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The NFL and Private Equity: Baby Steps Towards Big Investments

Published onFeb 03, 2025
The NFL and Private Equity: Baby Steps Towards Big Investments
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Until recently, the National Football League (“NFL”) was the only major sports league in the United States that did not allow private equity ownership. On August 27, 31 out of 32 owners voted in favor of allowing certain private equity firms to buy up to a 10% stake in a team. The NFL has received growing interest from private equity firms, and after years of discussions, it finally allowed such investments following skyrocketing franchise valuations

The change in ownership policy will provide solutions to cash flow challenges for current NFL owners. Teams receive most of their revenue after the season through lump-sum payments, making it difficult when owners need cash mid-season. Private equity firms can provide much-needed liquidity for owners interested in improving stadiums and facilities. Private equity investments will also make it easier for owners to pay player contracts and provide monetary incentives, which may make teams with such investors more attractive to elite talent. 

Allowing limited ownership by private equity firms will not result in any noticeable difference in how teams are run because the NFL has set strict parameters on private equity investments. Most notably, the NFL has labeled these transactions as passive investments, meaning funds will have no voting power. Additionally, the NFL will prevent funds from selling their stake for six years after their initial investment. These restrictions seek to allay the fears of players, coaches, current owners, and fans who worry that big investors will make drastic changes by influencing coaching decisions or increasing ticket prices. 

The NFL presents a new and attractive opportunity for private equity investors. In addition to the thrill of having a stake in an entertaining and competitive organization, NFL teams offer significant potential returns. Sports teams’ valuations have consistently grown faster than the S&P 500 over the last twenty years. Investors are interested in NFL ownership because those growing valuations result in sales with hefty price tags. For example, the Washington Commanders and the Denver Broncos, two of the worst teams in the league at the time of each sale, sold for $6 billion and $4.65 billion, respectively. The NFL also offers a level of publicity that other investments do not, which may be appealing to investors seeking to gain influence and prestige. 

The NFL will likely relax the restrictions on private equity investments. Major sports leagues have a history of loosening their regulatory schemes surrounding outside investments, meaning private equity firms will likely have more control of teams. Roger Goodell, the NFL’s Commissioner, has already indicated a willingness to raise the minimum investment above 10%. The NFL may also receive pressure from owners because other professional sports leagues across the United States allow private equity investors to own up to 30% of teams.   

If the move to allow private equity investments goes well, the NFL will likely increase the maximum stake funds can acquire and may allow different kinds of funds to invest. Sovereign wealth funds have had an increasing influence on sports in recent years. For example, sovereign wealth funds such as Qatar Sports Investments (“QSI”) and Saudi Arabia’s Public Investment Fund (“PIF”) own many European soccer teams. Additionally, PIF announced one of the most significant sports transactions in history, the LIV-PGA merger. With the NFL looking to expand globally and PIF becoming involved in various sports, it would be no surprise if the two organizations struck a deal in the next few years. 

However, such deals would come with severe backlash. The LIV-PGA merger was essentially a hostile takeover and fans are concerned with how such takeovers will change sports. When the Professional Golf Association (“PGA”) banned players if they joined LIV, an anti-trust suit soon followed, forcing the PGA’s hand to merge. Additionally, legal troubles often surround the controversial foreign sovereign wealth funds and holding groups. In Europe, Manchester City, which Abu Dhabi-based City Football Group Limited owns, faces 115 charges for breaches of the Premier League’s financial fair play regulations. While such groups offer an abundance of cash, the NFL should hesitate to expand beyond its current ownership rules because drastic changes could anger fans and lead to legal troubles.

David McIver is a second-year law student at Wake Forest University School of Law. He holds a B.S. in Management from UNC Asheville, where he played collegiate soccer. 

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Email: [email protected]

LinkedIn: https://www.linkedin.com/in/david-mciver-/

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