The National Football League (NFL) approved new ownership rules last August, allowing private equity funds to buy minority stakes in NFL franchises. The newly proposed NFL estate ownership rules are titled ‘2024 Resolution JC-7.’ It is designed to expand ownership to incorporate the connected investment groups. Under this Private Equity Policy, investors can purchase up to 10% of an NFL team at a minimum equity stake of 3%. It states that funds, as a passive owner, must hold the investment for at least six years, with no voting rights or decision-making power.
Although Funds may invest in multiple teams, the policy limits the investment to only six franchises. According to this policy, Funds must have at least $2 billion in committed capital. However, they are allowed to invest only up to 20% of their capital into one team.
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Things to Know About the NFL Ownership Policy
Resulting from several years’ discussion between NFL owners and the Special Committee on Ownership Policy in 2023, by Roger Goodell, NFL Commissioner, this policy further allows team owners and their immediate families to invest up to 3% in approved funds, which current NFL players may not be allowed to do.
The NFL Finance Committee chose four private equity firms to invest in NFL teams, effective from August 2024, in correlation with the policy approval. The Policy provisionally approved investors, including Ares Management, Sixth Street, Arctos Partners, LP, and a consortium comprising Carlyle, Blackstone, Dynasty Equity, Ludis, and CVC, led by former NFL star player Curtis Martin.
Through the policy, the NFL selected each firm based on its commitment to investment and selection of its hold times. Considering the fact that the list of firms could expand in the future, the approval process for private equity purchasers will be kept consistent with other changes in NFL ownership, demanding approval by a three-fourths majority of team votes. Since the adoption of the policy, Arctos Partners and Ares Management joined the Miami Dolphins and Buffalo Bills ownership groups, the first two private equity investments. As Funds have been putting money in other American sports leagues since 2019, the NFL is considered a late adopter of private equity ownership.
It has been observed that private equity firms are more driven towards professional sports investments due to the steady growth in team valuations, the unprecedented popularity of sports worldwide, and topped out media rights deals. Studies have shown that American sports teams have a significantly lower correlation value than stocks, commodities, and mortgages. This low correlation value is based on the irrationality of the American sports market.
However, despite this inconsistency in on-field performance, sports fans are highly loyal to their favorite teams. The steady growth in team valuations and many professionals conclude that sports teams have outperformed the S&P 500 for the last 20 years. Unlike other professional sports leagues, each NFL team yields higher multiples and proves to be profitable when sold. Its profitability is expected to soar in the coming decade, all due to the $111 billion media rights deal.
As a response, the policy has opened the door of ownership transactions to a new pool of buyers, increasing the demand and returns on investment at sale. This latest flow of liquid capital positions NFL teams to strategically address the operational and capital expenditures needed to build an enduring legacy.
The Latest Controversy About the Selling of Seahawks Under this Policy
Just before Super Bowl LX. ESPN reported that the Seahawks team could be put up for sale after the season, which raised questions regarding the franchise’s ownership future. This claim instantly reverberated across the NFL. Considering the team’s estimated valuation of $7 to $8 billion, we can anticipate the large-scale implications of the claim. After the declaration of this news, the Paul G. Allen Estate denied it. Although the firm’s will mandates the sale of its major assets, including the Seahawks, the firm insisted that the process is not forthcoming.
The report clarified that the Seahawks would be put up for sale in the market shortly after Super Bowl LX. The Wall Street Journal later agreed to that claim, stating that the sales process can only begin once the season ends. However, a spokesperson from the Allen Estate stated opposition to that, “We don’t comment on rumors or speculation, and the team is not for sale. We’ve already said that it will change at some point, per Paul’s wishes, but I have no news to share. Our focus right now is winning the Super Bowl and completing the sale of (Allen’s NBA) Portland Trail Blazers in the coming months.”
