NFL ownership rule changes may help private equity run up the score

Private equity, which is pursuing sports deals with gusto, may soon have a new source of opportunity.

Last month, Sports Business Journal reported that the National Football League is exploring changes in its ownership rules, potentially opening the door to institutional capital.

NFL commissioner Roger Goodell appointed five owners to a committee charged with evaluating its policies, the report said. The group is expected to prepare any recommendations for all team owners to consider at a March 2024 annual meeting.

The news is big for a number of reasons. The sports industry has traditionally been the preserve of super-rich families and individuals. Only recently have some owners begun to find reasons to lift bans on institutional capital – such as access to liquidity and growth capital, not to mention brand-building know-how.

If the NFL throws out the welcome mat to private equity, it would be following in the footsteps of other Northern American leagues. Over 2019-2021, Major League Baseball, Major League Soccer, the National Basketball Association and the National Hockey League all adjusted their rules to allow select funds to acquire minority stakes in teams.

The news is also big because the NFL is such a prized asset. Football games are marquee sports events, with the Super Bowl holding the title of most-viewed championship game in the US. The league has been savvy about monetizing content, helping to push the average club’s value to a record $5.1 billion – led by the Dallas Cowboys – according to Forbes (2023).

It is premium values that have driven unheard-of private equity investing since 2021. The torrent of money owes much to deals in Europe’s soccer leagues, where control acquisitions are common. An example is last year’s reported $3.1 billion purchase of Chelsea FC led by Eldridge’s Todd Boehly and Clearlake Capital.

In addition, league rule changes in the US have sparked a run of minority investments by shops like Arctos Partners and Blue Owl’s Dyal HomeCourt Partners. Along with team and league-focused deals, private equity is also buying into franchise assets (for example, media rights) and multi-asset holding companies.

Though nascent, sports private equity has emerged as a distinct niche strategy. Pioneers in the space, such as RedBird Capital Partners, have been joined of late by funds both big and small. Buyouts last year counted 20 to 30 active investors – a range that has almost certainly grown.

This week, Buyouts reported on the newest. Four former executives of RedBird in partnership with the firm unveiled Otro Capital, an investor in sports, media, gaming and entertainment, targeting under-monetized and under-valued assets. It is expected to soon roll out a debut fund, sources said.

While the NFL today prohibits institutional capital, private equity has from time to time made its presence felt indirectly.

In the summer, the Washington Commanders was acquired for a reported $6.05 billion – one of the priciest club purchases in sports industry history. The buyer was a group led by Harris Blitzer Sports & Entertainment’s Josh Harris, co-founder of Apollo, and included Blackstone executive David Blitzer.