NFL feeding itself to the sharks (Private Equity)

[bigduke6]

3 hours ago, WhitewalkerInPhilly said:

Oof. Private equity is the equivalent of the  Richard Gere in Pretty Woman/Gordan Gecko 80s stereotype of running the companies they get a stake in to the proverbial chop shop.

 

Remember Red Lobster a few months ago? They got acquired by private equity who sold the real estate their locations were built on from under them. They will have the companies they bought take on debt to purchase assets the firm can flip for a profit and then leave the company they used to borrow against out to dry

 

And the owners were ok with this?!?

greed gonna greed.   now the super millionaires and billionaires of the NFL arent stupid,  they didnt become that rich by being lazy and dumb,  so theres a good chance that this possible deal wont go south.  stranger things have happened to greedy people though.  more becomes an addiction,  that can at times lead to disaster.

[CoudyBills]

On 8/29/2024 at 1:50 PM, BarleyNY said:

Yes, that’ll probably be the way it works initially. Once owners get a taste of PE money they’ll want more and more of it. 10% is only the beginning. I wonder which team the Saudi Wealth Fund will get a chunk of. 

All of them eventually

[Shortchaz]

On 8/29/2024 at 1:48 PM, GoBills808 said:

i don't think so, not exactly

 

after salaries and operations spending is accounted and you add in revenue teamsare probably clearing $75-$100M once the NFL sends over the TV deal check

 

i think they like the fact that it basically runs itself...yes there are bigger returns to be made but I doubt you'll find much easier, it's very attractive investment imo

 

the nfl prints

This is like that old joke where someone talks about how much money Michael Jordan makes and what one could do with that much money and how much it breaks down to in dollars per second etc. The punchline is something like, bill gates makes 100 times that. 
 

nvidia netted more money last quarter than the NFL grossed all of last year. 

[Rigotz]

As a person who works in Finance, let me give you the scoop on what this actually means. It means nothing.

 

PE/VC funds are simply groups of wealthy people who are looking to make a profit. A good example is Josh Harris buying the Redskins alongside his friends instead of having one incredibly toxic owner in Daniel Snyder. Same applies to old school owners like Jerry Jones, Virginia McKaskey, etc.

 

Diluting that power and selling to the highest bidder is a good thing. I’ve never been a fan of someone inheriting businesses that are passed down from their “grandpappy” and run by privileged children who don’t know a thing about business or life. Just because something is old doesn’t make it good. PE/VE funds are solely interested in maximizing returns and there is always a high correlation between winning and profitability, so you know what you’d be getting and it isn’t some old egomaniac or his/her bratty kids.

[oldmanfan]

20 minutes ago, Rigotz said:

As a person who works in Finance, let me give you the scoop on what this actually means. It means nothing.

 

PE/VC funds are simply groups of wealthy people who are looking to make a profit. A good example is Josh Harris buying the Redskins alongside his friends instead of having one incredibly toxic owner in Daniel Snyder. Same applies to old school owners like Jerry Jones, Virginia McKaskey, etc.

 

Diluting that power and selling to the highest bidder is a good thing. I’ve never been a fan of someone inheriting businesses that are passed down from their “grandpappy” and run by privileged children who don’t know a thing about business or life. Just because something is old doesn’t make it good. PE/VE funds are solely interested in maximizing returns and there is always a high correlation between winning and profitability, so you know what you’d be getting and it isn’t some old egomaniac or his/her bratty kids.

Can you explain how a PE firm would generate profit from a 10% stake?  My understanding and experience from seeing PE firms buy medical practices is that they come in, increase charges to patients, slash employees and/or require much longer working hours, pressure health care professionals to go to more high cost treatments to generate revenue, and so on.  And then sell out to the next guy so they can take our profit.

 

I am not sure how, in the NFL model, a PE entity will generate the kind of rapid ROE they typically want.  Plus I just  think it’s the top of the iceberg.  Now it’s 10%.  How long will it take to be 20%?  Or 50%?  Or eventually a majority stake?

[mjd1001]

On 8/29/2024 at 1:24 PM, SoonerBillsFan said:

Not with a new stadium being built.   Maybe with that extra cash flow, Terry would have put a dome on the new stadium?

For 15 years. But after that, i think all bets are off.

 

I do not know the 'buy out' with this new stadium.  But if things keep going the way they are, growing cities like Austin, San Antonio, Oklahoma City, Raleigh/Durham...they are already bigger/more populated than Buffalo and at the rate they are growing, they might be REALLY far ahead in 15 years in population, GDP, TV market size, etc.   Yes, there still is Toronto, which is still growing at a rate of adding 1/2 of the population of the city of Buffalo each year (albeit to the 'metro area'.)

 

All you need is one of those places to say they are going to build a $4-5 billion dollar stadium (todays cost) and one billionaire owner.  The other NFL owners probably wouldn't think twice when they see the populations figures/wealth of those areas and see how much more it would mean to the entire league's bottom lines.

 

I'm not trying to bring people down. I'm not saying this WILL happen for sure. The Bills are safe here 'for a while' and we all should enjoy it.  Its just to say the Bill will be here for 20-30 years because of a new stadium is a little bit naive to me.

[Rigotz]

57 minutes ago, oldmanfan said:

Can you explain how a PE firm would generate profit from a 10% stake?  My understanding and experience from seeing PE firms buy medical practices is that they come in, increase charges to patients, slash employees and/or require much longer working hours, pressure health care professionals to go to more high cost treatments to generate revenue, and so on.  And then sell out to the next guy so they can take our profit.

 

I am not sure how, in the NFL model, a PE entity will generate the kind of rapid ROE they typically want.  Plus I just  think it’s the top of the iceberg.  Now it’s 10%.  How long will it take to be 20%?  Or 50%?  Or eventually a majority stake?

I can definitely explain and it seems like you already have a good understanding of what they do.

 

You’re also correct that most PE/VC firms are looking for 20%+ returns, so they’re rarely looking to invest in “mature” businesses that are difficult to turn around. I think we should be more defined here saying I’m mostly talking about Private Equity firms. VC firms invest in younger companies. 

 

The mega-PE firms like Blackrock, TPG, Carlisle, etc. are willing to invest in ANYTHING that they believe is undervalued. Often you will see public companies (think of Apple, Microsoft, etc.) go from publicly traded to going private (100% owned by PE firms and they no longer have a stock ticker). PE firms do this because they essentially think the public got it wrong when valuing a stock. Maybe the management team sucks. Maybe they’re doing a bad job marketing. Maybe they haven’t put a new or compelling product in the market in 20 years and they’re just surviving.

 

NFL teams can be seen the same way. Think about awful owners who have been around for 50+ years and have lost touch with how to put a competitive or fun product on the market, which has decreased the value of the franchise. These funds will do everything they can to rehab the franchise and increase its value.

 

Hope this helps. It’s an often misunderstood industry because so many tiny PE/VC shops buy up legacy small businesses, strip them for parts, and dissolve them for profit. It’s not really a fair perception to apply to all investment firms.

[Lost]

1 hour ago, Rigotz said:

As a person who works in Finance, let me give you the scoop on what this actually means. It means nothing.

 

PE/VC funds are simply groups of wealthy people who are looking to make a profit. A good example is Josh Harris buying the Redskins alongside his friends instead of having one incredibly toxic owner in Daniel Snyder. Same applies to old school owners like Jerry Jones, Virginia McKaskey, etc.

 

Diluting that power and selling to the highest bidder is a good thing. I’ve never been a fan of someone inheriting businesses that are passed down from their “grandpappy” and run by privileged children who don’t know a thing about business or life. Just because something is old doesn’t make it good. PE/VE funds are solely interested in maximizing returns and there is always a high correlation between winning and profitability, so you know what you’d be getting and it isn’t some old egomaniac or his/her bratty kids.

 

Greedy billionaire owners vs. Greedy college interns working in finance.    Greed is in all of us, it's not exclusive to Billionaires.   Some just have a lot more of it than others.    And a PE firm can be just as toxic as a single owner and be just as clueless at running a football organization.   Picking out the worst examples doesn't automatically make the argument valid.  

[SoonerBillsFan]

3 hours ago, mjd1001 said:

For 15 years. But after that, i think all bets are off.

 

I do not know the 'buy out' with this new stadium.  But if things keep going the way they are, growing cities like Austin, San Antonio, Oklahoma City, Raleigh/Durham...they are already bigger/more populated than Buffalo and at the rate they are growing, they might be REALLY far ahead in 15 years in population, GDP, TV market size, etc.   Yes, there still is Toronto, which is still growing at a rate of adding 1/2 of the population of the city of Buffalo each year (albeit to the 'metro area'.)

 

All you need is one of those places to say they are going to build a $4-5 billion dollar stadium (todays cost) and one billionaire owner.  The other NFL owners probably wouldn't think twice when they see the populations figures/wealth of those areas and see how much more it would mean to the entire league's bottom lines.

 

I'm not trying to bring people down. I'm not saying this WILL happen for sure. The Bills are safe here 'for a while' and we all should enjoy it.  Its just to say the Bill will be here for 20-30 years because of a new stadium is a little bit naive to me.

Oklahoma Storm has a nice ring to it 🙂

[billsfan89]

On 8/30/2024 at 12:23 PM, Jauronimo said:

I understand that private equity, Blackrock, and our financial system in general represents the boogey man for many people but in my experience of providing services for many a PE deal I see quite a few transactions where the target is a company with serious growth potential in need of the access to capital and stewardship from a PE partner to take things to the next level. 

 

Of course I also see the deals where PE buys a floundering company.  Usually the first to get fired are the old management team.  These are companies that are usually dead men walking.  The idea of corporate raiders enacting hostile takeovers and scrapping healthy companies for parts is highly inconsistent with my nearly 20 years of transaction services.  

 

Can't do much raiding with a minority stake in an entity where pretty much any major decision requires the approval of 31 other owners.  This is all about owners giving themselves an opportunity to de-risk the fact that a majority of their wealth is tied up in a franchise and get an infusion of cash when needed.  

 

 

 

Leveraged buyouts have really made Private Equity have a terrible reputation. There is a need in the market for companies with good products/services that need capital to scale up their production to have PE firms provide capital for them at a loan cost or percentage stake. But leveraged buyouts seems like shady ways for PE firms to make money without providing any value for what they do. In my opinion leveraged buyouts should be illegal, if PE firms want to buy a company outright and strip it's division out and sell them fine I don't see an issue as those divisions will be incorporated into other companies and still provide those services. But leveraged buyouts just seem to provide no actual value to anyone but the PE firms and hurt the companies who are driven out of business because they were saddled with debt and management fees by these PE firms. 

[WotAGuy]

On 8/29/2024 at 1:40 PM, MJS said:

Popularity is at an all time high. The entire nation is shoveling money toward the NFL. Players get paid way more. Coaches get paid way more. Owners make way more money. The game is safer.

 

I'm struggling to think of what's worse.

The attitudes of fans on message boards?

[Jauronimo]

19 hours ago, billsfan89 said:

 

Leveraged buyouts have really made Private Equity have a terrible reputation. There is a need in the market for companies with good products/services that need capital to scale up their production to have PE firms provide capital for them at a loan cost or percentage stake. But leveraged buyouts seems like shady ways for PE firms to make money without providing any value for what they do. In my opinion leveraged buyouts should be illegal, if PE firms want to buy a company outright and strip it's division out and sell them fine I don't see an issue as those divisions will be incorporated into other companies and still provide those services. But leveraged buyouts just seem to provide no actual value to anyone but the PE firms and hurt the companies who are driven out of business because they were saddled with debt and management fees by these PE firms. 

You have a problem with the financing?  Defunct companies don't pay principal, interest, or management fees.

On 8/30/2024 at 3:22 PM, SoCal Deek said:

Understood....but see my post above. The NFL is not like other industries. Where's the growth potential for the Buffalo Bills? The team is essentially a branch office  of a larger league. They are not allowed to 'grow' into Cleveland for example. The better analogy might be if a PE firm bought into a single branch office of a large accounting firm. That branch isn't allowed to 'grow' into the sales/client territory of a neighboring branch, nor would they be allowed to set off on a new marketing or branding strategy.

NFL franchises appreciate in value at incredible rates.  Where's the growth potential in a single family home? If there is money to be made, PE is on it.

 

Plus there is the cool factor.  I would bet a 10% stake gets some PE big wigs a lot of perks and access.  Maybe Blackrock gets a day with the Lombardi if their team wins?

[billsfan89]

28 minutes ago, Jauronimo said:

You have a problem with the financing?  Defunct companies don't pay principal, interest, or management fees.

 

Many times a Leveraged Buyout will include the business its self borrowing money to purchase its self, this is called a Management Buyout. A PE Firm will come in and put up 15% of the money but run the company which just borrowed money to pay for its self. That type of financing scheme should be illegal buy the company outright or don't buy it at all. These are companies that are usually profitable or only recently undergoing harder times. Many times like Toys R Us the companies could have stayed in business had they been able to put money into the infrastructure or operations of the company instead of the large debt/interest payments. 

 

So these companies will be saddled with tons of debt while the PE firms put up a small percentage to buy the firm and then make that money back by charging the company management fees and stripping away the the profitable entities and taking their cut from those sales. This adds no value because the companies go out of business largely because of the useless debt they took on and all the management fees. 

Edited September 1 by billsfan89

[Jerome007]

On 8/29/2024 at 6:31 PM, GoBills808 said:

😂😂Is that why the owners are inviting them in? For love of the game?

You know you can both love the game and want to max out profits. You're a commie or something?

 

Do you doubt JA17 loves the game? Yet he will negotiate for all the money he can get. As all players do. Or most anyone. Why would the owners not want that? But sometimes short term gains can be detrimental to long term goals! Owners letting these sharks in could backfire for them.

[Saxum]

On 9/1/2024 at 8:09 PM, Jerome007 said:

You know you can both love the game and want to max out profits. You're a commie or something?

 

Do you doubt JA17 loves the game? Yet he will negotiate for all the money he can get. As all players do. Or most anyone. Why would the owners not want that? But sometimes short term gains can be detrimental to long term goals! Owners letting these sharks in could backfire for them.

 

Some owners may way want private equity funds for they cannot keep up with the Jones (and other owners) in paying signing and other bonuses at rate they have gone up.