Private equity has sunk its teeth into the National Football League as some teams recently announced the sale of minority stakes to private equity firms.
The private equity firm Arctos Partners acquired a 10% stake in the Buffalo Bills, following approval by the NFL, the Bills announced Dec. 11. Also, Ares Management acquired a 10% stake in the Miami Dolphins, the club and Chairman Stephen Ross announced the same day, following league approval.
The deals came almost three months after the NFL allowed private equity firms to purchase stakes of up to 10% in individual teams at a meeting Aug. 27.
A spokesperson for Arctos declined to reveal the terms of the Bills transaction.
However, in a statement included in the Bills announcement, David J. O’Connor, managing partner at Arctos, said that under owner Terry Pegula’s leadership, the Bills have become one of the NFL’s “most recognizable, well-operated and successful franchises.” Arctos, he said, will “leverage its strategic expertise, data-science-backed insights and other resources to support the team’s commercial growth off the field.”
Moreover, the Bills welcomed nine other new limited partners in its ownership group, marking the first time in Bills history that minority owners have been added. Some of the new owners include Rob Palumbo, co-managing partner of the private equity firm Accel-KKR; Theresia Gouw, co-founder and managing partner of the venture capital firm Acrew Capital; Rob Ward, co-founder, general partner of the venture capital firm Meritech Capital; and former National Basketball Association stars Vince Carter and Tracy McGrady.
“This has been an incredible journey to add such an impressive and diverse group of limited partners along with a reputable private equity partner in Arctos that has an extensive track record of success with professional sports franchises," Pegula said in a statement.
The Dolphins deal marks the first entry into NFL ownership for Ares, whose portfolio already includes investments in the Inter Miami CF and Atletico de Madrid soccer clubs as well as the British motor racing team McLaren Racing.
With respect to the Dolphins, in addition to Ares, Joe Tsai and Oliver Weisberg — owners of the Brooklyn Nets of the NBA — also acquired a combined 3% interest in the club.
"The Miami Dolphins represent an iconic franchise with a deeply engaged fan base, and Ares is honored to invest alongside Joe [Tsai and Ollie [Weisberg] to support the team's long-term strategic goals," Mark Affolter and Jim Miller, co-heads of sports, media and entertainment at Ares, said in the Dolphins announcement. "Moreover, Steve[Ross] has been the architect of an impressive ecosystem of sports, entertainment and real estate assets that underscores the sector's significant potential for growth and value creation to the benefit of fans, local communities and financial stakeholders.”
An Ares spokesperson declined to comment further.
Kyle Walters, a private equity analyst at PitchBook, the financial data and software firm, said he thinks this is only the beginning of private equity firms pouring money into the NFL.
"Since the rule change in late August, rumors of such investments started circulating. And only a few months later, at the December owner's meeting, did these rumors come to fruition, showcasing private equity's eagerness to invest in the space,” Walters said. “As team valuations continue to soar, it is increasingly likely that more owners will look to tap these sponsors to either cash out a small stake of their franchise, to which much of their wealth may be tied, or use this source of capital as a means of funding new or ongoing projects.”
Walters cited, for example, that the Bills’ controlling owner, Pegula, will likely use a portion of the proceeds from the sales to help fund the ongoing construction of the Bills’ new stadium, set to open in 2026.
Scott Markman, founder and president of Monogram Group, a global branding agency specializing in private equity portfolio companies, said that as the NFL has a “follow-the-leader culture,” it is safe to assume that more teams will take on private equity stakeholders.
“Once the dam has been broken, several owners who didn’t want to be first in will feel comfortable to join the crowd,” he said.
Markman also said a key motivator here for the private equity firms and their managing partners is that the NFL, perhaps along with the U.S. Senate, is the most exclusive club in America, and they want in.
“It’s not about the economics, because while their shares will surely appreciate and in some respects these are prudent investments, there are 500 other places where they could invest the same capital and get a greater return,” he said.
Markman also pointed out that private equity firms normally hold onto investments, on average, for three to five years. “Taking that benchmark, I think the same hold period would be true in investing in NFL teams,” he said. “The shares would have appreciated, and perhaps the ‘buzz’ of being an NFL owner will have worn off. But it’s also on a case-by-case basis, maybe influenced by how well the individual team is run and their success or lack thereof on the field. Even private equity guys don’t want to be associated with a loser.”
Walters indicated that these private equity firms are required to hold these stakes in NFL teams for at least six years and will have to receive approval from the league and other team owners when they look to sell that stake.
“These stakes in these teams are completely passive and come with no voting rights, so they have very little influence in one sense,” he said. “But [they] can still be a part of internal team discussions.”