The National Football League approved new rules on Tuesday that will allow team owners to sell parts of their franchises to private equity firms, raising the possibility of a windfall that could add billions of dollars to the value of clubs.
The NFL's 32 owners voted for the measure at a special league meeting in Eagan, Minnesota, and private equity firms are expected to inject $12 billion in capital, according to The Wall Street Journal.
Before Tuesday's vote, the NFL was the only major North American sports league that banned private equity ownership in franchises.
The NBA, NHL, Major League Baseball and Major League Soccer allow their teams to sell up to 30% of their shares to funds.
The NFL's initial list of approved investors includes a consortium of Blackstone, Carlyle, CVC and Dynasty Equity, as well as Ares Management and Arktos Partners.
Rudis, a platform founded and led by former Jets star running back Curtis Martin, is also part of the consortium group.
“It's nearly impossible to buy an NFL team these days unless you're a billion-dollar man,” Ted Jenkin, a business consultant and co-founder of Oxygen Financial, an Atlanta-based financial planning firm, told The Washington Post.
“The new rules will allow owners to free up cash flow tied up in their team equity, allowing them to spend the money on improvements such as new stadiums.”
The Post has reached out to the NFL for comment.
The league created a committee last year to consider changes to its ownership rules, and Commissioner Roger Goodell said in March that the NFL was “very close to putting together the framework for an approach” but that “there is a lot of work to do to make that approach a reality.”
The Washington Commanders are the latest NFL team to be sold for a record-breaking $6.05 billion.
According to the Wall Street Journal, private equity firms must agree to strict rules, including granting governance rights, banning preferred stock investments and requiring them to hold shares for a minimum of six years.
Preferred stock is a type of investment that gives investors certain privileges and protections not afforded to common stock holders, such as dividend preferences and a higher claim on the company's assets in the event of liquidation or bankruptcy.
Under the terms of the rules, each private equity group is allowed to buy shares in up to six different teams.
The Green Bay Packers are off limits to private equity due to their unique community-based ownership structure.
The Packers are the only U.S.-based professional sports team that is publicly owned by its fans and operates the club on a not-for-profit basis.
The NFL's rules on private equity groups are believed to be stricter than those of other leagues, which have welcomed capital infusions in recent years.
In 2020, the National Basketball Association approved rules allowing private equity firms to own up to 30% of any single franchise, with each company being able to own shares in up to five different teams.
Major League Baseball opened up to private equity in 2021 when Dial Capital Partners was allowed to create a fund that could invest in multiple teams.
Each MLB team was allowed to sell up to 15% of its stock to private investors, but the limit for any one investor in any one team was 10%.
There is no limit to the number of clubs that private equity can invest in.
The National Hockey League, Major League Soccer, the English Premier League, La Liga and European soccer leagues such as Serie A also allow private equity groups to buy clubs.
While European soccer leagues allow sovereign wealth funds from countries like Saudi Arabia to buy clubs, the NFL does not allow direct investment by state-owned funds at all.
According to the paper, several owners believe the rules are too strict and have left the door open for them to be relaxed in the future.
Once the policy is formalised, discussions between the owners and private equity firms will reportedly begin immediately.
