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Formula 1 is an odd sport for a host of reasons but perhaps its parochial nature, insider’s-only style and high profile investors, sponsors and pundits make for a spectacle that can only be described as opulent and lavish. The dollars that ebb and flow through F1 are sometimes a bit mind boggling but such is life at the cutting edge of motor sport.

You may recall that several years ago Lehman Brothers had a significant stake in F1 and when the investment group went under, its shares were secured in a new holding group in order to liquidate the assets for maximum potential to repay creditors left holding the bag. No worries, I’m not one of those creditors but thanks for the concern.

To those ends, it seems that seeing Circuit Mont-Tremblant owner and Tommy Hilfiger/ Michael Kors fashion magnate, Lawrence Stroll in the paddock at Monaco gave rise to some speculation. Enough speculation to prompt a comment from Mr. Bernie Ecclestone telling Forbes:

“Nobody knows if Lawrence is buying into F1. Everybody talks. A deal has definitely not been done. I doubt that he will buy F1,”

As Forbes writer Christian Sylt put it, if CVC Capital were looking for a valuation of $12 billion for F1, then Lehman’s outstanding stake would be worth $1.5 billion and perhaps speculation is that Stroll might be interested, as a keen motor sport fanatic, to take a run at ownership.

It’s a tad complicated on how Lehman was dissolved and what company now holds which assets but Christian does a decent job of unpacking it here. Suffice it to say, there is a chunk of F1 stock out there that will need to be sold and that sale could be imminent but who might buy that stock is anyone’s guess.

Bad Breath

Advertising giant WPP has a sponsorship agency called Prism that belonged to former Benetton F1 team commercial director Steve Madincea. According to the Telegraph, he sold Prism in 1999 to WPP whose chief executive, Sir Martin Sorrell, happens to be a board member of CVC Capital and non-executive director of F1’s parent company, Delta Topco.

While Prism’s revenue has grown on the run-up to the world cup through Johnson & Johnson’s Listerine and Regaine brands, it also is worth noting that Prism is significantly leveraged in motor sport and holds the Inifiniti and Casio sponsorship in F1 that are both associated with Red Bull.

Small world huh? Lots of webs and deals made in F1 and sometimes it helps to see where all the ties that bind are located. Why does F1 continue in a certain trajectory? Why would F1 avoid making certain teams unhappy versus others? Where do the small teams fit into the bigger picture?

You can start to do a little addition and see where interests are held and for what reasons. Most likely, what we see is only the very tip of the iceberg.

It does make you wonder where all of these investors are in CVC Capital’s portfolio for F1. Kansas-based Waddell & Reed? Teacher’s union? Lehman brothers (LBI)? You know, I often am reminded that my fondness of Bernie Ecclestone is really born out of the simplicity, no nonsense approach of a benevolent dictator running the sport. You know where you stand with Mr. E and sometimes I do hear folks wishing he would move on and let F1 find its new footing and future.

I say be careful for what you ask for because the politics will get massive without Mr. E at the helm holding things together. It is an inevitability that it will someday come to pass and I believe we may just be looking back at the good old days when F1 was straightforward under Mr. E’s rule.

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An F1 fan since 1972, NC has spent over 25 years in the technology industry and as a CTO, he focuses on technology integration in commercial workspace design, AV systems integration, digital media strategies, technology planning, consulting, speaking, presenting, sales, content strategy, marketing and brand building.
  • Interesting analysis; I’ve never taken more than a cursory glance at F1’s Fiduciary. However, mention of Prism (have associates @ AKQA and Ogilvy&Mather who in turn are familiar w/ Prism/WPP’s umbrella), and Lehman (brother worked at Amaranth during its collapse, to which Lehman clients were heavily invested) piqued my curiosity, so did a quick Google search.

    (Aside: Didn’t TRS purchase LBI’s percentage last year? If LBI still holds it, it ultimately belongs to the creditors, with CVC holding Veto over sale).

    In contrast, I find it difficult deciphering or applauding Mr. Ecclestone’s role; he’s orchestrated myriad deals selling commercial rights to multiple investment firms and banks (often as conglomerates in purpose-formed holding companies). I’d assumed this was as a facilitator working for F1’s promotional and CVC’s economic interests, but just learned FOG (FOM) is owned by the investors, including CVC (but not Bernie’s Alpha Prema). Bad assumption.

    This is worrisome, as CVC has appeared unconcerned w/ the sport’s health, saddling it with debt as it repeatedly refi’d its high-interest purchase loan, pocketing the dividends while investing little into the promotional aspect (where are the TV ads/web popups/interactive content/centralized merchandise buying centers/etc.?).

    Although not strictly aligned w/ CVC (I’d like to think Ecclestone cares more about the sport) Alpha Prema is a benefactor in negotiations; wouldn’t F1 be better served w/ independent brokerage of its promotional concerns? Perhaps that falls under auspices of the defunct FOTA or perhaps FIA; pretty toothless.

    As I count it, F1 has 13 or more partners staking claim to F1, not including CVC subsidieries; no wonder they couldn’t float F1 last year.

    If this is transparency from a benevolent dictator, I don’t want to see opacity. It’s convenient having a titular “supremo” we fans relate to, but when that figure is spinning multiple webs, ultimately to line his pockets? Who knows if Bernie-less F1 will be better/worse; I can’t help feeling a major organizational reshuffle’s in order.

  • rapierman

    Regardless of when Ecclestone goes, we have to face that reality and we have to do it now. We’ve got to figure out what we are supposed to do in a Bernie-less world. We have to prepare ourselves for that eventuality and quickly, or we’re really gonna screw ourselves over when we’re caught off-guard.

    It’s basically similar to that old sermon: “The Lord is coming. Will you be ready?” That’s the question we have to ask ourselves when it comes to the management of Formula 1: Are we ready? If not, what will it take to be ready, and how much time do we have left?