F1: WRC: - Realview

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if there is a case to answer in the UK”
There has been little information
made public concerning the SFO’s
investigations, and it is unclear whether
they are still ongoing.
Whatever happens with the Serious
Fraud Office, the outcome of the
Gribkowsky affair might have a far more
immediate and personal impact on
Bernie. Irrespective of what HMRC may
or may not find over the course of what
is certain to be a multi-year investigation,
CVC Capital Partners could argue that
the attention on Ecclestone’s personal
affairs is harming their Formula One
investment. Should that be the case, the
private equity firm will almost certainly
orchestrate his removal.
CVC have spent the past few months
reducing their stake in the Formula One
business in anticipation of the court’s
verdict. Recent sales to Waddell & Reed,
BlackRock, and Norway's Norges Bank
Investment Management have seen
CVC’s stake drop from 63 percent to
35 percent in two separate deals – one
worth $1.6 billion, and one worth $500
million.
While these are not fire-sale prices,
there is a very real sense that CVC are
working their way through an exit plan
designed to make the greatest possible
return on their F1 investment at a time of
uncertainty caused by the possibility of
charges for Ecclestone and the on-going
Concorde Agreement negotiations, both
of which could lead to financial disaster
should the worst happen.
There are certain advantages to the
fact that the most likely consequences
for the sport – if any – will be reputational.
Given that Bernie Ecclestone is in
his eighties, Formula One’s biggest
stakeholders have been aware of the
need for a succession plan for when the
Englishman has had enough of running
the sport. Should the whisper of scandal
from Munich threaten to tarnish F1’s
image – and its pocketbook – Ecclestone
can retire without losing face.
Looking beyond Ecclestone, there
have been rumours that the effects
of a possible corruption scandal could
drive Mercedes out of the sport. But
whatever statements some members
of the Daimler board might make to
the press, it is unlikely that events in
Munich will lead to the retreat of the
Silver Arrows. There have long been antimotorsport
dissenters in Stuttgart, and
they take advantage of every opportunity
to generate exit talk. This is one such
occasion, irrespective of what the
company statutes – standard boilerplate
at many multinationals – might state.
The biggest concerns are financial, and
have the potential to affect every team
on the grid. While the sport itself can
survive seemingly any scandal, bluechip
sponsors have corporate images
and brand identities to preserve, and as
a result cannot be relied upon to stick
around in times of trial and tribulation.
The current financial climate is fraught
with difficulty, and losing a major sponsor
could be crippling, even for one of the
richer teams at the head of the pack.
Should a number of sponsors decide
that they can no longer risk association
with Formula One as a brand, the impact
on the teams’ budgets – and ability to
compete – could be devastating.
Formula One is resilient, thanks in no
small part to its large and passionate fan
base. But it is also heavily dependent
on public investment, thanks to the
governments who pay the sport’s hefty
hosting fees. As a consequence, a
worst-case scenario outcome of an
F1 corruption scandal could see race
contracts cancelled as governments
kow-tow to public opinion.
Until it becomes clear whether or not
Bernie Ecclestone will face any criminal
charges, the world of Formula One will be
on a knife-edge, debating the likelihood of
best- and worst-case scenarios.
Carlos Slim Jr.
This story isn’t over yet.
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