The owners of nearly three dozen National Football League (NFL) teams have approved a plan that allows private equity firms to take a minority stake in individual teams for the first time.
The vote, reported on Tuesday, has the potential to drastically change the ownership structure of football teams. Historically, a single “lead owner” was required to retain a 30 percent stake in a team, and no more than 25 individuals were allowed to consist of an ownership group.
That changes with the vote on Tuesday, with the NFL now allowing pre-approved private equity partners to take as much as a 10 percent stake in any one team. Some private equity firms have already committed as much as $12 billion in capital contingent upon approval of the rule, the Wall Street Journal reported this week.
The “pre-approval” clause is critical, in that it limits the private equity firms to ones that fall within a certain set of strict parameters, including no governance rights, no preferred-equity investments and a commitment to maintain an investment stake for at least six years, the Journal said. Arctos, Dynasty Equity, Blackstone and Carlyle are among the pre-approved firms. One firm can have positions in up to six teams.
Thirty-one of the NFL’s 32 teams are able to solicit offers from private equity firms under the new rule. The Green Bay Packers is the only team that will not benefit from the change, because the team is owned by members of the public through a not-for-profit organization.
For the teams that can benefit, allowing private equity to carve out ownership slices of various teams could infuse those clubs with much-needed cash to attract and retain high-value players. It is less likely to impact the NFL’s broadcast deals with radio and television outlets, as those commitments are negotiated by the league itself, with most rights locked in through at least 2032.
In a television interview with Bloomberg on Tuesday, Velocity Capital Management Partner David Abrams said the vote approving private equity ownership will benefit NFL teams in the long run because “a lot of sports teams have been run as more family-oriented organizations, so they don’t have best (business) practices.”
By contrast, private equity firms tend to be more-structured, with a focus on “making a business more valuable and function better,” Abrams affirmed.
“By bringing in new voices and creating proper governance, getting people around the table who have done this in other sports and other markets, I think it’s a great thing (for) the NFL, and it’s long overdue,” Abrams said.
