends time as president of the Cleveland Browns and senior vice president of the Dallas Cowboys. He was the key man for Legends Hospitality, a company that provided food, merchandise, retail and stadium operations to venues and companies around the world. Stehlik was the former president of OneTeam Partners and served as chief revenue officer for the Browns.
Otro’s portfolio includes the Formula 1 Alpine Racing team, FlexWork Sports marketing and events company, and Two Circles, a fan and data analytics platform. Similar to its other projects, Otro will own a large but not majority stake in Utah Brands & Entertainment. For example, Otro invested $200 million in Alpine Racing to acquire a 24% stake.
According to a story dated 2024 buyoutinsider.comOtro was targeting $500 million for a sports-focused investment fund. The company pitched its college plan to other schools (specifically one in the Big Ten) before Utah showed serious interest.
It’s unclear whether Otro plans to make similar deals with other schools.
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In Salt Lake City, Otro executives appointed for revenue-generating purposes will have access to the school’s trademark and licensing rights, facilities, sponsorships and university teams. However, decisions regarding coaching staff and player recruitment are the responsibility of university staff.
In fact, the school confirmed the partnership with NCAA officials. To remain under the NCAA’s umbrella, Utah’s university president and athletic director must retain the majority of decision-making.
