DealLawyers.com Blog

The NFL season kicks off next week, and once again, it’s not easy being a Cleveland Browns fan. Cleveland’s QB1 hasn’t played a down in preseason, Nick Chubb is out for at least the first four games, the team’s top draft pick is suspended indefinitely, and its owners are fighting with the City of Cleveland over a new stadium deal. While fans worry about stuff like this, the nice folks who brought us the “personal seat license” have come up with yet another way to line their own pockets. Yesterday, NFL owners voted to allow private equity investments in the league’s franchises. This excerpt from an NFL.com article on the decision provides some details:

A total of 10 percent of a team can be owned by private equity funds. The NFL has already vetted the big-name private equity funds that will be allowed to do transactions with the teams. 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.

This is truly a passive investment. There is no voting power attached to the transaction. The rest of the NFL’s strict ownership rules remain in place. The controlling owner must own 30 percent of the team. A franchise can have limited partners, but no team can have more than 25 owners total, including the controlling owner, other individuals and families, and now private equity funds.

According to Axios, NFL owners can only sell a stake in their clubs to a preapproved list of PE investors, which includes Arctos Partners, Ares Management, Sixth Street and a consortium made up of Blackstone, Carlyle, CVC Capital Partners, Dynasty Equity and Ludis, a platform founded by Hall of Famer Curtis Martin. Check out this document for more details on the NFL’s private equity investment policy.

The NFL prohibits corporate ownership and also doesn’t permit players, coaches or other employees who aren’t members of the owner’s family to own equity in a club, but the NFL.com article says the league is opening up to private equity in order to address a growing bajillionaire shortage that could threaten the upward spiral of franchise prices:

To keep sale prices going up — the 2023 sale of the Washington Commanders to Josh Harris and a collection of limited partners that includes Magic Johnson broke the $6 billion mark — the NFL needs a larger pool of potential owners to get into the bidding. The pool should expand now, because institutional investment will almost certainly be able to provide a larger chunk of the sale price as a limited partner than an individual or family can, with little to no interest in having a voice in team operations.

– John Jenkins