Will a new charter agreement pave the way for more private equity investment in Nascar?

Dan Etna, co-chair of Herrick's Sports Law Group, spoke to BlackBook Motorsport regarding private equity investment in Nascar and the proposal for a new charter agreement. The article notes that private equity investment is becoming increasingly common in North American sports citing the recent decision by the NFL to allow institutional investment in its franchises. 

Dan discussed recent investments in Formula One noting that he "believes Nascar teams could achieve a similar run of investment if the process is managed appropriately."

“Right now, you’re starting to see more and more interest from private equity funds, but I think in order for this to make sense going forward, you’re going to need the Nascar governing body to have a little more authority,” he stated. 

“It can’t be that you bring in some foreign wealth management fund and spend without concerns … I think that’s one of the growing pains that Nascar will have to deal with, finding out a way that you’re not in a situation where you have the haves and the have nots.”

The article states that "Nascar’s ability to preserve that level playing field could be challenged by the introduction of private investment, so the series needs to ensure that there is a framework in place to prevent its competitive balance from being compromised."

“You’ll probably have a small existing ownership group and you’ll have a private equity fund, or two or three, that will address the ongoing funding needs,” Dan considered.

“You’ll probably incentivize certain management team members by having them have some sort of piece of the equity roll. But I don’t see any mass ownership by the population at large."

“I just see this like private equity want to get in [and] make sure they can achieve their agenda, whether it’s through making sure they have management rights or blocking rights.”

While the details of the charter proposal have not been revealed, there have been reports suggesting the introduction of a cost cap and permitting private equity firms to invest into a charter, which would be a considerable change to how Nascar currently operates. “Private equity funds [are] only as smart as the people that work for them,” Etna states. “I’m not quite sure how you legislate this, but I would think the governing body would want to have some sort of assurance that you’re not just having somebody come in that has a big pocket of money."

“You’d have somebody that’s part of that team, that knows which wrenches to turn [and] which bolts to replace.”

Read the full article in BlackBook Motorsport here. Access may require a subscription.