Private equity makes its first college sports play
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The University of Utah's board of trustees on Tuesday unanimously approved the creation of a for-profit company in partnership with private equity firm Otro Capital.
Why it matters: Private equity is becoming part of college sports, after several stalled attempts.
Zoom in: The new venture will be called Utah Brands & Entertainment, once the legal paperwork is completed, and will manage a variety of UU athletic operations — including media, hospitality, licensing, and finance.
- Otro is cornerstone equity investor, albeit with a minority stake, and would receive a percentage of annual revenue. Major UU donors also are expected to participate, with total investment expected to approach $500 million.
Behind the scenes: Otro, which declined comment, is said to have discussed possible deals with dozens of schools and began speaking with UU more than a year ago.
- The New York-based firm wqas formed in 2023 by RedBird Capital Partners alumni. Its team has deep experience in pro sports, including the formation of Legends Hospitality, and both sides seem to view Utah Brands & Entertainment as a partnership.
- One possible reason this particular deal moved forward is that UU has just 10 trustees, thus helping to streamline negotiations.
The big picture: Two trends are converging. First, private equity's growing interest in sports. Second, college sports becoming more like pro sports, thanks to NIL agreements and the transfer portal — plus an NCAA settlement that will let schools pay student-athletes.
- A lot of early talks revolved around private credit investments, or equity at the conference level. None of those have yet come to fruition.
- "College sports is big business but it needs to be a better business," a source explains. "Schools still are begging for money from donors, cutting non-revenue sports, borrowing from the states, and even considering borrowing from private equity."
Yes, but: There still are open questions about putting a for-profit structure on a non-profit institution, let alone one supported by taxpayers.
- Some sports investors also have questioned if private equity can materially improve college sports finances, given that the biggest revenue stream (e.g., media rights) is negotiated at the conference level.
Look ahead: Both private equity and higher ed will watch this deal very closely, to see if the model should be mimicked.
