- Rules include restrictions on how much a fund can buy, how many clubs it can invest in, and how big the fund must be, according to Sportico
- MLS owners voted to change the league’s ownership rules last year to ensure better access to funds
Major League Soccer (MLS) has briefed its clubs on new rules around private equity ownership, including restrictions on how much a fund can buy, how many clubs it can invest in, and how big the fund needs to be.
The North American soccer league presented the guidelines to its teams, portions of which were viewed by Sportico. According to the sports business outlet, the measures cover four main areas: specifics for what constitutes a ‘qualified fund’, rules around the investments, governance restrictions and different deal types.
Sportico reports that groups looking to acquire stakes in MLS clubs must have raised at least US$500 million. In addition, the league is seeking diversified backers, meaning a qualified fund cannot have more than 25 per cent owned by a single investor. Sportico adds that no more than ten per cent of a fund can be invested in one club, and MLS clubs cannot make up more than 25 per cent of a fund overall.
MLS has reportedly informed its teams that it will create a shortlist of pre-qualified funds.
Any private equity investment must be more than US$20 million but cannot exceed 20 per cent of the club’s equity, according to Sportico. Furthermore, no team can reportedly have more than 30 per cent of its equity owned by funds, and no fund can own stakes in more than four teams.
Should an MLS club secure a private equity deal, funds will reportedly not be allowed to have a seat on the board, be the controlling owner, or have voting rights beyond what is required by law.
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Additionally, according to Sportico, the club’s controlling owner must have first negotiation rights should a fund chose to sell its stake, and the right to compel a sale of the fund’s interest in the event of a controlling stake sale. Funds can reportedly purchase either common equity, or senior equity instruments that don’t have debt features.
The various requirements come after MLS owners voted last year to change the league’s ownership rules, allowing investment funds to take stakes in clubs. The decision, initially reported by Sportico, was made in part to ensure teams had better access to funds at a time when income had fallen due to Covid-19.
A recent private equity deal in MLS arrived in September, with Inter Miami announcing that US investment manager Ares Management had closed on a US$150 million preferred equity investment.
Ares’ involvement was part of the agreement that saw Inter Miami’s remaining owners finalise the buyout of Marcelo Claure and Masayoshi Son’s stakes in the franchise.
