Dolphins and Bills private equity deals underline value to NFL

In a historic first for the National Football League (NFL), the Buffalo Bills and the Miami Dolphins have become the first teams to shake hands with private equity. These investments follow the update in August to the NFL’s investment and ownership rules allowing private equity minority ownership.

Ares Management Corp. is reported to be acquiring a 10 per cent stake in the Miami Dolphins ($8.1bn enterprise valuation), whilst Arctos Partners is reported to be buying near a 10 per cent interest in the Buffalo Bills ($5.8bn enterprise valuation).

Why now?

The NFL is the last major US professional sports league to relax its ownership rules. Private equity has been acquiring minority stakes in US leagues since 2019, starting with the Major League Baseball (MLB), followed by the National Basketball Association (NBA), National Hockey League (NHL) and Major Soccer League (MSL). 

Since its formation, the NFL’s team ownership has been an exclusive group; eight teams are still owned by their founding families. However, increasing player salaries (2024 saw an unprecedented $30m increase in salary cap to $255.4m per team) and rising infrastructure costs (the Buffalo Bills’ new stadium is reported to cost $2.1bn, exceeding the original budget by $560m), have created a growing demand for fresh capital.

Surging team valuations (with Forbes reporting the average team’s current worth at $5.7bn, an increase of 11 per cent since last year) means that existing owners face limited exit strategies. It is not surprising that 31 out of 32 franchises voted in favour of private equity investment in August.

Why private equity? 

In addition to new capital, private equity firms bring sector expertise and new revenue-generation opportunities. Arctos has an extensive track record of success with professional sports franchises, including the NBA, NHL, MLB, MSL, Formula One, Nascar and the English Premier League. 

The NFL’s target 2027 revenue is $25bn (currently around $13bn). Private equity will look to play a role in identifying innovative sponsorship and marketing strategies to help realise this goal. Arctos’ and Ares’ dominance in the technology, media and entertainment industries create new partnership opportunities between sports and commercial sectors, while enhancing fan engagement through digital innovation could create new revenue streams and accelerate the NFL’s global strategy.

Are there still misconceptions?

Private equity has historically been associated with short-term high returns, controlling interests and risks of conflict. However, as sport is no longer considered a niche, high-risk investment, but an increasingly attractive asset class, private equity ownership structures are adapting to recognise long-term growth potential. 

As the last US league to invite private equity investment, the NFL has created a new investment model that balances diversified investment with protecting the teams’ integrity and its players’ well-being through maintaining control.

Only a select group of private equity firms may invest: Ares, Arctos, Sixth Street and a consortium comprising Blackstone, Carlyle, CVC Capital Partners, Dynasty Equity and Ludis. Private equity may only hold a non-voting, maximum stake of 10 per cent (with a minimum stake of 3 per cent).

Furthermore, private equity investors will be required to lock in their investment for a minimum of 6 years, and the league is entitled to participate in any future private equity sale through a profit-sharing mechanism. To address conflict concerns, private equity firms may invest in no more than six franchises, with stringent information sharing restrictions.

These groundbreaking investments for the NFL demonstrate a win-win strategy for the Buffalo Bills and Miami Dolphins, their owners, and private equity alike. As broadcast and ticket revenues for NFL games continue to grow, and with reports of other teams seeking new capital, these investments are anticipated to be the first of many.

Keir Gordon, Partner, and Molly Moseley, Associate, in the Corporate team of law firm Charles Russell Speechlys