With regard to the Utes-
How will this work?
The school started a new company called Utah Brands & Entertainment. The Utes will own most of this company, but Otro Capital will also own part of it. The new company will handle some things most athletic departments do (like ticketing, events, sponsorships and NIL) but try to do them even better to make more money for the school and the investment firm.
The Utes would remain in control of big decisions like hiring/firing coaches and scheduling. Although the company will distribute NIL payments to players, the Utes would still control who gets how much.
The company will be under the university’s foundation and chaired by the Utes’ athletic director. On a potential seven-person board, the athletic director and three other Utah foundation members would be joined by two members from Otro Capital and another university supporter/investor.
The company would submit audits to Utah’s trustees, and the university would have the ability to buy back its share of the company from Otro Capital.
During a panel discussion at the SBJ Intercollegiate Athletics Forum on Tuesday, NCAA president Charlie Baker called the deal “really well thought out and really well designed” because the school still controls athletics’ decision-making process. Yahoo! Sports reported Tuesday that the Utes cleared the proposal with the NCAA.
“This is not a one-time transaction,” Randall said.
That said, the partnership is expected to include a significant initial transaction. Athletic director Mark Harlan called a “short-term solution” of capital something “that’s very important” for the program. Trustees discussed the possibility of a seven-year term to the partnership.
What are the risks?
Because financial details are either not yet finalized or not public, we can’t fully assess them. But generally, private equity groups don’t get into partnerships to lose money. What happens if this venture doesn’t make as much as both sides expect?
Foundation CEO David Anderson acknowledged a “tension” between commercial success and the university’s mission. Utah administrators said in the presentation that the school would be able to veto a sponsorship opportunity that doesn’t align with its values, but how might that work in practice?
A rosier risk is that Utah undervalued itself because it’s the first program to make a deal like this. Anderson told the board that if the deal becomes below market value, Otro Capital will effectively have to match the new numbers.
Is this the start of a trend?
Probably.
A few schools (like Kentucky and Clemson) have already formed companies to handle some of the business of college athletics. Utah simply took that idea a step further by adding an outside investor to the mix. The Utes aren’t the only program in these financial straits, so don’t be surprised if others follow to the same proposed solution.
The Athletic
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