National Football League owners voted Aug. 27 to allow private equity firms to buy stakes in their franchises, a move expected to attract billions in fresh capital while boosting team valuations that had already been surging.
During a special one-day league meeting in Minneapolis, the NFL loosened some of the strictest ownership rules in professional sports to allow private equity to own as much as 10% of a team.
Transactions are expected to happen quickly, given that the owners have already vetted and approved firms to pursue investments. They are Arctos Partners, Ares Management, Sixth Street Partners, and a consortium comprising Dynasty Equity, Blackstone, Carlyle Group and CVC Capital Partners.
There are also teams already looking for investors, including the Los Angeles Chargers and the Buffalo Bills, Bloomberg has reported. Philadelphia Eagles’ owner Jeffrey Lurie is also considering selling part of his franchise.
“This is certainly going to change the game,” said Mark Patricof, founder of Patricof Co., an athlete investment and advisory platform. “What individual wants to put up a $700 million check for a business where you have no control and no path to ownership? Institutional ownership was inevitable.”
The move has the potential to shift how teams are run. Limited ownership partners have traditionally been friends, former players and local celebrities. Private equity investors will be more focused on getting a return on their investment by pushing for better financial results.
And to get a piece, private equity will have to jockey for stakes in a league where team valuations range from about $5 billion to $10 billion, according to Sportico. This means 10% stakes in NFL teams could sell in a span from roughly $500 million to $1 billion.
The NFL, Sixth Street, Ares, Dynasty, Blackstone and Carlyle declined to comment. CVC did not respond to an immediate request for comment.
Arctos issued this statement: "We are honored to be among the first private investment firms being considered by the National Football League as potential partners for their clubs and owners. While there is much work ahead, today is a milestone reflecting Arctos’ commitment to the sports industry, our position as the market innovator and passion for being the partner of choice for leading sports ownership groups. Pending final approval, Arctos would be the only firm approved to invest in equity across each of the five most popular major North American leagues."
Bloomberg reported the owners were considering allowing institutional investors to be able to buy 10% of clubs, while some owners would like the cap at 5%. The NFL hired PJT Partners, an investment bank, to assess interest from private equity funds.
Other sports leagues, including the National Basketball Association and Major League Baseball, have already expanded ownership rules to private equity and other investors. By comparison, the NFL has historically had some of the strictest ownership rules.
Stricter rules
A principal NFL owner must be able to pay for at least 30% of a team and an ownership group can’t surpass 25 people. This setup has made selling teams more difficult than in other sports, given the amount of capital needed up front.
That was apparent last year when a large investor group, led by private equity billionaire Josh Harris, completed what was described as a complicated deal to buy the Washington Commanders for $6 billion. The sales process also didn’t attract many suitors, raising concerns that the league’s conservative rules were too limiting and would depress future sales.
Following the Commanders deal, NFL Commissioner Roger Goodell created a committee of owners to weigh changes to ownership rules.
Kansas City Chiefs owner Clark Hunt has backed private equity entering the league because it can be helpful source of capital, including for funding the renovation or building of stadiums, investment that is getting increasingly difficult to be obtained through local government subsidies.
Surging valuations for NFL teams have also created the potential for giant tax bills when ownership is passed down to the next generation. An owner could offset that by selling a stake to private equity.
