NFL owners have voted to approve a measure to allow private equity funds to buy stakes – small stakes for now – in teams. It is a significant shift in the NFL’s ownership rules, which, until now, had allowed a team to have limited partners, but had never allowed institutional investment – pooled money from investors – as part of ownership.
A total of 10 percent of a team can be owned by private equity funds. The NFL has already vetted the private equity funds that will be allowed to do transactions with the teams.
The list of permitted funds consists of Arctos Partners, LP; Ares Management Corporation; Sixth Street; and a consortium group including Blackstone, Carlyle, CVC, Dynasty Equity and Ludis (which is led by Hall of Fame running back Curtis Martin). Direct investment by sovereign wealth funds and pension funds is not allowed. Such funds are allowed to be investors in the overall private equity funds, but even then, their participation would be limited to a very small percentage share of ownership.
A team can sell stakes to multiple funds for a total of 10 percent of ownership, although each stake must be for at least 3 percent. And a fund can hold stakes in more than one team at the same time — up to six teams. The league has set up parameters around information disclosure for funds that own stakes in multiple teams.
Private equity funds that buy shares in teams are obligated to initially hold onto the investment for six years before they can sell; it is not going to be like flipping real estate.
The firms collectively have $2 trillion in assets and intend to commit $12 billion of capital to be raised (inclusive of leverage) over time, CNBC reports, quoting “people familiar with the matter”. With at least four investor groups able to invest in up to six teams each, that works out to $500 million of added capital on average for each team that receives an investment.
“This won’t change a thing,” NFL commissioner Roger Goodell told reporters on Tuesday. “This is 10 percent of a team. All it is, is a silent position that would allow access to capital for those teams that wish to offer 10 percent of their team. They will not be in any kind of decision-making influence in any way. It was very important when we began this that we strengthen the ownership. … We think the single-owner structure has been very valuable … and this does not impact that at all.”
“We’ve been very deliberate on this private equity,” Goodell said. “I think it’s an access to capital that I think has been of interest for a long time. Other leagues have been doing it; we’re doing it with a cap at 10 percent. So [it’s a] much less significant position (than other leagues). I think it’s an appropriate thing to give teams that liquidity to reinvest in the game, into their teams. I think it’s a positive development for us. I don’t think all teams will take advantage of that, but they will if they need that. It’s a very good opportunity for them.”
