Arctos co-founder on the future of private equity in sports
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Private equity keeps pushing deeper into sports, with all major North American leagues now allowing at least some form of institutional ownership.
State of play: Axos spoke with Ian Charles, co-founder and managing partner of Arctos Partners, which has deals with such clubs as the Buffalo Bills, the Golden State Warriors, and the Boston Red Sox.
- What follows is an edited transcript of our conversation, which touches on everything from the NFL to college sports to PE competition:
Q. Are we going to see lots of NFL private equity deals in 2025?
Charles: "I don't expect a significant wave of activity. The ecosystem is relational, not transactional. And you're often dealing with generational family assets. So these things take a lot of patience and time to make sure you're the right partner for that control ownership group — however they define it."
Also, remember the NFL's rules are different than the other leagues. You have to partner with the controlling owner, and then can only get a deal approved four times a year. Institutional capital cannot solve individual LP liquidity in the NFL today."
Are you worried about exits, given the inability to sell to other sponsors?"
"We've never assumed we would be selling to another sponsor. We might someday, and the rules allow for it in the other four big North American sports leagues, but you need a tremendous amount of market maturity and institutionalization to take place before that's robust."
What role do you expect private equity to play in college sports?
"I hope the answer is zero.
The collegiate landscape is very unstable and unpredictable, which is stating the obvious. And anyone who tells you they know how it's going to play out is not being authentic or they're delusional.
The idea that putting a piece of structured paper or pref paper or loan structure on top of nonprofit institution that doesn't have institutional-grade business leadership … the idea that's a stabilizing thing or a healthy thing I find very hard to believe."
Have you gotten inbound interest for college deals?
"Of course we have. What we've said to everyone is unless we can figure out a way together to bring stability to the situation we're not comfortable.
There will be a couple of deals that get cut in college athletics, and it may break an institution that matters to a community in this country, which isn't a good look for private equity.
Their pitch is we will help you grow your revenue, but that's a very low-credibility pitch. Most of the revenue streams at these universities are locked for long horizons. The media contracts are done at the league level. No sponsor is going to help you on ticketing. No sponsor is going to materially help you on sponsorship. Those are the big levers of value creation."
Do you expect to see more Arctos-type firms emerge?
"Competition is more likely to come from big global institutional platforms, because of the rules of the big five North American sports leagues and scale of capital required. It's going to be very hard for a de novo fund to be created.
That's why emergent players are focused on the broader sports ecosystem, like youth sports and sports data and emerging leagues. Because there are no institutional barriers and they can actually deploy capital."
What should sports fans think about private equity buying into their favorite team?
"In the big five North American leagues, the only thing institutional capital is allowed to really have a voice in is everything away from the field, the court, or the ice. It's just around the business and in collaboration with the controlling owner.
If they want our help to reimagine the fan experience, the venue, or sponsorship strategy, we'll help. But our job is to serve the owners that we partner with, not tell them what to do."
