How to Bid for the N.F.L.’s Biggest Prize: Team Ownership

After the last down is played and a new Super Bowl champion hoists the Lombardi Trophy on Sunday, the focus of the National Football League will turn to another prize: the sale of one of its 32 teams. The winning bidder will pay a huge sum for a property that is as close to a guarantee of fame and fortune as there can be.

Jerry Richardson, a former professional football player who made his fortune in the food service business, is putting the Carolina Panthers up for sale after the season ends. He has owned the team since 1993, when the N.F.L. added it to the league. But last year, allegations of sexual and racial harassment against him surfaced, and amid a team investigation, Mr. Richardson announced that he would sell the team.

The next owner of the Panthers will have to be incredibly wealthy. N.F.L. ownership rules say that only individuals can buy a team — so no corporate partnerships or funds — and that the general partner has to put up at least 30 percent of the purchase price, which runs into the hundreds of millions of dollars. The buyer is also limited in the amount that can be borrowed.

“The meek may inherit the earth, but you have to be a billionaire to own an N.F.L. team,” said Marc Ganis, president of Sportscorp, who has been a financial adviser to two-thirds of the N.F.L. teams.

The last team to be sold was the Buffalo Bills in 2014 for $1.4 billion, which set a record. The Panthers are expected to fetch far more.

“The N.F.L. is the most profitable league,” said Sal Galatioto, president of Galatioto Sports Partners, who represented Dan Snyder in his purchase of the Washington Redskins in 1999 for $800 million.

He added that the league divvied up the money from national television and merchandise deals evenly among the teams. “Whether you’re in Buffalo or New York, you get the same share of revenue,” he said. “The only difference is the venue revenues.”

Each team, no matter its record, received about $244 million in 2016 from television revenue alone. Add in tens of millions of dollars from merchandise revenue, and a team has enough money for its entire payroll before a ticket is sold.

For billionaires, the lure can be enticing. But what does it take to become the next member of the exclusive N.F.L. team owners club? Here are four things buyers should consider.

When Arthur Blank, a co-founder of Home Depot, bought the Atlanta Falcons in 2002 from the team’s original owners, he committed to making the Falcons better for the city. The same could be said for Robert McNair, who worked for four years to persuade the N.F.L. to return to Houston in 2002.

“You want to determine what the primary motivation of the buyer is,” said Joseph A. Bailey III, who was the chief executive of the Miami Dolphins a decade ago, during Wayne Huizenga’s ownership of the team. He said many incentives drove bidders, including asset appreciation, a sense of civic duty, access to other owners, a legacy for family heirs or simply a love of the sport.

Mr. Bailey, who runs the sports leadership practice at RSR Partners, said that if he were consulting a buyer on the purchase of the Panthers, he would determine that motivation and structure the bid accordingly.

All N.F.L. teams generate an incredible amount of money, but not all franchises have the same aura. Jerry Jones, the charismatic and forthright owner of the Dallas Cowboys, is in a league of his own for promoting and monetizing the value of his team, which is said to be the most valuable sports franchise in the world.

He is also the only owner to have opted out of the shared revenue agreement so that he can, for example, produce Cowboys apparel on his own and keep all the revenue from it.

But if you’re not buying a team like the Cowboys, or for that matter the New England Patriots, who are vying for their sixth Super Bowl victory on Sunday, you have to consider the team’s potential. A popular team can bring in extra revenue from the fans who buy seats, hot dogs and beer at the stadium.

It all comes down to marketing. For instance, Shahid Khan, owner of Jacksonville Jaguars since 2012, has to compete with two other professional football teams and a half-dozen major college football programs in Florida.

Mr. Bailey said Mr. Khan was giving his team a more international presence to distinguish it from other teams. The team has played in London every year since 2013 — to the point where The Guardian called the Jaguars “London’s team,” a play on the “America’s Team” moniker embraced by the Cowboys.

Determining what the seller wants in a buyer isn’t always straightforward. Clint Murchison Jr., who owned the Cowboys from their creation in 1960 to 1984, had specific criteria for a buyer.

“He wanted to sell it to someone who was a Texan and lived in Dallas and had a real affinity for the state,” said Mr. Bailey, who worked for the Cowboys from 1970 to 1989.

Mr. Murchison chose Harvey Bright, a Texas businessman known as Bum, who made his money investing in oil and gas. Mr. Bright sold the team to Mr. Jones in 1989.

Some sellers want to keep the team in the family, Mr. Bailey added, while others seek “a pure transaction.” Still others look for a buyer who will allow them to remain a limited partner.

Mr. Ganis of Sportscorp said he expected Mr. Richardson to seek a buyer for the Panthers who would do right by his partners: “Knowing him, he will fulfill his fiduciary obligations to his partners, which is more in line with the highest and best proposal that is likely to pose the fewest issues to the N.F.L.”

The final factor is that the buyer has to be someone the league wants. At the end of the day, three-quarters of the 32 owners need to approve the sale of a team.

“There’s a limited group of people who are predisposed to buying a team,” said Bob Reif who was the chief marketing officer of the Rams from 2005 to 2016, during a time when they were sold and moved to Los Angeles from St. Louis. “It’s rare the N.F.L. doesn’t know who’s going to come up as an owner.”

Mr. Khan had bid on the Rams and seemed poised to prevail, but in the 11th hour, Stan Kroenke, who owned part of the team, exercised the option to buy the rest. Mr. Khan was able to buy the Jaguars, the next team that came up for sale.

“When you’re buying a team, you’re not only making a deal between you and the seller, you also have to get the blessing from the N.F.L.,” said Anthony Di Santi, global head of sports finance and advisory at Citi Private Bank. “The buyer and seller can agree on price, but if the league doesn’t like the buyer or doesn’t like the price, it’s not going to happen.”

Content originally published on https://www.nytimes.com/2018/02/02/your-money/buy-nfl-team.html by PAUL SULLIVAN