Economic and tax opportunities for owners as NFL opens doors to private equity
The arrival of private equity investors to major U.S. professional sports leagues, including the NFL’s recent approval of PE ownership, provides a new and professional pool of investors for owners seeking to raise new capital, as well as buyers for longtime investors seeking to exit or realize part of their investment. For their part, PE firms and their limited partner investors now have an opportunity to invest in U.S. professional sports teams, by far the best performing “asset class” in the U.S. over the past 50 years.
The leagues have been cautious in permitting PE and other institutional investors into their exclusive ranks, which have historically been the domain of wealthy individuals and families, several of whom have passed down ownership over generations. PE firms are designed to provide returns to their limited partners, and investment horizons rarely extend beyond five years. PE firms are also known for their hands-on management styles, working directly with management teams to cut costs, find efficiencies and increase profit. PE firms also generally hold multiple investments in various industries, some of which might touch industries (e.g., gambling) that raise concerns or intersect with investments made by players themselves.
To guard against these concerns, MLB, NBA, NHL and now the NFL have each adopted PE investment policies focused on keeping PE investors in a passive position, with no capability to influence team governance or management, no capability to force the hands of controlling owners, no negative........
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