Sources: The University of Utah is close to a landmark private equity deal expected to generate $500 million

Private equity has officially arrived in college athletics.

The University of Utah is striking an industry-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 athletics outside the university.

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The new venture is expected to generate $500 million or more in capital—a groundbreaking and innovative move that could pave the way for more schools and conferences to pursue such a concept.

Finalization of the project is expected soon pending authorization Tuesday from the University of Utah Board of Trustees. The board gave the university permission to move forward with a deal with Otro Capital, a New York-based sports private equity firm.

Several officials with knowledge of the project spoke to Yahoo Sports on condition of anonymity.

The effort with Otro Capital isn’t just a nine-figure infusion of cash.

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At the heart of the project is a private, independent offshoot of the athletic department – Utah Brands & Entertainment LLC – created in a first-of-its-kind partnership between a university athletic department and an equity partner. Otro Capital’s executive team, along with the athletics department staff, will lead the creation and operation of the new company.

The University retains majority ownership and decision-making rights of the Utah brand and entertainment. Otro marries capital infusion with a team of experienced operators. The non-university president will chair the company and report to a board chaired by Utah athletic director Mark Harlan, with seats for trustees and Otro executives.

The project includes an attractive wrinkle. The university is offering a major group of donors the ability to purchase a stake in Utah Brands and Entertainment. Already, university officials have tapped a small donor base to generate millions in procurement deals. The $500 million-plus capital figure includes both a nine-figure cash infusion from Otro and those capital commitments from donors.

Utah Brands and Entertainment will retain most of the components traditionally held in the university’s athletic department, including many athletic personnel and divisions. However, the fundraiser will remain with the school.

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The new company’s primary goal is to generate additional revenue in an assortment of areas, including tickets, concessions, corporate sales and sponsorships. Charged with overseeing and operating the revenue-share payment system for Utah athletes, the new unit offers more flexibility and independence to the department considering operating separately from the public university.

The move isn’t entirely foreign to college sports. In the past several months, a host of schools — Kentucky, Michigan State, Clemson — have announced the creation of a private, revenue-generating entity outside of the athletic department as college sports evolve into a more professional ecosystem. None of these schools have partnered with an equity firm. However, Michigan State announced its own capital infusion of sorts in the form of a $401 million donation, a portion of which will go toward its new athletics unit.

For Utah’s partnership, in lieu of upfront cash, Otro will earn a larger percentage of annual revenue generated by Utah Brands and Entertainment as it splits funds with the university. An exit strategy — in five to seven years — exists, and the university retains the right to purchase Otro’s ownership stake.

The rise of private equity in college sports has been a long time coming.

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Over the past two years, as university athletic departments have faced increasing financial stress, dozens of schools have pursued private capital or equity deals, including conferences as a whole — especially the Big 12 and Big Ten. But, when these projects reached the finish line, they were stopped due to various reasons.

For example, Big 12 commissioner Brett Yormark has twice presented such a deal before his board of presidents. Big Ten officials nearly reached the point of voting on a $2.4 billion capital deal before at least two schools — USC and Michigan — scrapped the project.

Yormark’s pursuit of a capital deal caught the attention of Harlan and Utah administrators, who, more than two years ago, began the process resulting in a 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 Skinner, Niraj Shah, Brent Stehlik and Isaac Hallyard, all of whom served as senior executives at Redbird Capital Partners, one of the world’s largest game industry investors.

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Skinner 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 providing food, merchandise, retail and stadium operations for venues and companies around the world. Stehlik was the previous president of OneTeam Partners and served as a 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. Otro will own a large portion of its other projects, such as Utah Brands and Entertainment – but not a majority share. For example, Otro invested $200 million in Alpine Racing to own a 24% equity stake.

According to a 2024 story on buyoutinsider.com, Otro was targeting $500 million for a sports-focused investment fund. The company has pitched its college plan to other schools — most notably in the Big Ten — before Utah expressed serious interest.

It’s unclear whether Otro plans to implement similar agreements with other schools.

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In Salt Lake City, Otro executives, with 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 acquisitions rest with university personnel.

In fact, the school cleared the partnership with NCAA officials. To remain under the NCAA’s umbrella, Utah’s university president and athletic director must maintain majority decision-making.