We've got Grey Duck beer sales for NIL, meanwhile...University of Utah nearing landmark private equity deal expected to generate $500 million

[BleedGopher]

Per Yahoo Sports:

Private equity has officially arrived in college athletics.

The University of Utah is on the cusp of striking the industry’s first partnership with an equity firm in a marriage that features a nine-figure capital infusion and the creation and shared ownership of a for-profit entity to operate athletics outside of the university.

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

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

Multiple officials with knowledge of the project spoke to Yahoo Sports under condition of anonymity.

The endeavor with Otro Capital is more than just a nine-figure infusion of cash.

At the center of the project is the creation of a private, independent offshoot of the athletic department — Utah Brands & Entertainment LLC — in a first-of-its-kind partnership between a university athletic department and an equity partner. An executive team from Otro Capital, combined with athletics department personnel, will lead the creation and operation of the new company.

The university retains majority ownership and decision-making authority of Utah Brands & Entertainment. Otro marries the capital infusion with a team of experienced operators. A president from outside the university will preside over the company and report to a board, chaired by Utah athletic director Mark Harlan, with seats for trustees and Otro executives.

The project includes a fascinating wrinkle. The university is offering a prominent group of donors the ability to purchase a stake in Utah Brands & Entertainment. Already, university officials have culled a small donor base to generate millions in purchase agreements. The more than $500 million capital figure includes both the nine-figure cash infusion from Otro as well as those capital commitments from donors.

Utah Brands & Entertainment will house most of the components traditionally held within the university’s athletic department, including many athletic personnel and divisions. However, fundraising will remain with the school.

The new company’s primary goal is to generate more revenue across an assortment of areas, including ticketing, concessions, corporate sales and sponsorships. Charged with overseeing and operating the revenue-share pay system for Utah athletes, the new entity provides the department with more flexibility and freedom considering it will operate separate from a public university.

Sources: University of Utah nearing landmark private equity deal expected to generate $500 million

The new venture would generate a massive amount of money for the school in a groundbreaking move that may pave the way for more schools and conferences to do the same.

sports.yahoo.com

Go Gophers!!

 

[Whytetale]

If this becomes a nationwide trend, one that our anti-athletic administration will turn their nose up to as an unholy arrangement, we might be folding up the tents.

 

[upnorthkid]

i assume if they're going the private route, they're no longer going to go the route of collecting taxpayer money for anything related to sports?

UU has been in a fight about rebuilding arenas and has been getting a bunch of public pushback on this, so this may be where its coming from.

 

[WAGopher]

I wonder if the Big 12 needs to sign off on U of Utah’s private equity plan? Because there may be conflicts of interest if both a conference and it’s member schools want to move to private equity funding.

However, it makes sense for each school to do this on their own because why would Ohio State want a shared conference deal when they probably can get much more on their own.

 

[matt]

If Utah is getting $500 million then it seems to me there is a bubble. The TV contracts and ticket prices can only get so big before customers start saying no, and I have a hard time with thinking the roughly 30 programs bigger than Utah could justify more than a half billion dollar cash infusion and still make ends meet.

 

[Dave H]

If this becomes a nationwide trend, one that our anti-athletic administration will turn their nose up to as an unholy arrangement, we might be folding up the tents.

I would rather Gopher Athletics not exist than see them do this crap. This is disgusting and one of the main reasons I barely care anymore.

Kids are going broke and in debt for life going to college...but thank god the backup qb can buy a car with his private equity cash!

The NCAA is a joke.

 

[howeda7]

Is this really what the Supreme Court wanted? Congress has to address this in some way or it's dead within 15 years.

 

[MGGopher]

PE dictating college athletics decisions? Oh good lord. Get ready to welcome your favorite low-cost airline carrier policies to a stadium near you lol.

Also, we laughed about it in another thread, but it’s only a matter of time before the Saudis buy a team — or conference.

 

[upnorthkid]

Is this really what the Supreme Court wanted? Congress has to address this in some way or it's dead within 15 years.

Congress has to deal with soaring cost of higher ed in general.

Eventually this arms race will price more people out and all these fancy buildings and such will sit empty unless they fix that part

On the sports side, absolutely agree sports as we know it will die with Olympic sports getting gutted in the next few years if it continues at this pace

 

[GreasyGopher]

So the University of Utah athletic department (or at least a portion of it?) is a pro sport entity now?

I can’t imagine the private equity group is going to allow the AD to retain autonomy regarding decision making…

 

[Gopher_In_NYC]

PE dictating college athletics decisions? Oh good lord. Get ready to welcome your favorite low-cost airline carrier policies to a stadium near you lol.

Also, we laughed about it in another thread, but it’s only a matter of time before the Saudis buy a team — or conference.

 

[Goldmember]

So… the Utes are now officially a professional sports organization being allowed to play in the NCAA. Crazy times.

 

[forever a gopher]

It seems this has a high likelihood of going really poorly. If private equity is giving hundreds of millions of dollars, they're going to want a return, and quick. PE isn't exactly known for taking a calculated, slow, and long-term view on investments. Most athletic programs either break even or run a deficit. Even tOSU runs a deficit and pulls from the general fund. So where is this monetary return going to come from? Jacking up the prices? There is only so high they can go. Cut programs down to only the ones that make money?

My guess is Utah fans will see ticket prices, concessions, parking, increases by a fair amount, and money losing programs cut to make the PE people happy. The only people coming out ahead will be private equity investors and the athletes in the money making sports, until the golden goose has been fully strangled, when the pyramid scheme will come tumbling down.

 

[GreasyGopher]

Is this really what the Supreme Court wanted? Congress has to address this in some way or it's dead within 15 years.

Don’t blame the Supreme Court for the greed of the NCAA and member institutions. They knew where this was headed long ago and failed (or refused) to address the issue in a reasonable manner. In fact, this chaos is likely part of their plan.

If college sports die, the NCAA and the member institutions are responsible for killing the golden goose not the Supreme Court.

 

[howeda7]

Don’t blame the Supreme Court for the greed of the NCAA and member institutions. They knew where this was headed long ago and failed (or refused) to address the issue in a reasonable manner. In fact, this chaos is likely part of their plan.

If college sports die, the NCAA and the member institutions are responsible for killing the golden goose not the Supreme Court.

The NCAA is certainly to blame, but the Supreme Court also basically struck down any and every attempt to put the horse back in the barn too.

 

[Whytetale]

I would rather Gopher Athletics not exist than see them do this crap. This is disgusting and one of the main reasons I barely care anymore.

Kids are going broke and in debt for life going to college...but thank god the backup qb can buy a car with his private equity cash!

The NCAA is a joke.

Perhaps if the $500 million in incoming equity funds allowed no University money to be needed for athletics, the funds could then be used to reduce student tuition. I have my rose colored glasses on.
Side note: In 1971, I was at Bemidji State, my sister was at the U. I kidded her that I was paying $6 a credit while she was paying $9. State funding of higher education was more robust then. Adjusted for inflation if the funding had stayed the same, the U's per-credit cost would be $72. At that time, the U was on a quarter calendar, so now the fee per semester credit would be $108. Starting with Governor Jessie, Funding for higher ed. across MN was reduced by many of the following administrations. The price per semester for a full-time student is a flat rate of about $8,066 per semester, with credits over 13 being free.

 

[GreasyGopher]

The NCAA is certainly to blame, but the Supreme Court also basically struck down any and every attempt to put the horse back in the barn too.

That’s still an NCAA issue. Issues that the NCAA still has not addressed.

 

[GreasyGopher]

It seems this has a high likelihood of going really poorly. If private equity is giving hundreds of millions of dollars, they're going to want a return, and quick. PE isn't exactly known for taking a calculated, slow, and long-term view on investments. Most athletic programs either break even or run a deficit. Even tOSU runs a deficit and pulls from the general fund. So where is this monetary return going to come from? Jacking up the prices? There is only so high they can go. Cut programs down to only the ones that make money?

My guess is Utah fans will see ticket prices, concessions, parking, increases by a fair amount, and money losing programs cut to make the PE people happy. The only people coming out ahead will be private equity investors and the athletes in the money making sports, until the golden goose has been fully strangled, when the pyramid scheme will come tumbling down.

I wonder if the involvement of PE introduce any additional hurdles regarding donations or financial contributions to the athletic department? After all, those entities are subject to government regulations.

 

[upnorthkid]

It seems this has a high likelihood of going really poorly. If private equity is giving hundreds of millions of dollars, they're going to want a return, and quick. PE isn't exactly known for taking a calculated, slow, and long-term view on investments. Most athletic programs either break even or run a deficit. Even tOSU runs a deficit and pulls from the general fund. So where is this monetary return going to come from? Jacking up the prices? There is only so high they can go. Cut programs down to only the ones that make money?

My guess is Utah fans will see ticket prices, concessions, parking, increases by a fair amount, and money losing programs cut to make the PE people happy. The only people coming out ahead will be private equity investors and the athletes in the money making sports, until the golden goose has been fully strangled, when the pyramid scheme will come tumbling down.

i guess kind of depends.

They also are investors in an F1 team (along with a bunch of pro athletes they recruited) and are run by people with deep sports background with quite a few people in the former Browns org as well as advisors to multiple big sports entities like Fenway sports group, the gambling industry, etc in addition to all their people being big in the "mergers and acquisitions" space). There are certainly ways for them to leverage this and enter into partnership deals that will make their money elsewhere over the long haul and it also just opens them up to making more deals elsewhere (ie take a temporary loss here for the negotiation to make money elsewhere). So could see them going for the long term strategy but what are you going to do if you're UU and they say they're now going to sell their "share" to the Saudis or these random investors they are recruiting are going to want their revenue in use of their company, advertising, etc?

It all sounds great when this group comes in, sells you what they can do, and says hey look how we took this *insert whichever of their holdings seems most applicable* from a $35mil valuation to $200mil and forget that you can't really then "sell" UU.

will be amazing if Utah legislature or the feds decide they're no longer tax exempt. we'll see how it goes, but PE is not going to be caught holding the bag alone

 

[Gophers7NatTitlesBadgers0]

Would the financial backers be able to move the program off campus potentially if Utah isn't giving them what they want (facilities etc)?

 

[bonin21]

Gophers are toast in NIL era. Period.

 

[upnorthkid]

Would the financial backers be able to move the program off campus potentially if Utah isn't giving them what they want (facilities etc)?

in theory would think they would have this option if the board voted this way but the University maintains majority share (does not list details of who can vote or what the percentage split is)

 

[Stuff]

You guys are going to need to drink a lot of beer.

 

[NateDawgUM]

Friendly reminder that private equity never enters anything without having the exit mapped out and the way there is usually strewn with dead bodies.

 

[disco]

That’s still an NCAA issue. Issues that the NCAA still has not addressed.

This. It's not the court's job to police college sports in such a way that fans and schools may want.

 

[DarthGopher]

Friendly reminder that private equity never enters anything without having the exit mapped out and the way there is usually strewn with dead bodies.

Bingo. F'ing parasites masquerading as adding value.

 

[DarthGopher]

PE dictating college athletics decisions? Oh good lord. Get ready to welcome your favorite low-cost airline carrier policies to a stadium near you lol.

Also, we laughed about it in another thread, but it’s only a matter of time before the Saudis buy a team — or conference.

They sponsored the Turkey Trot!

If the Gophers embrace Cartman's Race Science, we could win it all.

 

[Panthadad2]

I'll do my best to keep help Duck Duck Beer sales compete with private equity.

 

[tikited]

I'd help a lot more if Duck beer actually tasted good.

 

[FinnGopher]

Private equity is like making a deal with the devil. Look no farther than Minnesota Rusco (since 1955) getting killed by marrying private equity. There is a reason why Michigan and USC have stood opposed to private equity in the B1G. It's a quick boost of money followed by enslavement and certain starvation in the long run.
Utah may get a quick boost, but it will die an agonizing death via private equity.