The National Football League (NFL) is considering allowing minority private equity ownership for its teams. Commissioner Roger Goodell stated in an exclusive CNBC interview that the league is open to the idea of private equity firms owning up to 10% of a team. Goodell emphasized the need for the NFL to adapt to the changing landscape of sports and ensure that its policies reflect these changes.
While other major U.S. sports leagues such as the NBA, MLB, NHL, and MLS allow private equity ownership of up to 30%, the NFL has been hesitant to accept money from institutional funds. The league has preferred limited partners who are individuals or families. However, with the rising valuations of franchises due to lucrative media deals, fewer people can afford team ownership.
According to Josh Harris, co-founder of private equity firm Apollo Global Management, it has become increasingly challenging for anyone other than the wealthiest individuals to write a $5 billion equity check. Harris led a group that purchased the Washington Commanders for $6.05 billion in 2023, marking the highest amount ever spent on a U.S. professional sports franchise. To raise the necessary capital, Harris enlisted the help of prominent figures such as Magic Johnson, Eric Schmidt, and David Blitzer.
The difficulty in raising such capital has sparked discussions about allowing private equity and institutional investors into the NFL. Private equity firms could provide the necessary financial backing and expertise to support team ownership. However, minority stakes typically come with little decision-making power, which could deter potential investors who are accustomed to being in control.
The National Women’s Soccer League stands out among U.S. professional sports leagues as it allows private equity firms to take majority control of franchise teams. This deviation from the norm in other leagues is due to the unique incentives that private equity firms bring, including investment targets and exit thresholds. These incentives may alter the motivations for ownership, which could make larger sports leagues uncomfortable.
While private equity ownership could help address the affordability issue of owning an NFL team, it may also limit the number of individuals interested in taking smaller stakes. Ted Leonsis, the owner of the Washington Capitals, Wizards, and Mystics, expressed that potential investors may not be satisfied with passive ownership and little decision-making power.
Private equity firms, on the other hand, are well-suited for minority ownership as they are tasked with finding investment vehicles to generate returns on their assets under management. This alignment of interests may make private equity ownership a more viable option.
In conclusion, the NFL is considering allowing minority private equity ownership for its teams. While the league has been resistant to institutional funds in the past, the rising valuations of franchises and the difficulty in finding individual owners have prompted discussions on this matter. Private equity ownership could provide the necessary capital and expertise, but it may also come with limited decision-making power for investors. The NFL hopes to finalize its new ownership policies by the end of the year, starting with a 10% cap that could potentially be increased in the future.
