A special committee of NFL owners has spent the past nine months investigating potential changes to league rules for team ownership, an attempt to grapple with a shrinking pool of potential team buyers amid soaring team valuations.
One of the possibilities on the table: allowing institutional wealth, including private equity, to invest in NFL franchises, which the league has never permitted.
Owners will likely discuss -- and potentially vote on -- the committee's research and findings at league meetings in Nashville this week.
"They've been very deliberate in the way they've evaluated different alternatives," NFL commissioner Roger Goodell said in March. "We're making progress. I think there'll be some changes, maybe as early as May, probably closer to October."
A move to allow private equity firms or institutional wealth to invest as limited partners could free up cash for owners to pursue projects such as stadium renovations and would represent a large shift in how the league has historically operated, with the majority of franchises traditionally run as family businesses with single-family ownership.
As the league continues to explore changes, what could this mean for teams? For private equity funds? If this happens, how could this all work?
What is private equity?
Private equity firms pool money from investors into a fund that then acquires stakes, or outright purchases, of public or private companies, real estate and other assets, with the goal of eventually selling the investment at a later date for profit.
These types of firms back or own companies worldwide. In recent years, sports-specific groups such as Arctos Partners, RedBird Capital and Blue Owl's Dyal HomeCourt Partners have emerged to invest in teams and leagues.
In 2010, private equity companies struck 23 deals worldwide worth close to $1.9 billion in the sports franchise, esports and sports gambling industry, according to Preqin, which tracks private equity data.
Since 2015, there have been at least 150 such deals per year with at least $1 billion spent annually, including a peak of 226 deals in 2021, according to Preqin. In 2022, private equity firms spent close to $86 billion in the sports industry, including RedBird's $1.3 billion purchase of Serie A soccer team AC Milan from Elliott Management. As of April 23, there have been 31 deals worth $20.1 billion this year, according to Preqin.
Why would the NFL want private equity investments?
Private equity firms could inject millions of dollars into teams to create liquidity for majority owners while also offering the league a bigger pool of potential minority owners.
Currently, NFL rules prohibit institutional ownership -- including sovereign wealth funds, pension funds and private equity firms -- in teams and stipulate a team's primary owner must have at least a 30% stake in the franchise unless granted an exemption. A franchise can take on limited partners, but no more than 25, including the majority owner, are allowed to buy in. A new buyer can take on up to $1.2 billion in debt to acquire a team (existing owners have a $700 million debt limit). The Green Bay Packers are an exception as they are publicly owned by shareholders in the franchise.
Meanwhile, team valuations are escalating. The Denver Broncos, for example, sold for $4.65 billion in 2022, and the Washington Commanders were purchased for $6.05 billion a year later.
Both of those clubs were purchased by a majority owner with limited partners -- the Walton-Penner family and an investor group, including former U.S. Secretary of State Condoleezza Rice and F1 star Lewis Hamilton in Denver, and Apollo Global Management co-founder Josh Harris alongside limited partners, including Magic Johnson and former Google CEO Eric Schmidt in Washington.
While there are 813 billionaires in the United States and 2,781 worldwide, according to Forbes, there's no guarantee they're interested in investing in sports or the NFL. So with valuations rising, the pool of individuals or families able to buy an entire team is shrinking, increasing the need for limited partners to help pay for a franchise.
However, limited partners typically have little to no decision-making power in NFL teams, which might not be appetizing to some of those wealthy enough to invest in a franchise, said Ted Leonsis, the owner of the Washington Capitals, Wizards and Mystics.
"These people are really rich and successful. They're used to being the center of the universe. And now you go, I need a quarter of a billion dollars. Fantastic, what do I get? Nothing," Leonsis told ESPN. "Do you have any control? Any role? No, you're passive investors. You'll get your name on a website somewhere or something and you get to tell people I own a piece of an NFL team."
Currently, the NFL only allows individual or family limited partners. While being a minority owner could offer a path toward future majority ownership -- Harris, Cleveland Browns owner Jimmy Haslam and Carolina Panthers owner David Tepper were all minority stakeholders in the Pittsburgh Steelers at one point -- there is no guarantee an individual will be willing to write a $200 million or $300 million check with little say over the investment.
Enter institutional wealth, which could be more amenable to passive investment. Arctos, for example, advertises on the company's website they are "long-horizon investors with no aspirations for control ownership."
There are other reasons for the NFL to consider private equity. For example, there is variance of wealth among NFL owners. Some owners have a vast amount of their fortune tied up in their teams and therefore less access to nonteam-related cash, so private equity firms could provide those owners with liquidity.
For other majority owners, who have multiple sports franchises or businesses and whose wealth comes from sources outside of the team, allowing private equity to purchase minority shares in a team can free up cash for stadium or real estate deals, or other personal, business or philanthropic purposes.
"These people are not just the owners of sports teams," said Brad Humphreys, a sports economist and professor of economics at West Virginia University. "Look at where most of these guys made their money. It's not in sports. It's somewhere else.
"You'd probably love to have $100 [million], $200 [million], $300 million cash infusion so you can go and invest that in some other of your very profitable business ventures where you made your money before you bought a team."
Taking on a limited partner isn't free cash for owners, however.
"The pitfall is you are giving up some of your future profits in order to get a big infusion of cash right now," Humphreys said. "That's a trade-off that these teams have to make."
Why would private equity want to invest in the NFL?
Money. The goal of a private equity firm is to generate returns for its investors. And the league, which has existed for over a century, has shown no signs of financially slowing down.
"They're immensely profitable," Humphreys said. "The profitable companies, the stock price goes up, right? And everybody makes capital gain. You think of that analogy for minority ownership in a pro sports team.
"NFL teams are profit-making machines, and private equity would want to both share in the short-term year-to-year profits and also the long-term capital gain."
NFL valuations -- as well as those in other leagues -- are augmented by media rights deals. Unlike most other leagues, where teams have contracts with local and regional networks, the media rights for all NFL regular and postseason games are national and have grown each time a deal takes place. For example, in 2021, the NFL signed 11-year deals with ESPN, Fox, CBS, Amazon and NBC worth at least a reported $110 billion, according to The New York Times. The previous deals the NFL signed in 2011 with ESPN, NBC, Fox and CBS, were nine-year deals for a combined $42.2 billion, according to Forbes and the Times.
While other American sports have popularity and interest, none are as big in the U.S. as the NFL. Of the top 100 telecasts tracked by Nielsen in the U.S. last year, the top 42 were NFL games or NFL-related programming. College football had three programs in the top 100 (Ohio State-Michigan, the SEC championship game and the Georgia-TCU national title game), and men's college basketball had one, its national championship game. The highest-rated non-NFL broadcasts were the Macy's Thanksgiving Day Parade, the Oscars and Ohio State-Michigan.
Plus, there's the prestige factor. Bill Yates, a senior associate at the Sports Advisory Group, which advises investors and teams during the purchase and sale of sports teams, said a stake in an NFL team would be "a jewel in the crown" for some investors.
What are the possible structures of institutional wealth investments with the NFL?
This is the main unanswered question, as the special committee has yet to publicly propose concrete parameters of what an NFL private equity plan might look like. At the league meetings in March, Kansas City Chiefs owner Clark Hunt, one of the committee members, said the group shared its research with other league owners and highlighted possibilities of what could come next, but he declined to share specifics with ESPN at the time.
Guidelines from other leagues could inform the NFL's private equity structure. For example, the NBA and NHL only allow private equity and sovereign wealth funds to buy passively into organizations -- meaning the funds don't have any real decision-making power. It remains unclear whether the NFL would allow investments from pensions or sovereign wealth funds.
According to an NFL source with understanding of the operations of the league and how team finances work, the committee is addressing other potential concerns, including whether cross-ownership -- meaning when a firm takes limited partnership stakes in multiple teams -- would be allowed, whether a fund investing in a team also has stakes in gambling entities, and which investors back the private equity funds. The league could remedy some of those concerns with a vetting process. The league might also seek to determine whether current players are investors in a private equity fund seeking ownership, because current NFL rules stipulate that players cannot own equity stakes in franchises.
The league will also need to decide whether private equity investors would be passive partners.
Exit strategies are another question. Opportunities to purchase an NFL team or a stake in a team don't arise very often. But private equity companies need to realize returns for their investors and might look to sell their stake faster than the league is accustomed to. Owners would have to decide whether they're comfortable with that pace.
One of the major cashouts by a private equity firm in American sports occurred in the NBA. Dyal HomeCourt Partners bought a minority stake in the Phoenix Suns in 2021 for a reported $1.5 billion. When Mat Ishbia bought a controlling stake in the Suns in 2023 for $4 billion, Sportico reported Dyal HomeCourt sold some of its stake for a reported 158% markup from its initial investment.
"If you are managing one of these funds, sports has traditionally been an asset play," Yates said. "More like a buy-and-hold stock, in that you are typically not getting huge dividends, but you are increasing the asset value so that if and when the time comes that you are prepared to sell your asset, you are obviously making a lot of money."
Figuring out the parameters of private equity investment -- if owners even approve it -- will take time.
How do private equity investments operate in other leagues?
The NBA, NHL, MLB, MLS, WNBA and NWSL, as well as international soccer clubs, allow some form of private equity investment in teams.
The NBA, MLS, NWSL, NHL and MLB all allow for up to 30% of their franchises to be owned by private equity firms or, in some cases, sovereign wealth funds. This doesn't mean one fund can purchase 30% of a team. Some leagues cap how much a single fund can invest. MLS and the NBA, NHL and NWSL allow for up to 20% ownership by one fund. MLB has a 15% cap.
In the NWSL, subject to board approval, an institutional investor can hold a majority stake in a franchise provided the firm isn't investing in other clubs. Sixth Street Partners is the majority owner of Bay FC, for example, with Sixth Street CEO Alan Waxman as a co-chair of the franchise along with former U.S. women's national team player Aly Wagner.
Other leagues allow cross-ownership. MLB, for example, has no cap on how many teams a private equity fund can invest in. The NBA and NHL have a five-team cap, MLS caps at four and the NWSL at three.
The NBA's five-team limit applies to most funds, but Dyal HomeCourt Partners has a partnership with the league allowing the firm to invest in an unlimited number of teams. Dyal bought into the Suns, Atlanta Hawks and Sacramento Kings. Arctos has shares in franchises across sports, including the Sacramento Kings, Golden State Warriors, San Francisco Giants and Real Salt Lake.
In the NWSL, investing funds must have raised at least $100 million overall and must hold their NWSL investment for a minimum of five years with a minimum buy-in of 5% of the franchise. If a fund wants to divest from a NWSL team, the transaction must be approved by the majority owner and the league, and the majority owner receives the first right of purchase. The NWSL can also force a fund to divest if the fund or any of the investors in the fund violate NWSL rules.
In MLB, which was one of the first major American sports to allow private equity investments, a firm must hold onto its stake in a team for at least five years if it owns pieces of multiple teams. There is no minimum hold in MLB if a firm only has a stake in one team, which was a parameter established over a lengthy process to create and implement MLB's private wealth investment rules.
The NHL requires private equity and institutional wealth investments to be passive. There is a $20 million minimum buy-in for minority stakes, and there is a minimum five-year hold period after an investment in a club. The NHL does allow pension and sovereign wealth funds to invest in their teams, but potential deals are evaluated case-by-case. Active players are not permitted to invest in franchises, which means they could not be part of any funds buying in.
Leonsis said it took a year for the NBA to write its rules about sovereign wealth and pension fund investment, which he helped devise. He then used the rules and created an example with his own franchises. The Qatar Investment Authority holds 5% in equity of Leonsis' Monumental Sports & Entertainment, which owns the Wizards, Capitals and Mystics. Per league rules, the QIA must be a passive investor.
"What is it that we want to achieve by bringing in these next-generation new long-term partners?" Leonsis said. "And the first thing was, we don't want them to think that they're partners and owners. We want them to be silent partner investors.
"I think that's very consistent with their thinking, too."
What's next?
NFL owners congregate in Nashville, Tennessee, for another round of league meetings starting Monday.
The five-member committee of the Atlanta Falcons' Arthur Blank, the New England Patriots' Robert Kraft, Denver Broncos CEO Greg Penner, Haslam and Hunt led a presentation to other NFL owners at the league's annual meeting in March. Cowboys COO Stephen Jones told ESPN at the March league meetings his team had done its own private equity research and "want to hear it all out."
At the March league meetings, the committee presented ideas to the full ownership, and there was what Goodell described as a "lengthy discussion," but nothing was decided or voted upon.
"I don't want to put a timeline on it," Hunt told ESPN in March. "But I would expect in the near future we would make a recommendation that could possibly be voted on."
Hunt said some owners have "changed their thinking on it and are more open-minded" to private equity, amid the committee's individual and group discussions with owners.
At the conclusion of the March meetings, Goodell said the committee "came very close to sort of outlining the approach" the NFL might implement. Even if a vote happens this month and is approved by at least 24 owners, it doesn't necessarily mean firms would immediately be able to invest in teams. Details would still need to be finalized, which would take time -- as would vetting processes of firms or funds looking to invest.
If the NFL allows institutional investing, for some clubs it might mean nothing at all. Whether to take money will be at the discretion of each owner.