🏈 The NFL's Private Equity Push

Week 1 is already in the rearview…and the NFL continues to find ways to bring home the bacon.

Ladies and gentlemen, we are back! Anyone miss us? No? Wonderful, let’s move on to another topic you might be a tad more excited to have back: NFL Football! We’re m’fing back baby! Week 1 just wrapped up, and we still don’t know how to act properly. But while we were away getting some last minute sun on the beach before the leaves turn orange for the first and last time of 2024, let’s go over what NFL Commissioner Roger Goodell and his team has been considering these last few months…Private Equity (P/E) has officially entered the NFL Group Chat 😲.

A little over a week ago, NFL owners gathered in Minnesota and voted 31–1 to allow private equity firms to buy ownership stakes in teams. What does this mean for the NFL? What does it mean for current ownership? Will the outlook of the game change moving forward?

Let’s get after it…

What does it mean that P/E firms can buy ownership stakes in teams?

• Maybe we should back up just a tad…

  • About a month ago, an NFL committee that included Commissioner Goodell, Chiefs owner Clark Hunt, Browns owner Jimmy Haslam, Patriots owner Robert Kraft, Falcons owner Arthur Blank, and Broncos owner Greg Penner met with some of the world’s largest P/E firms to hear their pitch on why the NFL should allow P/E investment.

  • Present in the meeting were: Blackstone, Carlyle, and CVC who collectively have ~$2T in assets under management.

• What’s crazy about this story, is the fact that the NFL showed up a little late to the party when it comes to accepting P/E investment.

  • Other U.S. sports leagues (ex. NBA, MLB, NHL, and MLS) allow each team to sell up to 30% of its equity to P/E investors.

  • No P/E firm can own more than 15% to 20% of an individual team, but rules allow them to invest in other teams, too.

  • Fun Fact: NWSL is the only league where P/E firms can buy a majority stake in a team.

• Overall, it’s no secret that sports franchise valuations (especially NFL valuations) have skyrocketed within the last few years. So much so, that owners, majority and minority, are having a hard time liquidating their “team ownership assets”.

  • Why is that? Well, few people want to write a check for hundreds of millions of dollars only to realize they have no say in team-related decisions.

What will this new structure look like for existing owners and their teams?

• According to sources, P/E investors in NFL teams won’t have any voting power, influence, or say in the team’s operations.

  • That means they won’t be the faces of the teams and won’t have governance rights.

  • Each team will be limited to selling no more than a 10% stake to P/E.

  • Additionally, no individual or group can own more than 7.5% of any league-approved fund (the NFL approved only eight), which means no individual from this new P/E group will own more than 0.75% of a team.

• The NFL is requiring P/E investors to stay invested for at least 6 years; that means they can’t buy and sell like Jordan Belfort!

So, what’s in it for the P/E firms?

• Besides the fact that P/E firms LOVE to invest and diversify their portfolios as much as possible??

• NFL team valuations have risen steadily every year, and the latest Forbes valuations are up an average of 11% from just a year ago.

  • All 32 teams are profitable and owning a piece of an NFL team is essentially a sure-fire bet to showing the world you’re wealthy.

    The NFL is requiring private equity investors to stay invested for at least six years; that means they can’t stage the kind of activist raid that PE is known for. And no matter which team a firm buys into, that firm will be able to sell its stake for a profit as soon as it’s permitted.

• Also, if you’re a P/E firm…why wouldn’t you be super pumped to have field passes, fully stocked “all you can eat/drink” suites for home games, your name on the team website, and the ability to meet and greet the players anytime you’d like?

But the main reason why this ruling is so important…

• This could end up being up to a 10% capital injection per team that helps the owners in terms of liquidation, franchise valuations, and ultimately helping continue grow the league.

• With the average NFL franchise now worth ~$6B, a 15% growth from 2023, another 10% capital injection would be like…

Enjoying this really awesome newsletter? Share with your friends!

Quick Hitters

• 🏀 College sports is an ever-changing landscape. So much so, it’s getting to be hard to keep up! When it comes to college basketball, the first NIL-driven in-season tournament is officially set to be played Thanksgiving week in Las Vegas and will broadcast nationally on TNT Sports. It will be called the Players Era Festival and it will take place at the MGM Grand Garden Arena on Nov. 26, 27, and 30. Eight men’s basketball programs will compete in two separate round-robin tournaments across the three days. Alabama, Houston, Notre Dame, and Rutgers will comprise the Impact Tournament, while Creighton, Oregon, San Diego State, and Texas A&M will make up the Power Tournament. All 12 games will have a March Madness feel, airing on NCAA tournament channels TNT, TBS, or truTV, and also streaming on Max.

  • What’s interesting about this tournament is the fact that, teams won’t be competing for prize money, but will each have the opportunity for its athletes to engage in more than $1M in NIL opportunities outside of competition (i.e. autograph sessions and community and charity service).

  • After the tournaments, another $1M in total NIL opportunities will be available to players.

  • The first year of the tournament has $9M in total NIL guarantees, with more than $50M expected to be shelled out over the first three years of the event. In 2025, tournament plans to expand to 18 teams and add international-style group play and championship matchups.

    • Baylor, Iowa State, Gonzaga, Michigan, St. John’s, and Saint Joseph’s are also committed for 2025.