NFL Private Equity Ownership Rules: PE Can Now Own Stakes in Teams
Brendan Coffey
6 min read
In August, the NFL voted to allow institutional investors to buy into franchises. The world’s richest league had stood apart from every other top-level global professional sports league by declining to allow private equity or other institutional investment in its teams. Global soccer was the first to allow private equity to own teams outright in 2006, leading to the current boom in fund interest in owning at least part of teams—the North American sports leagues began allowing PE in starting in 2019.
“Owners gain more options for how they can invest in the franchise and enhance the value of their team. Projects like stadium renovations and technological advancements are expensive and require significant capital to complete. Private equity can provide this much-needed funding,” the American Investment Council, a PE advocacy organization, said about the news of the NFL’s decision.
That’s technically true, but it also was true before—teams were always permitted to go to the bond market to borrow money. The real reason for allowing PE to join team ownership ranks has everything to do with the NFL’s skyrocketing team values. In 1989, Jerry Jones paid $150 million for the Dallas Cowboys—what was then seen as a shocking amount for an NFL team. The club is now the world’s first franchise worth $10 billion, and the average NFL team is worth $5.93 billion. Those huge values mean that some buyers have faced hurdles cobbling together enough cash to buy teams in recent deals. Now PE firms can be part of the consortiums that purchase teams, making raising cash easier.
Probably more importantly, letting PE buy into teams provides an avenue for minority owners to sell more easily. It’s a simple fact that even a 5% piece of the average team is nearly $300 million—very few of the ultra-wealthy want to spend that money to have minimal say in no the team operates. Family-owned teams also get an easier path to cash out those family members who want to get their money and do something else.
Who is allowed to own NFL teams today?
Control ownership of an NFL team hasn’t changed. The NFL requires a the traditional sports team ownership model—one owner making decisions for each team. That person leads the organization, attends owner meetings and votes on matters the NFL puts before its owners.
Of course, not every franchise is 100% owned by one person; the NFL requires one person to be the decision-maker while allowing others to hold minority stakes in teams. In long-standing exceptions to that rule, the league allows large extended families to divide equity among many family members, like with the Chicago Bears. Even more than half a million fans claim team ownership with a small slice of stock, in the case of the Green Bay Packers.
With the acceptance of private equity, permitted firms can own minority stakes in franchises too. But with a few guardrails the NFL has put on transactions.
What are the ownership guidelines for private equity?
Eight firms have been permitted by the league to invest in franchises. Three are acting independently: Arctos Partners, Ares Management and Sixth Street. Five others form a consortium that will buy and sell together: Blackstone, Carlyle Group, CVC, Dynasty Equity and Ludis Capital. The mechanics of the consortium’s arrangement hasn’t been publicly disclosed, but it’s assumed the arrangement allows the smaller funds—Dynasty and Ludis, which otherwise would not meet other league hurdles—to participate in deals.
Firms that buy into teams have to buy at least 3% of a team’s equity and can’t buy more than 10%—the maximum any team can sell to PE is 10%. In practice, this means at most three PE firms can invest in any single team (i.e. owning 3.33% each or some slight variation).
Any purchase by a PE firm can’t be sold for six years.
The maximum teams any single firm can have a stake in is 6. That means, based on today’s average team value, a PE firm could invest as much as $3.56 billion in the NFL. That’s real money.
The league requires any investment fund have at least $2 billion in capital. That means money it has in hand and invested anywhere; it’s a hedge against a fund being too small that it shuts down.
No more than 20% of the fund’s assets can be invested in any one club—again, a hedge against problems on the fund side affecting a team.
No one person can account for more than 7.5% of the assets of any investing fund.
In a mind-bender suitable to a Christopher Nolan film, NFL owners themselves can invest in the PE funds that own equity in their teams, too. The league has put limits on how much owners can put into those funds: No more than 3% of the fund’s capital can be from an owner or their immediate family.
Does this differ from ownership rules for people?
The admission of PE doesn’t change the rules around other owners.
An incoming controlling owner must own at least 30% of the franchise, though it is said the league strongly prefers a new owner to hold half outright. NFL teams with the same owner for at least a decade then see that rule loosened, with the controlling owner having to own just 1% of the franchise equity, while their families need to own 30%.
A maximum of 25 people can be in any ownership group.
A detailed succession plan for each team’s ownership must be filed and then updated annually with the league office. Of course, the NFL owners themselves can approve or decline any new owner if 24 of the 32 vote for it, and the owners can always vote to change their rules at any time.
What teams have private equity investors?
The Buffalo Bills and Miami Dolphins were the first teams to sell a minority stake to private equity firms in December. Arctos Partners purchased a 10% stake in the Bills while Ares Management bought 10% of the Miami Dolphins as well as stakes in Hard Rock Stadium and the Formula 1 Miami Grand Prix, which is owned by Dolphins majority owner Stephen Ross.
Will other types of funds will be allowed?
While the NFL’s rules for PE are tighter than other North American leagues (where 20% to 30% of team equity can be sold to institutions), the NFL appears to be following their example. At first, the other leagues just allowed PE firms to invest first. Some later permitted the addition of university endowments, pension plans and sovereign wealth funds to be, at least theoretically, permitted.
Unlike sports such as basketball, baseball, soccer and ice hockey that have sizeable followings outside the U.S. and Canada in at least handful of countries, American football is nearly only a North American game, at least as far as people who play. In the case of sovereign wealth, which often have a goal of advancing a sport or business in their home country when they invest, the NFL may be too American for them to want to invest.
(This story was initially published on July 2, 2024 and was updated after the NFL voted to allow private equity in ownership. It was updated again with details of the teams taking private equity investment.)
