The NFL’s new private equity ownership policy includes a number of provisions that both protect the league and give it more financial upside—including language that allows the league to compel a sale in certain situations, and the right to receive a cut when firms inevitably sell their stakes.
The details, shared by longtime NFL advisor Marc Ganis on the next episode of the Sporticast podcast, highlight the leverage that the world’s most valuable sports league used as it hammered out a set of guidelines for institutional firms to buy passive, minority stakes in franchises.
The NFL was the last major U.S. league to open its ownership ranks to private capital. The league’s Special Committee on Ownership Policy, known around the NFL as SCOOP, spent a year discussing a possible framework and negotiating with some of the world’s most prominent PE firms. The rules were ratified Tuesday afternoon in a 31-1 vote.
“There are provisions, there are causes, where the NFL can force the private equity firms to sell their stakes,” Ganis, co-founder and managing director of Sportscorp Ltd, said during the podcast. “Not necessarily to (sell) back to the league, but to sell their stakes. No one expects that will happen with this blue-chip group of private equity firms, but you have to prepare for that in the future.”
Ganis wasn’t specific about what triggers those provisions, but mentioned the hypothetical possibility of a firm’s investment presenting a political quandary for the league. A representative for the league declined to comment.
The NFL will also get a piece of the upside when firms sell their stakes, Ganis said, though he declined to provide the specific size. Sportico is unaware of any other major U.S. league imposing a similar demand when it opened its door to private equity.
The money from those sales will be split evenly among all clubs, just like media rights and national sponsorship, he added. That means owners who don’t choose to sell equity in their own teams will still share in the economics of other owners who do.
“Really, it’s a minority of teams that will ever [sell PE stakes],” Ganis said. “This is a small way to also have the non-users get a little benefit from their work, which resulted in a windfall profit.”
The policy ratified by owners earlier this week also greenlit a handful of funds to begin negotiating deals with teams. Those funds are Ares, Arctos, Sixth Street, and then a consortium comprised of Blackstone, Carlyle, CVC, Dynasty Equity and Curtis Martin’s Ludis.
The league used leverage in its talks with specific funds as well, Ganis said. For example, the NFL has the right to review the individual investors in a fund and to have those LPs subject to the representations and warranties that govern the investments. The league has also mandated that a sovereign wealth fund (or pension fund or endowment) cannot represent more than 7.5% of a PE fund’s financing.
“These are examples of how detailed the SCOOP committee was as it went through this, to be protective of the league,” Ganis said. “[The NFL] can impose this type of restriction on what money can be brought into the fund itself. ”
The full podcast episode will drop Thursday morning. You can subscribe to the Sporticast through Apple, Google, Spotify, YouTube, or wherever else you get your podcasts.
