NFL Private Equity

Similar to other leagues, the NFL has started to allow private equity firms to invest in their teams. I personally am not a fan of PE firms investing in teams that I care about because I think they have a short term view that is completely focused on making money, while a good owner has a long term view that is focused on winning.

The NFL has normally restricted PE firms from investing. However, they are dealing with the side effects of their own monumental success. Team values have ballooned in recent years and now it is extremely difficult to find one or a couple individuals wealthy enough to purchase an NFL team. PE firms have lots of money and are drooling to cash in on the NFL’s success.

Thankfully, the NFL has strict rules on PE firms investing, most notably that they cannot own more than 10% of a team and they get no governance rights in the team. One rule I do not support is that each fund or consortium will be able to do deals with up to six teams. This could present a strong conflict of interest. The time horizon is also very short as the minimum hold period for these funds will be six years.

Despite any reservations I or any other fans have, this probably is a necessity. The NFL is the last major US sports league to allow PE investing. The NBA, MLB, and NHL allow private equity ownership of up to 30%.

Something that also furthers the NFL’s need for PE investment is that teams often sell for much more than their estimated value. In August, the Eagles were valued by Forbes at $6.6 billion. However, according to the WSJ, in early December, the Eagles sold 8% of their franchise to two family investment groups, with one of those deals valuing the club at $8.3 billion.

WSJ also reported that Ares Management bought 10% of the Miami Dolphins in a deal that valued the organization at $8.1 billion, even though the Dolphins were valued at $6.2 billion by Forbes. The Bills also received a 10% investment from PE firm Arctos for an undisclosed amount.

The overpayments just raise the need for investments from outside money like PE firms. The NFL says these investments will be used for projects like building stadiums, which is good for fans and teams overall.