When you think of NFL owners, you think of multi-billionaires–individuals like Jerry Jones who seem to have an endless supply of cash and who like the idea of dabbling in sports and, they hope, hoisting a Super Bowl trophy one day. With the exception of the Green Bay Packers franchise, which is owned by a company that has individual shareholders, all NFL teams are owned by a principal individual who has to have at least a 30 percent ownership interest in the team. And while the NFL permits some limited partners to participate in ownership, those slots are limited to individuals or family groups.
That may be about to change, however–due to a combination of skyrocketing valuation of NFL teams and a shrinking number of people who are interested in paying huge sums for teams. As a result, the NFL is now considering whether it should allow private equity firms to invest as limited partners in NFL teams. Private equity firms are a familiar feature of the American economy–with lots of cash at their disposal thanks to the pooled resources of individual investors, they typically look for bargains and investment opportunities that will provide quick returns for their investors.
Investing in an NFL team might be very attractive to a private equity fund, because NFL franchises–even those that aren’t successful on the field–tend to be extremely profitable, thanks to TV revenues, merchandising deals, and other sources of revenue. An investment in an NFL team therefore might help the private equity firm achieve the kinds of returns that investors want. And if the franchise is ultimately sold at one of the mind-boggling prices we’ve seen recently, the private equity fund investors earn another return. In the meantime, the principal owner of the NFL franchise would be able to use the cash invested by the private equity fund to build new stadiums or practice facilities or invest in other opportunities.
It sounds like a match made in heaven, but it would represent a significant change in how the NFL has operated for decades. Typically, limited partners in NFL franchises have no meaningful say in how the team operates. Some private equity firms would probably be comfortable in a silent partner role, but in my experience most private equity firms are extremely focused on achieving those returns for their investors. As a result, they aren’t shy about pushing management of a business in which the fund has invested to take steps to maximize value–which might mean unloading significant assets to achieve an immediate return or taking other steps that change how the business is conducted.
If a private equity firm sinks hundreds of millions of dollars into a non-competitive NFL team, you wonder how long they will be satisfied with the returns they are getting, when they see that more successful teams are realizing even greater profits. If I were a general manager of an underperforming NFL team, I’d be a little leery of a high-powered private equity firm investing in the franchise. They will undoubtedly be paying a lot more attention to the bottom line, and won’t be satisfied with just the opportunity to rub elbows with NFL stars.
Webner House 