The owners of the National Football League (NFL) have voted to permit certain private-equity firms to take an ownership stake in single teams. It has also done some vetting and come up with the following list of approved firms: Arctos Partners, Ares Management, Sixth Street and a consortium of Blackstone, Carlyle, CVC, Dynasty Equity and Ludis. Sovereign wealth funds – such as Saudi Arabia’s Public Investment Fund (PIF), eager of late to invest in sports – and pension funds are barred from taking direct ownership stakes. They may, however, be investors in one of the approved PE funds.
Firms must take ownership stakes of 3 to 10 percent per team and may invest in up to six teams. The NFL otherwise stipulates that this is “truly a passive investment,” with “no voting power attached to the transaction.” A team’s controlling owner must own 30 percent, and no team may exceed 25 owners, controlling owner included.
Having mulled this over for five years, the NFL has concluded that even the rich – NFL owners have traditionally been individuals – need liquidity. By selling some of their stake they can generate cash infusions for investments like new stadiums and refurbishments. Moreover, “to keep [team] sale prices going up […] the NFL needs a larger pool of potential owners to get into the bidding.”
PE in big US sports
Major League Baseball (MLB) was the first of the big American sports leagues to provide entry to private equity, also in the form of minority shares. That decision came about on Oct. 16, 2019, as Sportico and Bloomberg then reported. Sal Galagioto, President of the sports finance and advisory firm Galatioto SportsPartners, established for the occasion an investment vehicle worth $500 million.
The National Basketball Association (NBA) followed suit in 2020, as Yahoo Finance reports, but narrowed its decision to one firm: Dyal HomeCourt, since become part of Blue Owl GP Strategic Capital. The decision was broadened to include Arctos Sports Partners (also on the NFL list) a year later.
Major League Soccer (MLS), according to Sportico, laid down rules of its own in 2021, capping a PE firm’s share, limiting the number of clubs it can buy into and the number of board seats it can hold, and establishing a threshold for the firm’s size.
For the National Hockey League (NHL) the PE story goes back to 2005, when Stephen Pagliuca sought through his firm, Bain & Co., to make off with the entire league for $4 billion, as Sportico recounts. He failed, but the NHL came around to the idea of PE ownership in 2021. A fund can now purchase up to 20 percent of a team and buy into as many as five teams as long as it puts up at least $20 million. A team, on the flipside, may sell no more than 30 percent of its stock to private equity.
