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Private equity firms are quietly preparing funds to invest exclusively in the US National Football League, according to people familiar with the matter, as a potential precondition for being allowed to hold stakes in teams that make up the world’s richest professional sports league.
A special committee of NFL owners has been reviewing ownership policy rules since last summer, with the goal of developing bylaws that would govern potential private equity stakes. One requirement being explored by owners is the stipulation that institutional investors set up NFL-specific funds, according to three people briefed on the matter.
At least two firms have begun exploring investors’ interest in an NFL fund, these people say. The gridiron football league is the only North American sports organisation that has not yet opened itself to institutional investment. Major League Baseball became the first top-tier US league to do so in 2019, and the NBA, NHL, and MLS soon followed suit, spurred by a need for liquidity during the coronavirus pandemic.
NFL owners are expected to approve institutional investment as soon as next month. They are still debating the structure of the funds and specific restrictions that would be placed on investors.
The NFL declined to comment.
The NFL remains the richest and most exclusive group of sport owners in the US, and league bylaws restrict the amount of debt held by each club as well as the percentage owned by controlling and minority investors, respectively.
The league’s 11-year, $110bn media rights deal and generous revenue-sharing agreements among its 32 teams have sent valuations soaring. Last year’s $6bn sale of the Washington Commanders to former Apollo Global Management co-founder Josh Harris set a record for most expensive sports team sale ever.
People familiar with the matter said the NFL is asking for investment groups to create American football-only funds that would preclude them from investing in sports teams from other leagues. The concept would mirror an existing fund set up by Blue Owl, the asset manager of Dyal HomeCourt Partners, to invest exclusively in National Basketball Association teams.
The NFL is also considering whether it will only allow minority common-equity investments, and not a more senior security that has a higher priority or receives a special coupon or dividend, said two people briefed on the matter. The percentage stake that a team can sell to outside investors is still under discussion, as are issues such as whether a fund can hold interests in multiple teams and guidelines for potential investment exits, said the people.
Harris’s acquisition of the Commanders opened many owners’ eyes to the amount of money involved in buying a team — the financier had syndicated about half of the equity from a broad group of investors, including billionaire healthcare executive Mitchell Rales, private capital executives Marc Lipschultz, Doug Ostrover and David Blitzer and former Google chief executive Eric Schmidt, among others.
US professional sports team valuations have risen dramatically in recent years, driven in part by rising media rights contracts. The phenomenon in turn has meant that both majority and minority shareholders in clubs have a shrinking pool of financially qualified candidates to whom to sell their stakes.
Many owners face succession challenges or want to raise new capital to finance improvements to their stadiums and surrounding real estate. It has led to an increased recognition that minority stake sales to passive private investors could create liquidity many owners may need as valuations continue to climb.