Will Private Equity Get a Piece of Pro Football?

Private equity might make its next investment touchdowns in pro football, as owners of National Football League teams, meeting recently in Phoenix, talked informally about accepting PE and institutional investor money, according to Bloomberg.

While the issue was not on the group’s formal agenda this year, team owners and executives told the news agency they hope to bring up the idea at the 2024 meeting. The owners pushing for the change reportedly would seek to permit minority positions for PE and allocators. The NFL requires that the lead investor for each team have at least a 30% equity piece. Owners cream off 52% of the earnings, with the rest going to the players.

Most likely, asset allocators would not opt for direct ownership of teams. For institutions, if the past is any guide, their preferred play is using PE firm partnerships to get into specialty investments. Among allocators, PE is popular: It ranks as the third largest allocation for public pension funds, at 13%, after stocks and bonds.

Right now, team ownership is concentrated among billionaires, sometimes with 100% control, such as hedge fund magnate David Tepper, sole owner of the Carolina Panthers. But Rob Walton, a member of the mega-rich family of Walmart fame, who controls the Denver Broncos, has other partners, such as Mellody Hobson, co-CEO of Ariel Investments. (The breakdown of the partners’ portions of the Broncos is undisclosed.)

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Team valuations are steadily rising, so owning one looks like a good idea. When Walton acquired the Broncos last year, for $4.65 billion, that represented a premium over the worth Forbes calculated for it in 2021. Amazon founder Jeff Bezos and Josh Harris, co-founder of Apollo Global Management, are among those interested in acquiring the Washington Commanders—whose current Forbes value of $5.6 billion is seven times what current owner Dan Snyder paid for it in 1999. The Washington Post just reported that Bezos is dropping out of the bidding, although he has not confirmed that.

The NFL could be angling to follow basketball’s example: In 2020, the National Basketball Association agreed to allow private equity firms to hold passive ownership stakes. In 2021, Dyal Capital Partners bought a 6% stake in the Atlanta Hawks, and a PE fund focused just on sports, Arctos Sports Partners, took a 5% position in the Golden State Warriors.

If that happens in football, the buyout funds would be tapping into the most lucrative sports venture on earth. The NFL garnered an estimated $10.8 billion in revenue last year, per Sports Brief data, and expects that to rise to $19 billion in 2023, according to Sportico, on the back of lucrative new broadcast agreements. Football’s haul bests that of Major League Baseball, in second place at $10 billion, and the NBA, third at $8 billion.

The 32-team football league rakes in money from broadcast deals, tickets, merchandising and sponsorships.