A Family Business? NFL Seeks to Control Ownership Succession Plans

Some NFL teams have been passed down generationally, staying in the same family for decades. These generational families purchased the teams for measly amounts, making their current values all the more astounding. The Halas family, owners of the Chicago Bears, paid all of $100 to establish the Chicago Bears in 1920. Further, the Mara family paid $500 to found the New York Giants in 1925. Now, the New York Giants are worth $750 million; talk about a good investment. However, for new owners purchasing their teams more recently, such as Jimmy Haslam of the Cleveland Browns, the investment is enormous. For example, in 2014, Terry Pegula purchased the Buffalo Bills for $1.4 billion, outbidding President Donald Trump and Bon Jovi.

Image Credit: Adrian Kraus / Associated Press

The NFL requires potential owners to jump through several hoops when attempting to purchase a team. NFL ownership rules say that only individuals can buy a team, which means no corporate partnerships or funds. The general partner has to put up at least 30 percent of the purchase price, which runs from hundreds of millions to billions of dollars. The buyer is also limited to the amount of money they can borrow to pay for the franchise. “The meek may inherit the earth, but you have to be a billionaire to own an NFL team,” said Marc Gaines, president of Sportscorp. The NFL discourages large ownership groups from purchasing the teams because the NFL prefers each franchise to be led by a single face. The only exception to this communal ownership, predating the NFL’s rules, is the Green Bay Packers.

While some sellers are looking for a pure transaction, others want to keep the team in the family. It’s no secret why owners would want their investment to stay within their own family. First, the accrued investment itself. Most of the NFL family dynasties purchased their teams for far less than what they are worth today. Second, when “new school” buy a team, they are barely breaking even in their investments. Third, many of the family members have been heavily involved with managing and working with the association. Fourth, many families view the franchise as a career and a hobby. League insiders anticipate that more teams will move to transfer their ownership to younger generations or new owners in the upcoming decade. In many ways, the family-owned sports franchise is not manifestly different from the family-owned plumbing supply business or catering hall. “The reality is that to have a healthy and smooth-running organization, what you need to do is build a healthy, functioning family,” says Joe Astrachan, Professor of Management and Entrepreneurship at Cornell’s SC Johnson College of Business and a family business expert. “That’s true whether it’s a family restaurant or a football team.”

Image Credit: Phelan M. Ebenhack / Associated Press

The NFL is seeking to dramatically increase penalties for teams that don’t comply with league rules about the ownership structure. The NFL is seeking the owners’ approval to enhance the rules so that there is stricter compliance. The debate comes after five longtime owners have passed away within the last three years, generating brutal legal battles in some of the cases. Rivers, of the Family Business Institute, said that “the seeds of family business destruction are sown in good times . . . in good times, family businesses become complacent. They start to read their own press clippings. They are making more money than they ever have before. They start to believe in their own legend. That is when they get in trouble and get sloppy and make mistakes. That’s when the family intrigue can come out because they bicker over money and power. It can be a pretty heady, exciting environment, but also a toxic environment if they are not careful.” To address the problems with multi-generational ownership families and succession, the NFL met with its owners on October 12 and 13. 

The meeting’s date reflects the League’s concern that it has insufficient power to enforce requirements that a single person has at least 30% equity and autonomy on all team matters. Along with the 30% rule, another rule is that if a family trust owns a team, the controlling owner must be a family member. The new regulations will not impact interfamily disputes; however, the rules may force families to develop more transparent plans that promptly address succession problems. The resolution would give NFL Commissioner Roger Goodell the power to fine teams up to $5 million at first and up to $10 million annually if they remain out of compliance after given a reasonable opportunity to fix the problem. Individual owners could be fined $2 million to start and up to $5 million annually. The resolution was tabled without a vote, but it’ll likely be revisited in the December meeting.

+ posts

'21 J.D. Candidate at the University at Buffalo School of Law

Leave a Reply

Powered by WordPress.com.

Up ↑

%d bloggers like this: