Investing in Sports Franchises: Legal, Governance and Structural Considerations
To listen to an audio recording of this article, click here.
Introduction
Over the past decade, professional sports teams have evolved into one of the most compelling alternative asset classes in global finance. Once regarded primarily as trophy assets, sports franchises are now increasingly recognized for their long-term appreciation potential and strategic role within diversified investments. As interest accelerates, it is essential to understand not only the drivers behind increasing valuations but also the legal, governance and regulatory frameworks that shape who can own sports franchises, how investors participate economically and how and whether they can ultimately exit.
In Canada, these dynamics are particularly pronounced. With a limited number of franchises across major leagues and deeply entrenched fan bases, Canadian teams represent some of the most stable and valuable assets in the global sports ecosystem. Assets such as the Toronto Blue Jays (Major League Baseball or MLB), Toronto Maple Leafs (National Hockey League or NHL), Montreal Canadiens (NHL) and Toronto Raptors (National Basketball Association or NBA) are among the most prominent and valuable sports franchises in their respective leagues, reinforcing the scarcity premium associated with Canadian ownership opportunities. As a result, access to ownership stakes remains exceptionally limited and highly competitive, and transactions typically involve bespoke structuring, negotiated governance arrangements and league-driven approval processes that can differ meaningfully.
The Rise of Sports as an Asset Class
Professional sports franchises occupy a rare position in the investment landscape. Acquisition opportunities are inherently scarce with occasional expansions and significant barriers to entry. League-imposed restrictions on ownership reinforce exclusivity and further intensify competition among prospective buyers.
Beyond scarcity, sports franchise valuations are supported by sophisticated and diverse revenue streams, including media, streaming and broadcasting rights, ticketing, sponsorships and commercial partnerships, licensing and merchandising, and in some cases real estate development tied to stadiums and surrounding districts.[1] These revenue streams are often embedded in interconnected operating entities, related-party arrangements and venue/real estate structures, which can complicate diligence and require careful attention to how cash actually flows within an ownership platform.
Notably, even during periods of broader market volatility, sports franchises have demonstrated resilience by maintaining stability and long-term growth, all of which have led to the sustained rise in team valuations across major global leagues. Canadian sports franchises benefit from strong national broadcast arrangements, integrated ownership structures and consistent market demand, which contribute to stable and growing enterprise values across professional sports. These characteristics have made sports teams increasingly attractive to long‑term capital seeking downside protection and brand‑driven upside.
Importantly, the appeal of sports franchises extends beyond purely financial returns. Investors are often drawn to the intangible benefits of ownership, including global brand visibility, access to elite business and social networks, legacy building, philanthropic and community impact, and the opportunity to align investments with a personal passion for sports.
Why Investing in Sports Teams Is Different
Unique Investment Characteristics
Investments in sports teams materially differ from traditional operating companies. Notably, transactions are less common (although becoming more frequent),[2] ownership stakes are tightly controlled and exit opportunities are limited. As such, investors must be prepared for long holding periods, illiquidity and constrained flexibility. Investment theses are therefore typically anchored in long-term capital appreciation with value realized over extended periods of time, rather than short-term cash flow generation.
League Overlay
A central differentiator in sports investments is the influence of leagues. Governance frameworks differ across professional sports leagues, with each shaping many aspects of ownership, including investor eligibility, capital structure and economic outcomes.
Governance and Ownership Rules
From an investment standpoint, league rules may set minimum ownership thresholds, limit institutional participation, cap the number of teams an investor may own, and govern the size and composition of ownership groups, including restrictions on the number of limited partners. Approval is often discretionary rather than mechanical, and league feedback can drive changes to deal structure, ownership composition, governance rights or closing timelines late in the process.
Ultimately, leagues retain broad discretion over investor approval, and prospective owners are routinely subject to extensive vetting processes, which assess, among other things, financial capacity, strategic alignment and reputational considerations.[3]
For Canadian investors, these factors are often layered with cross-border complexity. Many leagues operate within U.S.-centric frameworks, requiring Canadian stakeholders to address additional tax, currency and structuring considerations when acquiring or holding ownership interests. The right structure can affect tax, financing flexibility and the ability to transfer or reorganize holdings over time.
League Economics
Leagues also play a pivotal role in shaping their sports franchises’ financial outcomes. Revenue-sharing systems are designed to promote competitive balance by redistributing income across the league. Additionally, many leagues centralize their media and broadcasting rights, negotiating lucrative deals that are then distributed among sports franchises. The enforcement of salary caps and luxury taxes regulates owner spending on players, while collective bargaining agreements define labour relations and cost structures. For example, the NHL’s hard salary cap and escrow system create a uniquely disciplined cost structure, which can reduce volatility but also constrain short-term upside. Investors must therefore evaluate team performance and valuation within the confines of league‑mandated economic systems, rather than traditional free‑market assumptions.
Recent league rule changes have also facilitated increased institutional participation. Since 2019, major North American leagues have loosened restrictions to allow private equity firms to acquire minority stakes in teams, with minority investments now accounting for a significant portion of deal activity. See our earlier article which discusses the trend of institutional participation further: Investing in Canadian Sports Teams: Private Capital and the Investment Canada Act. These developments have introduced new regulatory and approval considerations, particularly where foreign capital or regulated investors are involved.
The Changing Capital Structure of Sports Teams
Evolution of Ownership
Historically, sports teams were controlled by ultra-high-net-worth individuals or family groups holding majority positions. Ownership was largely concentrated, with access to the asset class limited to a small pool of buyers. However, the ownership model has significantly evolved in recent years.
As a result of the “Big Four” leagues in North American professional sports (MLB, NBA, NHL and the National Football League) introducing new frameworks permitting private capital investment, minority ownership stakes have become increasingly prevalent, opening the door to a broader range of potential investors, including institutional firms, private equity, sovereign wealth funds and international capital.
Canadian ownership structures provide a notable example of this evolution, particularly through integrated platforms such as Maple Leaf Sports & Entertainment, which owns the Toronto Maple Leafs, Toronto Raptors, Toronto FC (Major League Soccer), Toronto Argonauts (Canadian Football League) and other assets, and reflects a diversified, multi-asset ownership platform combining sports, media and real estate assets within a single integrated capital structure. Recent NHL transactions, including the acquisition of the Ottawa Senators by a consortium led by Michael Andlauer, further illustrate the continued shift toward group ownership and institutional participation.
Ownership structures are now larger and more complex, often comprising multiple stakeholders with varying levels of influence and economic participation.
Benefits of the Evolving Capital Stack
The shift in capital structure has created several advantages for ownership groups. For controlling owners, the ability to sell partial interests provides them liquidity without being forced to completely relinquish their control. For minority stakeholders, lower capital requirements have increased exposure to the asset class and made participation more accessible. Investors also have the ability to diversify their exposure by allocating capital across multiple teams, leagues and geographies. The sports franchises themselves benefit from this influx of capital, which can be deployed toward infrastructure projects, commercial expansion and strategic initiatives. This added financial flexibility allows sports franchises to invest in stadiums and facilities, team development and global brand-building efforts, which in turn enhance their competitive positioning, fan engagement and long-term value.
Limitations and Risks of Minority Investments
Despite these advantages, there are significant constraints involved in minority ownership. These investors typically have limited voting rights and influence over key decisions (including day-to-day operations). Board representation may be restricted with minimal access to detailed operational information. As a result, minority stakeholders generally assume a passive role and must rely heavily on the controlling owner’s governance, strategy and execution. Unilaterally exiting a minority position poses a further challenge as league approval is often required for transfers of ownership. Minimum holding periods and transfer restrictions may also apply, reinforcing the illiquid nature of the investment. These factors underscore the importance of careful structuring and thorough due diligence before making minority investments.
Conclusion
As professional sports franchises continue to develop as an asset class, they are attracting growing interest and participation from private equity firms, institutional investors and global capital pools seeking differentiated returns and strategic exposure. However, success in this space requires more than capital alone. Investors must develop a comprehensive understanding of league governance frameworks, ownership constraints and the economic dynamics that underpin the industry. In particular, investors must carefully assess minority ownership dynamics, long-term capital structure considerations and the limited liquidity inherent in these investments.
Ultimately, investing in sports teams is not a conventional financial strategy. It is a specialized, relationship-driven asset class at the intersection of media, entertainment and institutional capital. Those who approach it with discipline, insight and a long-term perspective are best positioned to capture both its financial and intangible rewards.
The Sports, Media & Entertainment Group at Aird & Berlis LLP advises clients on private capital investment, team ownership transactions and related matters in professional sports. The group continues to monitor recent transactions to see these dynamics playing out across the world of sports. Stay tuned for future insights regarding common transaction structures, league approval processes, governance and economic rights negotiated in deals, and the practical challenges around liquidity and exits. Please contact the authors if you have questions or require assistance.
[1] Sports Franchise Valuation: Key Factors & Methods Explained
