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MLB owners voted this summer to increase the private-equity ownership limit for teams to 20%, up from 15%, a source familiar with the matter told Front Office Sports. The change was not publicly announced.
The revision was specifically made to match the NBA’s approach, where the PE limit is 20% unless the controlling owner owns less than 20%, in which case the percent the controlling owner has is the limit. (So if a team’s controlling owner holds 19% of a team, a private equity firm cannot own more than 19%.) Under a separate MLB rule, the controlling owner must own at least 15%.
The NBA, NHL, and MLS allow one private equity firm to own a maximum of 20% in a franchise. Forbes contributor Maury Brown first tweeted out the MLB rule change Tuesday night.
The NBA allows the same private equity firm to invest in as many as eight teams—it was previously five, but the league increased the number earlier this year. MLB does not have a cap on how many teams one private equity firm can invest in, as long as each stake is 20% or less.
More recently, the NBA revised its private equity rules to allow a firm and its executives to invest at the same time, a different source confirmed. That change, which was made in part to allow for Josh Kushner’s investment firm Thrive Eternal to invest alongside him in his deal to buy the Lakers, was first reported by Bloomberg.
The NFL, when it began allowing PE investors one year ago, capped it at 10%, and only approved four firms to invest in teams. Seven NFL teams now have brought on private equity investors, most recently the Seahawks and Falcons.
The league has not added any new approved firms, a source told FOS, although Apollo—which is not yet among the approved firms—has expressed interest in investing in the NFL.
Around 10 MLB teams have added private equity investment, and close to 20 have some kind of private equity connection, like the Padres, which were just purchased by the cofounder of Clearlake Capital. Other teams that have direct PE investments include the Giants and A’s, the latter of which reached a deal with Mark Cuban’s Harbinger Sports Partners in July.
The latest example is Apollo Sports Capital, which injected $2.6 billion into the Yankees in a deal that closed last month.
“They thought there could be a need for growth capital, refinancing existing debt, and just doing an overall holistic capital solution to give them various levers to pull financially to help grow the club,” Apollo chief strategy officer Sam Porter said onstage earlier this month at FOS’s Asset Class event when asked why the Yankees needed $2.6 billion from Apollo. “What they do with it, they have a lot of latitude and leeway to use that to help grow the club and grow the business, and obviously standard refinancing of existing debt is part of that.”
Dave Checketts, a veteran sports executive with long tenures running the Knicks and Jazz, previously told FOS that rising valuations will ultimately force leagues to “open up” limitations on private-equity ownership.
