The booming business of the NFL will now be open for more business.
League owners voted their carefully crafted approval of private equity in club ownership, putting in place a provisional new rule on Tuesday that lets certain firms buy up a stake of up to 10% in any of the 32 franchises that have soared in value over the past few decades like few other industries.
At a special meeting in Minnesota, nine days before the regular-season opener, owners for the first time opened their teams to institutional investment after previously prohibiting it. Other major American sports leagues allow as much as 30% holdings by private equity firms, and it's also a common practice in international soccer.
"It's an access to capital that has been interest to us for a long time," Commissioner Roger Goodell said after the session at the Omni Viking Lakes Hotel, which sits across from the headquarters of the Minnesota Vikings. "I think it's an appropriate thing to give teams that liquidity to reinvest in the game and to their teams."
The NFL with this vote permitted only four different groups to enter the arena: standalone firms Arctos Partners, Ares Management Corporation and Sixth Street, plus a consortium of five funds — Blackstone, Carlyle, CVC, Dynasty Equity and Ludis. The approved list could well be extended in the future, but these selections from the initial vetting process were made based on having the cash ready to go right away.
Ludis was founded by Pro Football Hall of Fame running back Curtis Martin, who spearheaded the collaboration as part of his effort to include minority race investors in NFL ownership positions.
"This is something that we've long fought for and tried to find ways to encourage that," Goodell said.
In addition to the 10% private equity cap, there were other guardrails established. Multiple funds can account for the 10%, but there's a 3% minimum investment for each. Each purchase must be held for a minimum of six years. There's a maximum of six teams that each of the approved funds can invest in, and no more than 20% of each fund can go to one NFL club. No individual investor can own more than 7.5% of a fund. Also, league owners and their families are allowed to invest their own wealth in these funds, but only up to 3% of them.
The NFL let MLB, MLS and the NBA and NHL go ahead on this front, content to take notes in a cautious approach with a steadfast goal of preserving the parameters of the single-owner structure that has seen several of its prominent franchises stay in the same family for generations. Controlling owners must own at least 30% of the team, and no more than 25 owners can be part of an ownership group.
"We tried to talk to people who we think were in the know," Goodell said. "We were patient on this."
Since the study was initiated five years ago, the Denver Broncos ($4.65 billion) and Washington Commanders ($6.05 billion) have been sold in further illustration of the opportunity for current owners to liquify portions of their teams. These increasingly expensive and complicated transactions have also become more difficult for prospective owners without potential cash boosts from private equity firms.
The process accelerated a year ago, and a special committee on ownership policy was created including Kansas City's Clark Hunt, Denver's Greg Penner, New England's Robert Kraft, Cleveland's Jimmy Haslam and Atlanta's Arthur Blank.
"The support today in the room was very strong for this decision," Penner said. "One thing that was really important was giving owners a different option for capital sources but at the same time maintaining how we operate."
There's no reason for fans to be concerned that this new source of potential investors will affect any football operations, the league said.
"All it is is a silent position that would allow access to capital for those teams that wish to offer 10% of their team," Goodell said. "They will not be in any kind of decision-making influence in any way."
The stipulations also entitle the league to a portion of the proceeds from each sale, Goodell confirmed.
"The private equity firms that participated in this absolutely understood and expected that the NFL would have a collective participation in this," he said.
Naturally, a league with a stated goal of soon reaching $25 billion in annual revenue is not going to make an unsound financial decision.
"I know this: This is good for anybody that's in love with the NFL, any part of it," Dallas owner Jerry Jones said.