August 28, 2024

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Good morning. The NFL takes a historic step, officially allowing private equity firms to invest in teams. We break down what this means for the league, the impact on ownership structures, and why this move is a game-changer.

— Eric Fisher [[link removed]], David Rumsey [[link removed]], and Colin Salao [[link removed]]

Private Equity Enters NFL Ownership: League Approves Historic Investment [[link removed]]

Joe Camporeale-USA TODAY Sports

EAGAN, Minn. — The NFL on Tuesday approved the introduction of private equity into team ownership, at last bringing a lucrative source of capital into the largest and most dominant U.S. pro sports league.

The highly anticipated league vote [[link removed]], taken in a special meeting held here, will allow private equity investors up to 10% of an individual team’s equity—below other comparable leagues that allow up to 30%. An approved firm can hold stakes in up to six teams. The vote to approve was 31–1, with the Bengals standing as the lone dissent.

“This has been a long process,” said Joe Siclare, NFL EVP of finance, following the vote. “Our ownership policy is one of the key foundational elements of our business model. … We were very deliberate in this approach, very measured. This is a very important thing for the league, and we have the benefit of having a lot of interest in the investment community.”

The approval, however, is by no means a free-for-all. There are only eight approved firms that can participate, at least at the outset, and there is a provision in which the league can force a sale of an equity stake held by private equity if a firm violates league terms, including conduct clauses. Additionally no governance rights in teams will be included in any of the deals. The involved firms will also be required to hold their team stakes for a minimum of six years. There is also a requirement in which the NFL will take a percentage of private equity stake sales, known as “carry.” The level of that fee will vary, but in concept, the practice differs from private equity policies adopted by other major U.S. leagues.

“The private equity firms that participate in this involved absolutely understood and expected that the NFL would have a collective [profit] participation in this,” said league commissioner Roger Goodell. “We think it’s appropriate, the private equity firms thought it was appropriate, and the way to approach this.”

Heavy Hitters

The involved firms include:

Arctos Partners Ares Management Sixth Street Partners A consortium of Blackstone Partners, CVC Capital Partners, Carlyle Group, Dynasty Equity, and Ludis. The latter firm was founded and is led by Pro Football Hall of Famer Curtis Martin.

Many of these firms have already been highly active across many other parts of the sports industry. The approval is expected to set up several deals that are targeted to close before the end of the year.

“The NFL has taken a prudent, cautious approach, and by doing this in the way that they have, they’ve created a marketplace and will be in position to generate the very best deals,” George Pyne, Bruin Capital founder and CEO, tells Front Office Sports.

Arctos in particular touted its role as the only firm approved to invest in the five largest North American pro leagues.

“While there is much work ahead, today is a milestone reflecting Arctos’ commitment to the sports industry, our position as the market innovator and passion for being the partner of choice for leading sports ownership groups,” the firm said in a statement.

Urgent Need

The private equity funds will be used for a variety of purposes, including recapitalization of clubs, generating additional liquidity, and stadium projects. Fast-rising franchise values, increasingly out of reach for even the uber-wealthy, also added to the push to finally get this done after the league’s long deliberation.

“By having four investment groups, each of which bring several billion dollars to the table, there is enough capital to address anybody who wants to avail themselves of this opportunity in the next 18 months,” said Chiefs owner Clark Hunt. “That was one of our goals, to have enough capital and enough firms to create a bit of competition.”

NFL’s Chosen Private Equity Investors Already Have Big Sports Ties [[link removed]]

Tommy Gilligan-USA TODAY Sports

Eight U.S.-based private equity firms are set to benefit from the ever-growing valuation of NFL franchises after being exclusively approved to buy minority stakes in the league’s 32 clubs.

Most general sports fans may not recognize the names of the multibillion-dollar funds, but all except one have already made investments in other professional franchises, leagues, and other sports properties. The NFL has given the green light to Arctos Partners, Ares Management, and Sixth Street Partners, as well as a five-firm consortium of Blackstone Partners, Carlyle Group, CVC Capital Partners, Dynasty Equity, and Ludis, a firm founded by Pro Football Hall of Famer Curtis Martin.

Blackstone and Ludis are the only firms without a prior known sports franchise investment.

Arctos

Arctos, founded as a sports-specific firm in 2019, is known to have more than 20 investments in professional entities. The most notable as it relates to the NFL is its investment in 76ers and Devils parent company Harris Blitzer Sports & Entertainment, founded by Commanders owner Josh Harris (above) and his business partner David Blitzer, who holds a minority stake in Washington.

Here’s a full list of Arctos sports investments:

NBA: 76ers, Jazz, Kings, Warriors NHL: Devils, Lightning, Penguins, Utah HC, Wild MLB: Astros, Cubs, Dodgers, Giants, Padres, Red Sox Soccer: Liverpool, Paris Saint-Germain, Portland Timbers Motor sports: Aston Martin Formula One team, Joe Gibbs Racing

Arctos is also invested in the Premier Lacrosse League. Its stakes in the Red Sox, Liverpool, and Penguins come by way of an investment in those teams’ shared parent company, Fenway Sports Group. The Jazz and Utah HC are both owned by Ryan Smith.

Ares

Ares Management was founded in 1997, but in 2022 raised $3.7 billion for a fund focused on sports, media, and entertainment finance. Its sports investments are mostly in soccer, holding minority ownership stakes in Atlético de Madrid, Chelsea [[link removed]], Inter Miami, and Eagle Football Holdings—the parent company of Crystal Palace and Olympique Lyonnais.

Outside of soccer, Ares has stakes in the Padres and McLaren Racing.

Sixth Street

Sixth Street’s biggest NFL tie comes by way of the majority stake it acquired in Legends in 2021. The sports hospitality agency was founded in 2008 by Cowboys owner Jerry Jones and the Steinbrenner family who owns the New York Yankees.

Additionally, Sixth Street is the lead investor in NWSL club Bay FC, and it has minority stakes in Barcelona, Real Madrid, and the San Antonio Spurs.

Best of the Rest

Three of the five firms partnering on a consortium that will invest in NFL franchises already have sports franchise investments.

Carlyle has a stake in the Seattle Reign, and the firm’s founder, David Rubenstein, bought the Orioles [[link removed]] earlier this year. Carlyle was also reported to be in talks [[link removed]] with Alex Rodriguez and Marc Lore to help fund their majority acquisition of the Timberwolves, which remains unsettled.

CVC invested $150 million [[link removed]] into the WTA last year, and it has been linked [[link removed]] to a potential investment in the Big 12 Conference. The firm also has stakes in Indian Premier League franchise Gujarat Titans, as well as Spain’s LaLiga, France’s Ligue de Football Professionnel, and Premiership Rugby in the U.K.

Dynasty Equity was just founded in 2022, and it has only two investments, both in sports: Liverpool and TMRW Sports, the company founded by Tiger Woods and Rory McIlroy that is launching the TGL golf league next year.

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PIF, Other Sovereign Wealth Funds Now Have Entry Point Into NFL [[link removed]]

Kirby Lee-USA TODAY Sports

As the NFL follows in the footsteps of other major U.S. sports leagues by allowing private equity ownership in its franchises, it’s going against the grain by not allowing sovereign wealth funds in on the party—sort of.

The league has approved a select list of private equity funds [[link removed]] that can acquire up to 10% ownership of a team. And, for now at least, state-controlled entities like the Public Investment Fund of Saudi Arabia—the financial backer of LIV Golf—will not be allowed to directly pump cash into NFL clubs.

However, the rules will not prohibit the PIF and others from being investors in a private equity fund that purchases an ownership stake in a team. A sovereign wealth fund will be allowed to own up to 7.5% of an entity that owns a maximum of 10% of an NFL club.

“I don’t think we looked at sovereign wealth any different than any other institutional investor like pensions, endowments,” said NFL EVP Joe Siclare. “We’re just taking a measured approach. … We’re not differentiating among types of investors [in the funds]. But we do have that [7.5%] sublimit. If you sort of do the math, you get down to a pretty de minimis level of ownership for any individual investor.”

Across the Country

The NBA, NHL, MLB, and MLS have no bans at all on franchises selling stakes to sovereign wealth funds. But so far, there has been just one transaction involving a foreign fund.

Last year, the Qatar Investment Authority paid $200 million for a 5% stake in Monumental Sports & Entertainment, the parent company of the Capitals, Mystics, and Wizards. Monumental CEO Ted Leonsis predicted that his move [[link removed]], which brought sovereign wealth to the NBA, WNBA, and NHL, would start a trend. ​​“I believe other teams and other leagues will all be embracing pension funds, college endowments, university endowments, and sovereign wealth funds as investors, as a part of the tapestry of their investment base,” he said.

Beyond American Football

MLS commissioner Don Garber has previously said the league is open [[link removed]] to sovereign wealth funds investing in clubs, as is commonplace among top European teams. The PIF owns Newcastle United, and Qatar Sports Investments (a separate entity from the QIA mentioned above) owns Paris Saint-Germain, for example.

In MLS, though, New York City FC is owned by City Football Group, the multiclub portfolio that also owns Manchester City. CFG is owned by United Arab Emirates vice president Sheikh Mansour bin Zayed Al Nahyan, who is separately chairman of two UAE sovereign wealth funds.

FRONT OFFICE SPORTS TODAY How the NFL Private Equity Talks Went Down

FOS illustration

NFL owners voted to allow private equity money into the league, opening up a new funding source and altering the league’s ownership rules. Front Office Sports newsletter writer Eric Fisher provides a report from the meetings that will likely soon reshape NFL ownership groups.

Plus, Amazon pivots from baseball to the Kelce brothers in a $100 million deal. We also look at the present and future of the Commanders, one year into the Josh Harris era, as the team names its current stadium and eyes a new one.

Watch, listen, and subscribe on Apple [[link removed]], Spotify [[link removed]], and YouTube [[link removed]].

NIL WATCH Going for Two

Darren Yamashita-USA TODAY Sports

Front Office Sports keeps you updated on the latest NIL (name, image, and likeness) deals shaping college sports. Here’s who is cashing in now:

Athletes: Zion and Zachariah Branch Sport: Football School: USC Brand: Jordan Brand

The deal: Jordan Brand announced Monday that brothers Zachariah Branch (above) and Zion Branch are the company’s first NIL football athletes. Other college athletes sponsored by Jordan include women’s basketball players Kiki Rice from UCLA and Mikaylah Williams from LSU. Jordan Brand also sponsors 17 NFL players, including Dak Prescott and Jalen Hurts.

Zachariah, a wide receiver and return specialist, and the younger of the two, is entering his sophomore season with the Trojans after a strong freshman year tallying 1,162 total yards. Zion, a redshirt sophomore safety, played just nine games last season due to injury.

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Conversation Starters The Commanders signed an eight-year naming rights deal [[link removed]] with Northwest Federal Credit Union to name its home the Northwest Stadium. The US Open set an attendance record [[link removed]] Monday, the first day of the tournament, with a combined 74,641 fans during the day and night sessions. Hawk-Eye technology will not be used to determine first downs during NFL regular-season games this season despite the league using it throughout the offseason. Learn more [[link removed]]. Editors’ Picks Amazon Paying Travis Kelce Roughly NFL Salary for Podcast [[link removed]]by Alex Schiffer [[link removed]]The Kelce brothers got the nine-figure ask they wanted for their podcast. Texas Freshman Slams Headfirst Into NCAA Prize Money Rules at US Open [[link removed]]by Alex Schiffer [[link removed]]Maya Joint won $140K in Queens—if she can keep it. NFL Keeping First-Down Chains After Preseason Tech Test [[link removed]]by Margaret Fleming [[link removed]]First-down technology used in preseason won’t make it to Week 1. Question of the Day

Do you support the NFL’s decision to allow private equity firms to invest in team ownership?

Yes [[link removed]] No [[link removed]]

Tuesday’s result: 77% of respondents think a majority of NFL teams will have private equity in their ownership groups within five years.

Advertise [[link removed]] Awards [[link removed]] Learning [[link removed]] Video [[link removed]] Podcast [[link removed]] Written by David Rumsey [[link removed]], Eric Fisher [[link removed]], Colin Salao [[link removed]] Edited by Matthew Tabeek [[link removed]], Catherine Chen [[link removed]]

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