Every main U.S. sports leagues except the NFL have permitted institutional investors to take minority stakes in teams. However, it seems the NFL is softening its stance on this.
Before we go into this, lets talk about what it takes to own an NFL team.
What it takes to be an NFL team owner
Owning an NFL team is a good investment, as its value rarely goes down. For some owners, an NFL team is another asset in a huge portfolio, and for other owners, it’s a family affair, held for generations.
An NFL franchise only comes on the market about every four years, and when they do, only the filthy rich can buy one.
To buy an NFL team there are several requirements the prospective owner must meet. These include the following:
- Any group (note that the NFL forbids ownership groups of over 24 people) looking to buy an NFL team must be led by a single individual who must own a minimum of 30% of the team.
- The league now allows up to $1 billion in debt for a team acquisition, but a new owner must meet specific terms and conditions in order to be offered a higher ceiling.
- The league also requires future owners to have high liquidity in their assets and positive cash flow.
- A succession plan is needed in order to purchase an NFL team and is generally updated on an annual basis. Also, 24 of the 32 NFL owners must approve the acquisition transaction.
- For teams that have been owned by the same individual for a minimum of 10 years, the threshold in the team that a controlling owner imposes is 1%, and families must still own 30% of equity.
Restrictions to owning an NFL team
The NFL restricts corporations, governments, religious groups, nonprofit organizations, or private institutions, such as private equity firms, from owning a team. One team, the Green Bay Packers, is exempt from this restriction, as it is under a grandfather clause and is owned by shareholders.
The NFL also has restricted cross-ownership of a majority interest in teams in other major American sports.
NFL’s stance on Private Equity ownership
Private equity’s presence in sports team ownership groups has been a constant topic over the last many years. Leagues such as the NBA and MLB have all altered their bylaws to allow institutional investors to purchase minority investment stakes in clubs in a feat to bring liquidity to franchise owners and keep club valuations soaring.
The NFL has yet to go down the same path, however, many well-connected NFL insiders believe the league might decide to change its stance on private equity investments in clubs in the future, as it has been considering it since at least the mid-2000s.
It was said that if there are tensions on valuation arising from limited pools of available capital, leagues are likely to consider institutional capital, so the NFL seems likely to embrace private equity at some point, but the conclusion on this is yet to be seen.
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