The Denver Broncos are about to launch the most expensive sale in professional sports history.
Depending on whom you ask, that’s either a hundred-million-dollar question, or a billion-dollar question—one that Allen & Co. will be in charge of answering.
The sale comes amid a seismic shift in U.S. team ownership. Facing soaring valuations and declining LP interest, the NBA, NHL, MLB and MLS all changed their bylaws to allow institutional investors. The NFL, by contrast, has stood pat, making small tweaks to existing rules but upholding the basic barriers to entry: Joining the exclusive club nowadays requires being a highly-liquid multi-billionaire.
Sportico spoke to roughly a dozen bankers, lawyers and NFL insiders about the upcoming sale, several of whom were granted anonymity as they were not authorized to speak on the subject. Most agreed that whoever buys the franchise will need at least $2 billion in cash, and maybe a lot more. That’s a tall ask, even for buying into a business as strong as the NFL’s. Clues to just how tall came with the last franchise sale, when David Tepper paid $2.28 billion for the Carolina Panthers, well below early expectations.
Has the league grown too big to sell?
“Let me rephrase the question: Can you name a single situation where there’s a human spending $3 billion in cash on anything?” said one of the bankers, who’s done team sales in multiple leagues. “It’s Elon Musk going to space. It’s crazy stuff…. The NFL is crushing it, the team is profitable, you get an annual return, but it really boils down to who shows up, and where they are from a liquidity standpoint.”
A number of insiders expressed some skepticism that this sale would end up as a competitive bidding process among a group of wealthy suitors. The NFL declined to comment. A representative from the team, now controlled by the trust of late owner Pat Bowlen, didn’t respond to multiple requests.
The likely answer is that the NFL has not hit a price ceiling—at least not yet. There are already people showing early interest, and the market has known for months that a sale was probable, allowing prospective buyers time to free up capital.
No matter what, the price will shatter the previous record sale set by the Panthers in 2018. Sportico conservatively values the Broncos at $3.8 billion, No. 11 in the 32-team league.
Broncos representatives have already interviewed sell-side bankers, and CEO Joe Ellis, who is also a trustee, has said an announcement on the team's ownership future would come after a new head coach is hired (which was done on Thursday). Once a banker is in place, an offering memorandum will become available to prospective buyers detailing the team’s assets and finances.
"Can you name a single situation where there’s a human spending $3 billion in cash on anything? It’s Elon Musk going to space. It’s crazy stuff."
NFL Business Boom
The sales pitch is easy. NFL franchises almost never come up for sale—the Panthers are the only team to change hands during the past seven years, and the three prior sales (Buffalo, Cleveland and Jacksonville) were all franchises that rank among the seven least valuable. Franchises are also very profitable—each NFL club received a record $309.2 million share of national revenue last season before adding its own local income. There’s also labor peace guaranteed through 2030, $113 billion worth of new TV deals, and a massive tax write-off on deck for the buyer.
Beyond the economics, the Broncos are located in a popular city, near a number of mountain towns popular among the ultra-rich. The next closest NFL city is more than 500 miles away (Kansas City) and it’s the first team in the Western U.S. to sell since the Seattle Seahawks in 1997 (for $194 million!).
The only red flag might be the team’s stadium, which opened in 2001 and will likely require renovations costing hundreds of millions of dollars.
The NFL allows up to $1 billion in debt for a team acquisition and requires the lead owner to hold at least 30% of the equity in the team. At a $4 billion sale price, that means the controlling owner needs at least $1.2 billion in cash, but most people familiar with these transactions say that number is misleading.
A buyer with $1.2 billion in cash and $1 billion in debt would still need to find $1.8 billion in minority investors, which isn’t likely, with the few perks of being a limited partner. So the controlling owner will need to front far more than the 30% minimum.
There are roughly 200 Americans worth more than $5 billion, per Forbes, so there are plenty of people rich enough to cut that check. But the NFL needs buyers who are wealthy enough, liquid enough, interested in a team, willing to go through the personal financial disclosures necessary to close, and open to parking at least $2 billion in cash inside an asset that they likely won’t sell for a few decades.
The cash might be the trickiest part. Many high-profile hedge fund and private equity investors—the same people investing in leagues with lower valuations, higher debt limits and looser ownership restrictions—don’t have loads of cash on hand. It’s more profitable for them to keep it deployed. It’s rare for a family office to have $500 million in cash on hand, let alone multiple billions, and the new class of Silicon Valley billionaires has publicly shown little interest in joining the NFL club.
The pool of available limited partners is also shrinking, particularly in the NFL, which prohibits corporate ownership and private equity investment, and has almost zero investors from outside North America.
The league has studied the pros and cons of institutional investment for years, and most insiders Sportico spoke to thought the NFL would eventually get in line with the rest of the major leagues. Raising limited partnerships of $200 million is a lot trickier than LPs of $20 million.
Carolina was expected to attract bids as high as $3 billion when Jerry Richardson put the club up for auction in late 2017, but they failed to materialize. After hedge fund billionaire Tepper nabbed the team for $725 million less, the NFL did a post-mortem on the sale process and its ownership rules. The tweaks included an end to the cross-city ownership prohibition, which prevented new owners from having non-NFL teams in markets with NFL clubs. In recent years, the debt limit was raised from $350 million to $500 million, and then doubled to $1 billion specifically for new owners during a purchase.
“The table was set when the Panthers sold for what they sold for,” one NFL insider said. “People started understanding that there’s just not enough people on the planet who can write a check for that much money.”
Virtually every recent NFL team sale (the Panthers, Bills, Browns, Jaguars and Dolphins) has resulted in an individual or single family buying the team outright. That appears to be the league’s preference, and it’s unclear how soaring valuations will affect that calculus.
On one hand, limited partners don’t get much tangible return for their investment in the short term. On the other, they gain entry to the NFL orbit, an improved position for future investments, and the opportunity to capture the appreciation when it’s time to exit.
Which explains why the Broncos sale will be so closely watched. Is the cash requirement too onerous? Has the cost-benefit of minority investments swung in the wrong direction? Does the NFL need to rethink its ownership rules? Should owners care less about the value of their teams?
“It’s lazy to say, ‘Oh the NFL is hot, people are going to be tripping over themselves for the Broncos,’” one banker said. “That’s the best word I can come up with. This is going to be way more difficult than most people think.”
(This article has been updated in the third paragraph to include news that Allen & Co. will run the Broncos sale.)