You know how you like to gather a group of buddies in front of the flat-screen TV with some good beer and a plate of nachos to watch the game?
Well, the team of attorneys who helped structure the deal to bring four new minority investors into Arthur Blank’s Atlanta Falcons franchise was kind of like that—minus the TV, beer and nachos and plus a whole lot of paper and phone calls.
That’s because many of the lawyers on the deal used to practice together at King & Spalding. Michael J. Egan III, who represented Blank, still works there. Lead counsel for the four investors, Tyler B. Dempsey, spent nine years at K&S before joining Troutman Sanders in 2008. William B. Shearer III, the general counsel of United Distributors, a company headed by one of the new minority investors, was at King & Spalding until about a year ago.
As Egan put it, when he was with opposing counsel on this deal, “You’d often find yourself sitting around talking about things you’d be discussing if you were watching the game with a friend.”
Dempsey said that these negotiations, like most, had moments of conflict. But, he added, “Probably because a lot of the reason these [minority investors] are doing it is for fun, it wasn’t as heated as some of these are.”
In general, Egan said, negotiations involved discussions of when minority investors may or must liquidate their interests; what participation rights and perks minority investors receive; some tax issues related to investing in a limited liability corporation, which is the Falcons’ business structure; and the National Football League’s investor approval process.
“The NFL is very, very strict about who they will have as an owner, even a small owner of one of their teams,” Egan said. “There’s a detailed questionnaire that has to be filled out and submitted to the league, to the financial committee [on which Blank serves]. … They approve not just the people, but they review all the documents and they have to be satisfied with the structure of the deal.”
Egan said that Blank, a co-founder of Home Depot, retains “better than 90 percent control” of the Falcons. The team already had two minority owners—John P. Imlay Jr. and John A. Williams—prior to this transaction. The new minority owners are all local business leaders.
They are: Ronald E. Canakaris, chairman and chief investment officer of Montag & Caldwell, an investment management services company based here; Douglas J. Hertz, president and CEO of United Distributors, a beverage distributor based in Smyrna; Ed Mendel, co-founder of investment-related firms Ned Davis Research Group and Davis, Mendel & Regenstein Inc.; and Derek V. Smith, the former chairman and CEO of ChoicePoint Inc.
Neither Egan nor Dempsey would reveal the value of the transaction. Forbes valued the Falcons franchise at $872 million in September 2008; Blank paid $545 million for the Falcons in 2002.
Forbes, Egan said, has valued NFL teams for years. “If you go back 15 years … the average NFL team has appreciated almost 14 percent per year, and that’s a pretty good investment for something where you get to have a lot of fun, too. All four of these [minority investors] are pretty savvy businessmen. They wouldn’t invest just for fun.”
Dempsey pointed out that a large proportion of sports revenue is derived from media sales. In this era of TiVo, an NFL game is one of the few things people watch live, which makes it a very attractive advertising vehicle. “So there are all these business reasons it is a solid investment,” Dempsey said of why the minority investors were interested in the deal. “And it’s fun—they’re all Falcons supporters and fans.”
Egan said that Blank wanted to bring in more minority investors because he was “looking for some liquidity to fund his foundation further during his lifetime. So that’s really the primary motivation behind this.”
The Arthur M. Blank Family Foundation is a charitable group focused on helping Georgia families and enhancing community life.
In addition to Egan, King & Spalding associate Chirag P. Shah also worked the deal on behalf of Blank, as did tax lawyers Peter J. Genz and Svetoslav S. Minkov.
Dempsey’s team at Troutman included tax partner Robert A. Friedman in the firm’s New York office and associate Brian A. Teras on corporate matters.
“It was interesting,” said Dempsey. “At the end of the day, the documents looked pretty much the same [as for any other deal], but for some reason it’s a lot more fun when the Falcons are involved.”