NFL owners approve up to 10% private equity ownership stakes for teams
- Thread starter DeadlySplitter
- Start date
They’re all PE money anyways so might as well cut out the moddleman.
Someone like ARod buying into the Timberwolves isn’t Arod money. It’s Arod credit. He goes to private money (IB/PE whatever), they say he can have a 100m credit line mostly secured with his stake in the team. He buys in, pays his debt service, then sells ten years later for however much it’s appreciated.
It may not impact actual top like ownership but I think we can see less volatility on the minority side. Now instead of Arod doing he he’d more likely just invest in the private equity. There will be exceptions of course.
Someone like ARod buying into the Timberwolves isn’t Arod money. It’s Arod credit. He goes to private money (IB/PE whatever), they say he can have a 100m credit line mostly secured with his stake in the team. He buys in, pays his debt service, then sells ten years later for however much it’s appreciated.
It may not impact actual top like ownership but I think we can see less volatility on the minority side. Now instead of Arod doing he he’d more likely just invest in the private equity. There will be exceptions of course.
It’s another big source of demand for ownership by a group who can source capital cheaper than anyone else. Valuations will go up.
What does this mean? Isn't ownership already PE, sometimes split amongst multiple owners? Does this just mean they can sell up to 10 percent of the team to anybody without the normal vetting and approval process for NFL owners?
Current private equity guys who are own pieces of NFL teams have invested as individuals using their own capital. This will allow private equity firm to invest capital from the partnerships that they raise from institutional investors as well. There are some very wealthy private equity people, but the funds they manage for third parties are much, much larger pools of capital than their individual bank accounts.
Seems like the NFL is running out of people wealthy enough to purchase teams, at least without having to resort to what European soccer has done in terms of accepting Middle Eastern money. This is a way for them to tap a large spigot of capital to keep valuations high and growing.
I've seen pitches from several firms that specialize in purchasing pieces of teams (to date mostly in the NBA). The investment thesis largely seems to be "these assets have appreciated tremendously in the last 20 years so they will continue to appreciate tremendously."
It liquifies NFL ownership and allows for a 10% sale for portfolio/estate/liquidity reasons versus having to put up a $8B asset up for sale in what may be a small universe of individual billionaire buyers
The NFL is on the vanguard because their teams are worth the most, but I assume other leagues will follow for the same reasons. Could that very slow-moving Brady acquisition of a chunk of the Raiders have spurred some of this? I wonder if it's not really his money, along the lines of the Slappy McBluelips example cited above, so they needed to make a rule change to facilitate his purchase (and others).
Curious -- are potential NBA investors paying attention to the general economic direction of travel of the streaming services/regional networks? On the one hand, I'd be worried about what kind of revenues will be coming to franchises in smaller cities if the regional network contracts continue blow up. On the other hand, these are smart/arrogant guys and I assume they assume they can come up with a lucrative plan for monetizing local TV broadcasts and are going to assume the national TV money will always be out there (not sure that's true, but...).
My understanding is the NFL is actually behind the times on this and the other leagues already accept PE investment and it's common in European soccer where franchise valuations rival the NFL. The NFL has always had weird ownership rules. Single person/family, can't own any other sports teams, etc.
In my experience, concerns about things like RSNs and the changing ways in which people consume media are waived away with a simple "people love sports - they'll always watch them! The ways in which we get paid might change, but we will still get paid, and even more in the future!" Right now, Amazon/Apple/Netflix are assumed to supply the next wave of money to wash into the industry.
The multiples of cash flow at which NBA teams have traded recently are truly heroic, as high or higher than rapidly growing software businesses with 90%+ margins. In general, suggestions that sports valuations might not always rise or might even be due for a correction are met with looks that imply that I'm probably a simpleton.
Last edited:
Oh interesting - thanks for the info.
As someone who has developed a late-in-life fascination with corporate failures/scams (Theranos, Enron, FTX, Madoff), I always enjoy the documentary interview with the person who says, "I told [the regulator/owner/press] about the iceberg five years before things went wrong and they [ignored me/dismissed my concern/fired me]."
edit: nm you covered it in the first part of your post, I had brought up DSG but the people you're talking to brush those types of situations off apparently lol.
First, thank you for these (and all your sports biz) posts - I always manage to learn something, even when I am actively not trying.
Next, I am in the uber bull camp for the value of live sports and professional sports franchises. I agree that the already steep rise in valuations doesn't mean it will continue (and may suggest that all the juice is out of the trade) but when you consider the best-seen-live/brand loyalty/social signaling/cultural phenomenon aspects of professional athletics, owning one of these clubs still feels like a promising investment.
It just feels like sports has filled the community building void that a lot of older (and more problematic) institutions used to provide to society. Maybe that changes but the direction of travel has only been one way during my lifetime, regardless of the sport. And if sports are the new religion, the NFL sect has a lot of true believers with plenty more on the way.