University of Utah athletics launches landmark partnership with private equity firm

University of Utah fans welcome their team to the field at Rice-Eccles Stadium in Salt Lake City for a recent game. The university is the first NCAA school in the nation to partner with private equity for athletics fund-raising activities. (University of Utah photo)

When you hear the term “private equity,” you immediately think of outside investors owning part of your company. That’s apparently exactly what’s happening with University of Utah athletics. 

The UofU has announced a landmark deal that will help its sports entities generate new revenues through a partnership with Otro Capital, a New York City private equity firm “with deep operational experience in sports, entertainment and media.” Through the partnership, the school will go down as the first NCAA college athletic department to accept private equity money.

In an open letter from university President Taylor Randall and Athletics Director Mark Harlan, the school announced the formation of Utah Brands & Entertainment LLC, a new company owned by the University of Utah Foundation with equity participation from Otro Capital. The company will now own “select core revenue-generating operations,” the letter said.

The university has declined to say just how much of the new operation will be owned by Otro Capital because the deal has not been finalized. Yahoo Sports, which first reported the deal, said the partnership could bring in up to $500 million in revenue.

In addressing concerns that the University of Utah may be falling behind in its ability to function in a new athletic environment driven by “name, image and likeness” (NIL) payments to recruits, the transfer portal and the world of revenue-sharing mandated by a recent court settlement, the letter from Randall and Harlan said these things have “disrupted the status quo and introduced significant costs to the university. Additionally, we face growing financial headwinds across all of our missions — academics, research and patient care.”

To address these challenges, the letter said, “Utah Brands & Entertainment will enable Utah Athletics to transition to a modernized business model that can more strategically build our brand and strengthen our athletics programs.”

Through the new entity, the school will build work to build its brand, the school said. That will include overseeing corporate sponsorships, ticketing, event-related revenues and campuswide university trademarks and licensing.

The new business model was unanimously approved Dec. 9 by the university’s board of trustees, and the deal could be finalized by early next year. The school added it plans to partner with prominent university supporters along with Otro Capital.

Also addressing concerns from boosters, Randall and Harlan wrote, “Importantly, the university is not selling parts of our athletics department, ceding operational control to a third party or relinquishing control of any facilities. Decisions regarding sports, coaches, scheduling, operations, student-athlete care and other athletics matters will remain solely with the athletics department. The university’s foundation will appoint a majority of the board of directors of Utah Brands & Entertainment, and the board will be chaired by the athletics director.”

Although the UofU was the first to pull the trigger on private equity involvement in college athletics, the idea has been around for several years.

“There have been a lot of attempts, going on three or four years now, to make direct investments into sporting programs at schools,” Ben Fund, a partner at Washington, D.C.-based investment firm Carlyle Group, told Front Office Sports. “Everyone in the market wants to talk about college sports.”

The university’s private equity deal has received mixed reviews throughout college sports. CNBC reported that NCAA President Charlie Baker, speaking at the recent Sports Business Journal’s Intercollegiate Athletics Forum in Las Vegas, said that the formation of Utah Brands & Entertainment is “really well thought out and really well designed.” He praised the UofU deal for keeping decision-making in-house with the school’s athletic department. Baker has reportedly long been skeptical of shifting too much power to private equity.

“My message to everybody on this would be really simple: ‘Be really careful,’” Baker said earlier this year about private equity deals, according to ESPN.

A number of national and local lawmakers and community leaders have also weighed in on the deal, with questions ranging from transparency ahead of the announcement to the lack of competitive proposals from entities other than Otro Capital. Local media have also expressed similar concerns.

Questions over the university’s tax-exempt status have been raised, with U.S. Rep. Michael Baumgartner (R-Washington) writing on social media, “Congress will be taking a hard look at the tax-exempt status of universities that enter into private equity deals. If you want to act like a non-public entity, you better be ready to be treated like one.”

But UofU leaders see the deal as critical, with the Randall and Harlan letter concluding, “Most importantly, this transition will allow more of the university’s internal resources to remain focused on education (scholarships, access and student success), cutting-edge research and exceptional patient care. By modernizing our athletics model, we are protecting and strengthening our ability to advance our academic mission and deliver societal impact over the long term.”