Bringing Private Equity into Play: The NFL’s Approval of Private Equity Investors

By: Vanessa Wydeven*                                                                    Posted: 10/07/2024

The mention of private equity (“PE”) investments often comes with a negative connotation, as many picture struggling companies who are willing to use such firms as a last resort to keep their business afloat.[1]  Although, in some circumstances, research goes to support these “misconceptions,” there have been certain industries, including professional sports, that have found a way to work productively with PE firms.[2]  On August 27, 2024, the NFL became the last of the four major American sports leagues to approve limited PE investment in team ownership following a meeting in Minneapolis, during which NFL team owners voted thirty-one to one in favor of the policy change.[3]  

Overview of Private Equity Investing

PE firms operate by generating capital, which is then invested into, typically, more mature businesses, with the goal of raising the company’s net worth or extracting value via subsequent sales.[4]  These firms use a number of investing strategies, including distressed investments, where the firm invests in an “undervalued or financially struggling” company, hoping to eventually sell it for a profit.[5]  Furthermore, PE firms sometimes take on large amounts of debt to purchase companies through a leveraged buyout, with the hope that the firm’s efforts to add value to the company will pay off the debt and generate profits on top of that.[6]  However, when working with professional sports teams, PE firms assume the lesser-known function of growth equity, where the firm takes a minority stake in a fast-growing business and provides the necessary capital for the company’s continued expansion.[7]   

A significant source of much of the distrust surrounding PE firms is that they have very limited disclosure requirements as compared to public companies.[8]  Publicly traded companies must report information related to performance and liabilities to allow individuals investing in the stock market the opportunity to make informed investing decisions.[9]  However, in May 2023, the Securities and Exchange Commission (SEC) passed a regulation requiring large PE firms and hedge funds to report the occurrence of certain “triggering events,” thus allowing for better regulation of the PE industry and enhancing investor protection.[10]  Furthermore, many of the largest PE firms have gone public, permitting the firms’ gains and losses to be better distributed across the companies’ numerous investors whereas, in the earlier days of PE, such firms were owned by individuals “leveraging their own funds to make more money,” perhaps sometimes unethically.[11] 

While PE firms have invested in European sports since the 2000s, major American sports leagues were not as quick to allow PE to infiltrate the industry, with the MLB finally being the first to permit PE investments in 2019.[12]  The main culprit for the involvement of PE in sports is teams “soaring valuations” that have generated an increased need for liquidity.[13]  As the value of professional sports teams has skyrocketed, the pool of individuals who are able to afford large shares in team ownership has inevitably shrunk.[14]  Such a drastic increase in value can be largely attributed to the “exponential growth in media rights deals,” which has allowed sports leagues to expand their fan bases far beyond their traditional geographic borders.[15]  PE investors have therefore provided sports leagues with additional resources to “professionalize their business operations” and continue to grow in the wake of the rather quick and appreciable increase in value of professional sports teams.[16]   

Private Equity Investment in United States Sports Leagues

United States professional sports leagues began to expand their field of investors to PE firms in  the late 2010s.[17]  However, American professional sports leagues have been careful to place restrictions on the level of involvement of PE, primarily by limiting PE firms to minority ownership investments.[18]  The NBA, NFL, and MLB all allow for up to thirty percent team ownership cumulatively by PE firms, although the specifics of the leagues’ policies vary slightly.[19]

In the MLB, while PE investors may hold up to thirty percent of a team cumulatively, individual funds are limited to a maximum stake in team ownership of fifteen percent.[20]  Further, the MLB does not limit the number of teams a fund may invest in but does require a five-year holding period when PE firms are involved with multiple MLB teams.[21]  The NHL expands the maximum team ownership stake by a single fund to twenty percent, but restricts firms to investment in a maximum of five franchises, also with a minimum five-year holding period.[22]  The NBA’s regulations are similar to the NHL’s, allowing individual PE firms a maximum of twenty percent investment in, at most, five teams for a minimum of five years.[23]  Notably, “the parent company of the NBA’s Washington Wizards and NHL’s Washington capitals” have gone one step further in granting the Qatar Investment Authority an exception to the leagues’ typical prohibition against investments by governmental authorities and sovereign wealth funds.[24]  In 2023, the PGA had also announced plans to merge with the controversial organization LIV Golf, backed by the Saudi Arabia public investment fund, however the deal appears to have stalled.[25]

Private Equity Investors in the NFL

The NFL has typically been conservative when it comes to team ownership, emphasizing its single owner structure that has allowed several “prominent franchises [to] stay in the same family for generations.”[26]  Yet, after observing other professional sports leagues’ success in working with PE firms, and facing increasing team valuations, the NFL finally decided to dip its toes into PE.[27]  The NFL is, however, entering the field cautiously, and has imposed various limitations on PE investments.[28]

The policy approved by the NFL “includes a number of provisions that both protect the league and give it more financial upside.”[29]  PE firms will only be allowed to acquire up to ten percent of a teams’ shares, a decently smaller percentage compared to the MLB’s, NBA’s and NHL’s maximum of thirty percent.[30]  This ensures that PE firms will have minimal to no control over NFL teams’ strategic and business decisions.[31]  The policy also contains a provision that would permit the league to force PE firms to sell their stakes in teams in certain situations, another significant safeguard for the NFL.[32]  

Furthermore, only those PE firms on the NFL’s permitted funds list will be allowed to invest, providing the NFL with more means of regulation.[33]  This restriction also serves the purpose of blocking investment by controversial groups such as the Qatar Investment Authority and the Saudi Arabia public investment fund. [34]  Individual PE firms are allowed to hold the maximum ten percent PE stake within NFL teams, whereas the MLB, NBA, and NHL do not allow a single firm to own the maximum cumulative thirty percent PE stake in team ownership.[35]  In the NFL, PE firms are required to invest a minimum three percent, must commit to a term of at least six years, and, due to the limited number of pre-approved PE firms, each firm may invest in up to six NFL teams.[36]

Implications for the Legal Field

The NFL seems to have carefully considered the risks of PE investments, responding with a strict policy that still gives the NFL substantial control over such investments without much impact on team operations.[37]  While offering a relatively low ownership percentage of ten percent could make securing investors difficult for certain companies, the NFL’s extremely high valuation essentially eliminates this problem.[38]  Regardless of conflicts, as sports leagues continue to rise in value and become involved with more corporate entities, teams’ need for attorneys will rise as well.[39]

Now that the NFL has opened its doors to PE ownership, PE firms will likely want to quickly secure their investments in such a profitable industry.[40]  The parties involved will need strong legal backing to ensure that all necessary protections are put in place while still meeting parties’ needs.[41]  Especially considering the NFL’s cautious approach to PE thus far, NFL teams will probably employ extensive legal counsel to ensure that their traditional ownership structure is not disrupted.[42]  As a result of the NFL’s PE approval, law firms can expect to find increased work in a range of related matters including counseling teams during sales, analyzing potential ownership structures, advising PE firms when purchasing team ownership shares, and negotiating deals between the two parties.[43] 

*Staff Writer, Jeffrey S. Moorad Sports Law Journal, J.D. Candidate, May 2026, Villanova University Charles Widger School of Law

[1] See Marina Vizdoaga, The Myths of Private Equity Investment Debunked, LinkedIn (Mar. 27, 2024), https://www.linkedin.com/pulse/myths-private-equity-investments-debunked-marina-vizdoaga-msf-xg1oc/ (noting that field of private equity is subject to various criticisms, including “the belief that [private equity] firms are vultures, preying on companies to dismantle them and sell off their parts for quick, short-term gains.”).

[2] See Brendan Ballou, Private Equity is Gutting America - and Getting Away With It, N.Y. Times (Apr. 28, 2023), https://www.nytimes.com/2023/04/28/opinion/private-equity.html (stating that “companies bought by private equity firms are far more likely to go bankrupt than companies that aren’t” and that, in past ten years, private equity has been responsible for loss of almost 600,000 jobs just within retail sector); see also Brendan Coffey, Sports Grow From Private Equity Afterthought to Booming Market, Sportico (May 16, 2024, 5:55 AM), https://www.sportico.com/business/finance/2024/when-did-private-equity-start-investing-in-sports-teams-1234779117/ (explaining that professional sports leagues’ private ownership structure combined with exorbitantly high value of such sports teams has led professional sports leagues to look to private equity as source of funding).

[3] See Randall Williams, NFL Loosens Strict Ownership Rules to Allow Private Equity Investments, TIME (Aug. 27, 2024, 10:05 PM), https://time.com/7015348/nfl-football-private-equity-ownership-investors/ (noting that NFL has finally loosened its historically strict team ownership policies).

[4] See James Chen, Private Equity Explained With Examples and Ways to Invest, Investopedia (Apr. 10, 2024), https://www.investopedia.com/terms/p/privateequity.asp (explaining how private equity works in general and how its involvement may impact businesses depending on company’s financial situation and its future predicted value).

[5] See Avneet Dosanjh, A Comprehensive Guide to Private Equity Law, Moore Barlow (Apr. 26, 2024), https://www.moorebarlow.com/guides/a-comprehensive-guide-to-private-equity-law/ (listing “distressed investments” as one strategy used by private equity firms and explaining that firms use exit strategies to “realize its investment in a target company” by selling company publicly, via stock market, or privately to another business, individual, or even another private equity firm).

[6] See id. (listing “leveraged buyouts” as another strategy used by PE firms); see also Unpackaging Leveraged Buyouts (LBOs): How PE Firms Engineer Growth Through Debt, Altavia, https://altvia.com/unpacking-leveraged-buyouts/#:~:text=Leveraged%20buyouts%20(LBOs)%20are%20a,company's%20assets%20and%20cash%20flows. (last visited Sep. 25, 2024) (explaining how leveraged buyouts work and noting that they are where “financial engineering meets strategic acquisition”).

[7] See Pamela Espinosa, Growth Equity, Moonfare (Sept. 9, 2024), https://www.moonfare.com/pe-masterclass/growth-equity#:~:text=Growth%20equity%20funds%20target%20companies,Growth%20equity%20in%20a%20nutshell (noting that growth equity typically targets established businesses with); see also id. (explaining that “growth equity,” also known as “growth capital,” involves “investing in growing companies requiring capital to expand”).

[8] See Rogé Karma, The Secretive Industry Devouring the U.S. Economy, The Atlantic (Oct. 30, 2023, 9:30 AM), https://www.theatlantic.com/ideas/archive/2023/10/private-equity-publicly-traded-companies/675788/ (explaining that lack of disclosure requirements led to financial problems and questionable tactics by some private equity firms).

[9] See id. (noting reasoning behind public companies’ more extensive reporting requirements).

[10] See SEC Issues New Rules for Hedge Fund and Private Equity Disclosures, McCarter & English (May 23, 2024), https://www.mccarter.com/insights/sec-issues-new-rules-for-hedge-fund-and-private-equity-disclosures/ (noting that, prior to new ruling, large firms were required to report to SEC on quarterly basis, but will now be required to inform SEC within 72 hours of occurrence of “triggering event[s],” such as “extraordinary investment losses”).

[11] See Coffey, supra note 2 (explaining that large PE firms going public has helped to increase their credibility and to further “soft[en] their edges”).

[12] See Elizabeth Lenas, Maurice R. Gindi & John A. Kupiec, Major League Sport Continues to Draw Private Equity Crowds, Cleary Gottlieb, https://content.clearygottlieb.com/private-funds-bulletin/major-league-sport-continues-to-draw-private-equity-crowds/index.html (last visited Sep. 5, 2024) (noting that PE firms first broke into less strict European Sports Market and now hold “ownership stakes in more than a third of all Europe’s top football clubs”).

[13] See Brian DeChesare, Sports Private Equity: Bright Spot in a Troubled PE Landscape or an Emerging Bubble, Mergers & Inquisitions (Apr. 10, 2024), https://mergersandinquisitions.com/sports-private-equity/ (explaining the relatively sudden increase in private equity involvement in sports); see also George Shamiyeh, Skyler Minke & Knowles Adkisson, Private Equity Investments in Sports: Opportunities and Risks, Forward Risk (Nov. 21, 2021), https://www.forwardrisk.com/2021/11/private-equity-investments-in-sports-opportunities-and-risks/ (noting that in 2001, Forbes’ valuation of average NBA franchise was $207 million and that, by 2021, this estimate had shot up to $2.2 billion).

[14] See DeChesare, supra note 13 (explaining that in recent years, professional sports leagues have increased in value so drastically that much fewer individuals can now afford to buy significant percentage of team ownership, as compared to when such teams were worth significantly less, relatively).

[15] See Shamiyeh et al., supra note 13 (explaining one primary reason for significant increase in value of sports teams, and further noting that growth of “digital technology and streaming” have resulted in broader access to international sports).

[16] See id. (explaining why sports teams sought aid of private equity investors and stating that because of positive potential for future growth, “private equity has returned interest”).

[17] See David Steele, Why the NFL Finally Let Private Equity Onto the Playing Field, LexisNexis Law360 (Aug. 30, 2024, 1:48 PM), https://www.law360.com/articles/1874231/why-the-nfl-finally-let-private-equity-onto-the-playing-field (explaining that since late 2010s, private equity has been involved with professional sports leagues such as “NBA, NHL, MLB, and Major League Soccer,” as well as “up-and-coming women’s pro sports leagues like WNBA and the National Women’s Soccer League”).

[18] See id. (stating that private equity investment “remains highly regulated industry with substantive restrictions on private equity ownership”); see also Katie O'Leary, Private Equity Sports Investing in North America vs. Europe, Chronograph (July 10, 2024), https://www.chronograph.pe/private-equity-sports-investing-in-north-america-vs-europe/ (stating that, unlike U.S. leagues, “many European leagues don’t cap private equity ownership”).

[19] See C. Anthony Mulraine & Blaine B. Remmick, Private Equity's Time on the Bench is Over: NFL Owners Allow Private Equity Fund Investments, Holland & Knight (Sept. 5, 2024), https://www.hklaw.com/en/insights/publications/2024/09/private-equitys-time-on-the-bench-is-over (demonstrating restrictions put on private equity investments by major American professional sports leagues).

[20] See Randall Boe, Vanessa Roman, Christopher Staton Spicer, Sergio A. Urias, Amy Wollensack, Marc Holloway & Elyssa Pak, Institutional Investment in Sports: Fueling Revenue and Valuation Growth, Akin Gump Strauss Hauer & Feld LLP (Aug. 29, 2024), https://www.akingump.com/en/insights/alerts/institutional-investments-in-sports-fueling-revenue-and-valuation-growth#:~:text=MLB%20ownership%20rules%20cap%20limits,minimum%20five%2Dyear%20holding%20period. (explaining MLB’s regulations on PE investments).

[21] See id. (noting that, unlike other leagues, there is, theoretically, no limit to number of MLB teams PE firms could invest in).

[22] See id. (describing NFL’s PE investment rules).

[23] See id. (explaining NBA’s guidelines on PE investments).

[24] See Olafimihan Oshin, Qatar Sovereign Fund to Invest in NBA's Wizards, NHL's Capitals, The Hill (June 22, 2023, 5:44 PM), https://thehill.com/blogs/blog-briefing-room/4063474-qatar-sovereign-fund-to-invest-in-nbas-wizards-nhls-capitols/#:~:text=The%20Qatar%20Investment%20Authority%20(QIA,a%20U.S.%2Dbased%20sports%20team. (explaining that “sovereign money has had a great influence on sports in the past few years” despite that Qatar has “faced criticism from many for its human rights record”); see also Boe et al., supra note 20 (noting NBA’s involvement with Qatar Investment Authority).

[25] See Oshin, supra note 24 (noting PGA’s 2023 announcement regarding merger with LIV Golf as another example of foreign investor involvement in U.S. professional sports); see also David Rumsey, Everything You Need to Know About the PGA Tour, LIV Golf, and a Potential Merger, Front Off. Sports (Apr. 13, 2024), https://frontofficesports.com/newsletter/so-are-the-pga-tour-and-liv-merging/ (noting that PGA and LIV Golf failed to meet their December 31, 2023 deadline to reach deal and thus are continuing to operate as separate entities; however, there are rumors that these organizations have set new deadline of August 2024, near date of Masters Tournament).

[26] See Dave Campbell, NFL Teams Can Now Sell Shares to Private Equity Funds After Letting Other Pro Leagues Lead. Why Now?, Oneida Daily Dispatch (Sept. 4, 2024, 6:44 PM), https://www.oneidadispatch.com/2024/09/04/nfl-teams-can-now-sell-shares-to-private-equity-funds-after-letting-other-pro-leagues-lead-why-now/ (explaining NFL’s historically restrictive ownership policies).

[27] See James Dator, The NFL Private Equity Ownership Vote, Explained, SBNation (Aug. 27, 2024, 10:06 AM), https://www.sbnation.com/nfl/2024/8/27/24229506/nfl-private-equity-ownership-vote (stating that some private equity ownership in NFL was inevitable, as team values are increasingly “moving beyond realm of possibility for some of the richest people in the world.”).

[28] See Lillian Rizzo, Private Equity Will be Able to Invest in the NFL But Won't Have Much Say in Team Decisions, CNBC (Sept. 5, 2024, 9:00 AM), https://www.cnbc.com/2024/09/05/nfl-private-equity-how-investing-in-teams-will-work.html (emphasizing that NFL is limiting private equity’s involvement in league).

[29] See Eben Novy-Williams & Scott Soshnick, NFL Private Equity Rules Let League Force Sales, Share in Upside, Sportico (Aug. 28, 2024, 3:32 PM), https://www.sportico.com/business/team-sales/2024/nfl-private-equity-rules-forced-sale-carry-cut-funds-1234795107/ (noting extensive protections put in place by NFL in collaborating with private equity firms).

[30] See Rizzo, supra note 28 (noting NFL’s ten percent maximum PE investment in team ownership).

[31] See id. (explaining that PE firms will essentially have “silent role” within NFL teams, beyond funding).

[32] See Novy-Williams et al., supra note 29 (highlighting inclusion of provision in NFL’s private equity policy that could allow NFL to compel private equity firms to sell their shares).

[33] See Judy Battista, NFL Owners vote to allow private equity funds to buy stakes in teams, NFL (Aug. 27, 2024, 4:50 PM), https://www.nfl.com/news/nfl-owners-vote-to-allow-private-equity-funds-to-buy-stakes-in-teams (listing PE funds pre-approved by NFL to invest in teams).

[34] See Dator, supra note 27 (noting that allowing only “permitted” PE firms to invest in NFL teams effectively prohibits unwanted, controversial investors).

[35] See Mulraine et al., supra note 19 (noting that single PE firm can hold entire ten percent permitted PE ownership in NFL teams).

[36] See Williams, supra note 3 (explaining minimum requirements for PE investors in NFL); see also Rizzo, supra note 28 (stating maximum number of teams that one individual PE firm may invest in).

[37] See Rizzo, supra note 28 (explaining that because of PE firms’ role as “silent partners” within team, there will not be much, if any, change in how team and business are run: “It’s business as usual”).

[38] See Lenas et al., supra note 12 (noting that limitations placed on PE firms affords them less control than they would typically have in target businesses).

[39] See Patrick Smith, Big Law and Big Sports: More Money, Law Firms and Work, Law.com (June 24, 2024), https://www.law.com/americanlawyer/2024/06/24/big-law-and-big-sports-more-money-law-firms-and-work/ (stating that “issues have become far more complex, the stakes far more significant, and the players far more global and institutional,” facilitating need for lawyers to counsel and defend, if necessary).

[40] See Boe et al., supra note 20 (explaining that PE investments in NFL “could generate $12-$15 billion in transaction” and noting that the “dramatic increases in team valuations” and the NFL’s new PE policy “may well unleash another torrent of investments in sports teams).

[41] See Smith, supra note 39 (noting that, since rise in major sports leagues’ approval of private equity investments, law firms have increasingly been involved in facilitating sale of teams to private equity firms); see also Roy Strom, Wall Street Law Firms Invade Booming World of Pro Sports Deals, Bloomberg L. (June 3, 2024), https://news.bloomberglaw.com/business-and-practice/wall-street-law-firms-invade-booming-world-of-pro-sports-deals (explaining that extremely high price of these sales often adds to their complexity and highlighting some of many law firms that have found significant work in this field).

[42] See Steele, supra note 17 (noting NFL’s caution in adopting its PE policy and arguing that “the change in the source of funding” will bring “unforeseeable consequences,” requiring counsel to assist teams in working through issues that may arise).

[43] See Strom, supra note 41 (explaining some legal matters that law firms have been involved in relating to approval of PE in professional sports).