Mara, Rooney, and Jones—what do these surnames have in common? A significant part of their “family business” has involved owning an NFL franchise for decades, with some even approaching a century of ownership.
For many sports franchises, ownership is passed down through kin. However, NFL liquidity has attracted various investor groups to become more interested and involved in team ownership over time.
Ownership of NFL teams has been a closely guarded privilege, typically reserved for the rich and wealthy, family-owned dynasties, or small groups of business partners. Now, the door is open for institutional money, and it may be one of the most impactful moves the league has made in its modern history.
On Aug. 27, NFL owners agreed on passing a new policy that would allow them to sell up to 10 percent of their teams to private equity firms that must be approved by the league. This new decision has the possibility of changing everything there is about the game.
Private equity is an investment strategy where firms will use a pool of managed capital to buy stakes in companies with enough growth potential to create a return on investment that hopefully meets the threshold sought out by investors.
According to Statista, the private equity market size is forecasted to grow to $765 billion in 2027, with a compound annual growth rate of 11 percent.
The decision to allow private equity investments into NFL teams could ignite a new era of financial growth and stability for the league. Franchises, even the smaller market ones, will have access to capital that was previously unimaginable.
Lucrative opportunities will be created from this as more competitive teams mean better games, which lead to higher TV ratings, more lucrative sponsorship deals, and increased fan engagement.
While the financial upside is clear, there are concerns about how private equity influence could change the very nature of NFL team ownership.
Traditionally, NFL owners have had a deep connection to their franchises and, by extension, to their local communities. The Rooney family in Pittsburgh and the Hunt family in Kansas City are prime examples of owners whose legacies are tied to the teams and the cities they represent.
Trevor Johnson, a senior economics major from Nashville, Tennessee, believes that there could be positive outcomes born from this decision.
“There’s more risk involved in the NFL but there’s also an incentive for the NFL to perform and deliver,” he said.
Johnson continued, “What I personally want to see with this since the NFL could receive more funding is more development in communities. I believe the NFL has a good opportunity to branch out into the community.”
More available funding could be put to projects that enable the franchise to create more jobs through new construction of facilities and more capital to be distributed to the surrounding community.
Another factor to think about is how it could affect competition in the NFL over time. Although there is a pre-approved list of firms that are able to participate in this process, further rule changes could lead to an expansion in the future.
As more firms enter, we may see more results from operational strategies implemented by these firms that want to be seen as top candidates for buying stakes in these franchises.
Private equity firms often increase competition through heightened spending on their portfolio companies, which leads to improved operational performance and competitiveness. According to a report by Accenture, many private equity firms are shifting their efforts, with 75 percent of their focus now on operational improvements, which includes spending to enhance the value of the companies they invest in.
So far, the league’s initial list of firms includes Arctos, a firm that has a prior history of investing in minority equity stakes. Others include larger firms such as Ares Management, Sixth Street, Carlyle, and CVC, all firms with larger pools of capital that have experience in the sports sector as well.
It may be too early to see what the positive and negative outcomes this decision will bring. However, one thing is for certain: investing behavior will continue to permeate every corner of our lives just as it has done for a very long time. Only time will tell how that will affect our everyday lives over the course of this experiment.
Copy edited by Camiryn Stepteau
