The National Football League will reportedly approve a new rule allowing team owners to sell a piece of their franchises to private equity firms — setting the stage for a potential windfall that could drive up the value of clubs by billions of dollars.
The owners, who began their annual meeting on Tuesday, are weighing whether to they can sell up to 10% of their teams to a select list of private equity companies such as Arctos, Ares Management, Sixth Street, Blackstone, Carlyle, CVS and Dynasty Equity, according to The Wall Street Journal.
Blackstone, which has $1.1 trillion in assets under management, is said to be a favored potential partner in the eyes of NFL owners despite the fact that it has no prior investment in sports leagues, it was reported by the Journal.
Private equity firms looking to buy a slice of an NFL franchise will have to agree to stringent rules, including no governance rights, no preferred equity investment and a requirement to maintain their stakes for a minimum of six years, the Journal reported.
Preferred equity is a kind of investment that gives the investor certain privileges and protections that are not extended to common equity holders, such as priority in dividends as well as higher claims on the company’s assets in case of liquidation or bankruptcy.
Observers told the Journal that the fact that private equity firms were willing to agree to these limits indicates the strong motive there is to own a piece of an NFL franchise.
“Unless you’re a multi-billionaire, it’s almost impossible to buy an NFL team today,” Ted Jenkin, a business consultant and co-founder of the Atlanta-based financial planning firm oXYGen Financial, told The Post.
“This new rule will allow owners to free up cash flow tied up in the equity of their team that can be used to spend money on improvements including new stadiums.”
Jenkin added that the change will give “accredited investors the opportunity to own a very small stake in a professional football team by investing money through one of these private equity firms.”
As per terms of the rules, each private equity group is permitted to buy stakes in up to six different teams.
The Green Bay Packers are off limits to private equity due to its unique community-based ownership structure.
The Packers are the only US-based professional sports team that is publicly owned by its fans who operate the club as a non-profit.
The NFL’s rules for private equity groups are considered more stringent than other leagues, which in recent years have welcomed the infusion of capital.
In 2020, the National Basketball Association approved a rule which allowed private equity firms to own up to 30% of a single franchise — with each company allowed to own stakes in up to five different teams.
Major League Baseball opened its doors to private equity in 2021 when Dyal Capital Partners was permitted to form a fund that was allowed to invest in several teams.
Each MLB club was allowed to sell up to 15% of their equity to private investors — with a cap of 10% for a single investor in a single team.
There are no limits as to the number of clubs that private equity can invest in.
The National Hockey League, Major League Soccer and European soccer leagues such as the English Premier League, La Liga and Serie A have also allowed private equity groups to buy into their clubs.
European soccer leagues have allowed sovereign wealth funds such as Saudi Arabia to buy clubs, but the NFL won’t allow for any direct investment by state-owned funds.
According to the Journal, several owners believe that the rules are too stringent and have left open the possibility that they will be relaxed down the line.
Once the policy becomes official, talks between owners and private equity firms are expected to commence quickly, it was reported.
The Post has sought comment from the NFL.
