Private Equity Enters the NFL

On 27 August, NFL owners voted 31 to 1 to allow private equity funds to buy stakes in their teams for the first time, with the Cincinnati Bengals the only team voting against. Until then, the NFL was the only major North American league that banned institutional investors from owning part of a team.

The change came as team values rose so high that fewer individuals could afford even a minority stake. Under the new rules, approved funds can own up to 10% of a team, compared with up to 30% in the NBA, NHL, MLB and MLS. Each fund must invest at least 3%, hold its stake for at least six years and can invest in no more than six teams. Funds need at least $2 billion of committed capital and cannot put more than 20% of it into a single team. The first approved investors are Arctos Partners, Ares Management, Sixth Street and a consortium of Blackstone, Carlyle, CVC, Dynasty Equity and Ludis, a platform founded by Hall of Famer Curtis Martin.

The investments are purely passive, with no voting rights or influence over how the team is run. The NFL's existing rules still apply, so a controlling owner must hold at least 30% of the team and no team can have more than 25 owners. Sovereign wealth funds such as Saudi Arabia's Public Investment Fund cannot invest directly and can only hold up to 7.5% of a fund that owns a stake. The league also takes a share of the proceeds when a fund sells.

The NFL is opening up to outside capital while keeping tight control over who owns its teams. English football has taken a different approach, allowing private equity firms to buy clubs outright.