NFL team sales may plateau due to rising valuations.

• NFL owners are content to hold on to their teams as valuations soar.
• The Seattle Seahawks will likely change majority ownership in the coming years.
• Beyond the Seahawks, it's difficult to name another clear candidate.
• Allowing private equity ownership of up to 10% of teams can provide owners with more liquidity if they wish to sell a small stake in their team.

The sale of the Seattle Seahawks is a possibility, but the timeline for when another NFL team will be sold is uncertain.

Since the death of former Seahawks owner and Microsoft co-founder Paul Allen in 2018, the team has been under the control of a trust run by Allen's sister, Jody. According to Allen's estate, the team should eventually be sold, with the proceeds going to charity. However, there is no clear timetable for a transaction to occur.

Other team owners may not sell their teams for the same reason that Allen's trust has reason to wait.

The value of NFL teams is expected to increase in the future due to the league's media rights deal, expansion, and increased game schedule, as advised by Marc Ganis, a consultant to NFL Commissioner Roger Goodell and team owners. Selling teams now could result in missed opportunities for significant profits.

"Ganis stated that the NFL is still in a growth phase in terms of appreciation and net revenue, and we are not even close to the top of the market."

The NFL's average team value is now $6.49 billion, with no team worth less than $5.25 billion, according to CNBC's 2024 NFL Team Valuations. Additionally, seven of the last 10 NFL teams sold outperformed the S&P 500 on a percentage-gained basis since their sale.

Last year, the average franchise generated $640 million in revenue and $127 million in operating income, thanks to the growth in leaguewide media, sponsorship, and licensing deals, which are shared among all 32 teams.

The NFL's new media rights deal, worth over $110 billion, began last year and runs through 2033. This 11-year agreement is an 80% increase from the league's previous deal. Additionally, the NFL has a clause that allows them to opt out of all packages except Disney's at the end of the 2028-2029 season, and they have an out clause for Disney's deal after 2030.

The NFL's most-watched games may see surges in value due to hypothetical future bids from deep-pocketed technology companies such as Google, Facebook, and YouTube. TV ratings for the 2023-24 season increased by 7% from the previous year, making it the second-highest rated season since data was first tracked in 1995.

"According to Neal Pilson, former president of CBS Sports and founder and president of Pilson Communications, the NFL is the largest and most valuable audience in the U.S. for advertisers. He stated that the NBA deal will be a benchmark, but it will become ancient history by the time the NFL renews, even if it opts out. Pilson added that the NFL's rights deal will be based on its audience and the revenue third parties think it can generate from being a partner."

Ganis stated that the addition of an 18th regular season game and Goodell's plan to increase the NFL's international presence through games in Spain, Germany, and Brazil would likely result in increased revenue and higher valuations for the league.

He stated that the NFL has yet to tap into significant international earnings.

Illiquid market

NFL teams are typically sold once every 3.5 years, according to Ganis. These sales are usually triggered by death or scandal, making it challenging to predict when the next team will change hands.

The Washington Commanders were the last NFL franchise to be sold, with the deal completed in 2023 after league owners pressured Daniel Snyder to relinquish the team due to allegations of sexual harassment and a toxic workplace. The team was bought by Josh Harris, who also owns the NBA's Philadelphia 76ers and the National Hockey League's New Jersey Devils, for a record $6 billion.

The NFL team sales have been consistently breaking records, indicating a rise in valuations. The Pegulas acquired the Buffalo Bills in 2014 for $1.4 billion, which was surpassed by David Tepper's purchase of the Carolina Panthers in 2018 for $2.3 billion. The Panthers were sold after the NFL fined previous owner Jerry Richardson for workplace misconduct.

In 2022, after the death of Pat Bowlen, a group led by Rob Walton, a member of the family that owns , purchased the Denver Broncos for $4.65 billion.

The value of the Bills, Panthers, and Broncos has skyrocketed in a short period of time, with the Bills now worth $5.35 billion, the Panthers valued at $5.9 billion, and the Broncos' worth increasing to $6.2 billion, according to CNBC's 2024 Valuations.

Ganis stated that the NFL prefers to have owners who have a long-term perspective, as they prioritize long-term decision-making over short-term profits. He also mentioned that modernized estate planning has led to more family handoffs from one generation to another, reducing taxes.

The NFL mandates that every team must have a written succession plan in place in case their owner dies. The Chicago Bears, owned by 101-year-old Virginia Halas McCaskey, the daughter of team founder George Halas, will have their ownership distributed among her children and controlled by her eighth-oldest child, George McCaskey, who is currently the team's chairman.

"Ganis stated that the league's decision-makers have a significant stake in the outcome, as they are not just employees with voting rights but are making decisions with a long-term perspective in mind."

Private equity's role

Goodell has favored allowing private equity ownership for the first time due to limited franchise turnover and soaring valuations. Last week, NFL owners voted to allow select private equity firms to buy up to a 10% stake of a team. Each fund or consortium will be able to do deals with up to six teams.

The Miami Dolphins, the Bills, and the Los Angeles Chargers are likely to explore selling minority stakes to private equity, with the Bills considering selling up to 25% of the team in total.

Spokespeople for those three teams declined to comment.

The initial firms approved to invest are Ares Management, Sixth Street Partners, and Arctos Partners, as well as a consortium comprising Dynasty Equity, Blackstone, Carlyle Group, CVC Capital Partners, and Ludis, founded by investor and former NFL running back Curtis Martin. This list is likely to expand in the future, said Tracy Gallagher, head of private investments at Arta Finance, a digital wealth management platform.

"Gallagher stated that the NFL prioritized liquidity in its first step towards expanding buyer options."

Private equity ownership is being approached with caution by the league, with the NBA, NHL, and Major League Baseball allowing up to 30% ownership, while the NFL limits ownership to 10% with select firms and plans to take a portion of the carry.

"Robert Kraft, owner of the NFL's New England Patriots, stated in a CNBC interview on Aug. 28 that he believes our league is unique due to having 32 individual owners. He emphasized the importance of preserving the league's special culture and not making any changes that could negatively impact what makes it great."

"The ownership groups with big families are facing real problems with illiquidity, which require them to solve unique issues. We thought that this could be an excellent source of capital and could be done in a functional way without affecting the team's operation," he said.

CNBC reported that Kraft stated the league's reluctance to permit more than 10% private equity ownership was due to emphasizing teams' contributions to their local communities rather than prioritizing financial gains.

"From our perspective, keeping the investment under control is achievable by limiting it to 10%," he stated.

Even though NFL franchises have a clear upward valuation trajectory, the league's onerous restrictions may limit investment interest, according to Gallagher.

"According to Gallagher, these assets are valuable, but private equity managers profit from carry. If a portion of that is removed, it reduces their motivation to acquire these assets."

Private equity firms typically have downside protection and board seats in standard investments, but the NFL currently has no plans to grant governance rights to these firms.

Gallagher stated that it would be fascinating to observe the specific investments that funds are making and how they safeguard these investments to generate profits for their investors.

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