NFL to Allow Investments from Private Equity Funds
NFL to Allow Investments from Private Equity Funds
Cat Anderson
Staff Writer
https://www.gettyimages.com/detail/news-photo/inglewood-ca-a-view-of-the-main-stage-featuring-a-360-news-photo/1235563655?adppopup=trueThe National Football League (NFL) owners voted to allow private equity funds to buy limited stakes in teams on August 27, according to the NFL. Fans will not see immediate changes in the way teams are run, but the change is likely to affect existing NFL owners and future sales of teams, the NFL writes. Resolution JC-7, passed with a vote of 31-1, will allow private equity funds to acquire up to 10 percent of any team for “passive ownership.” Each fund may buy stakes in no more than six teams, ESPN reports.
The U.S. Securities and Exchange Commission defines a private equity fund as a “pooled investment vehicle.” In these funds, investors pool their money together, and an adviser uses that pool to make investments on behalf of the fund, The Washington Post says. Private equity firms generally focus on long-term investments.
The NFL provisionally approved eight individual equity firms, with each one potentially eligible for investment, pending an agreement tailored to the transaction. Sovereign wealth funds, such as the Qatar Investment Authority or the Norwegian Government Investment Firm, will not be allowed to invest in teams directly, but they can invest in approved funds, ESPN continues. No individual investor, including a sovereign wealth fund, can own more than 7.5 percent of any fund that is investing directly in a team.
The NFL is the last major American sports league to allow for this type of investment. Private equity funds will not have an active role in football decisions–they will not have voting power, nor will they be able to change the way franchises are run, CNBC reports. Instead, funds are expected to go towards stadium repairs and other necessary infrastructure.
Traditionally, NFL franchises have been owned by individuals or families. While this model of ownership has been generally very successful, it became more difficult for individuals to “write the check” to become principal owners of teams as franchise values increased, the Washington Post reports. This change is intended to help owners fund their teams and related expenses but is not expected to change the way decisions are made, or franchises are run, CNBC says.
NFL Commissioner Roger Goodell said that the change gives owners access to capital that has been of interest for a long time. He also noted that with the 10 percent investment cap, equity firms will have a significantly smaller portion of NFL teams than in other major leagues, SportsPro reports. In other sports leagues, including the NBA, MLB, NHL, and MLS, private equity firms can own up to 30 percent of teams, while regulations about how many teams each firm can invest in varies across teams, according to SportsPro.
Some experts predict that investing in the NFL will become very popular for firms, as investments in these teams are often seen as “recession-proof,” Bloomberg reports. While some experts argue that the NBA will continue to be a more popular target of investment, others believe that it will shift to the NFL, primarily because the league’s franchises are worth more money, Bloomberg says.
Although there is speculation throughout the league, it remains unclear which teams will receive funding from private equity sponsors. Additionally, as with any other ownership change in the NFL, any transaction resulting in a firm gaining partial ownership would need to be ratified by at least 24 of the league’s 32 owners, the Washington Post reports.
Alongside the 10 percent limit on investments by private funds, the NFL has imposed additional rules on its new investors. While NFL team owners are allowed to invest in these private equity funds, such investments cannot exceed a 3 percent ownership stake if the fund acquires a portion of another team, says the Washington Post. Furthermore, Bloomberg reports that each fund is required to invest at least 3 percent every time for a minimum of six years.
While the NFL and its owners view this as a positive and necessary change, they do not view it as a “happy” one.
Image courtesy of Getty Images
