CVC Capital Partners, the private equity firm that controls the Formula One group, has enjoyed considerable rewards from the investment in the course of the last eight years but, at the same time, it has had a great deal of negative publicity as a result of the relationship, something which the besuited wunderkinds are not used to dealing with. They prefer to stay in the shadows while they are stripping the assets out of solid companies, not least because the world’s financiers have something of a reputation for being greedy. The source of the discomfort with Formula One has been because the boss of the Formula One group Bernie Ecclestone spent a good part of the year having to ferry backwards and forwards to Germany to go to court to answer charges of bribery. In the end he chose to pay $100 million to avoid a judgement, which was perhaps not the best way to convince the world that he was innocent – even if he was. It seems that the risk has now passed and the money men have (finally) reappointed Ecclestone to the board of directors of the Formula One group and announced that he will continue as the CEO. This appears to be because they cannot find anyone willing to come in as chairman and tell him Bernie what to do. It is an odd state of affairs that a private equity firm is putting its faith in an 84-year-old with no apparent succession plan, but presumably they are hoping that he will live to be 100 and that this will enable them to continue to award themselves vast dividends from the sport for years to come.
If Ecclestone drops dead next week they will look rather silly. However they will probably have done their homework and discovered that while the average life expectancy in England is 78.9 years for men, according to the Office for National Statistics there are some remarkable statistical quirks in the numbers as old men in the Royal Borough of Kensington and Chelsea tend to live to 93, apparently because they have vast sums of money (you cannot live there without it) and can afford the best doctors. Whether this will convince the stock markets that the Formula One group is worth a flutter remains to be seen, particularly as the European Commission is already sniffing around the business, having heard someone whisper the word “cartel”.
Peter Brabeck-Letmathe, the chairman of Nestlé, will continue to serve as chairman, although he has not been well in recent months, while there are two new non-executive directors: Luca Montezemolo, formerly the chairman of Ferrari, and Paul Walsh, the ex-CEO of Diageo. Montezemolo has enjoyed a very close relationship with Ecclestone over many years, and was previously a non-executive director as a representative of Ferrari, now he is independent.
It seems that CVC has decided that there is no point trying to throw out Ecclestone and has now capitulated completely.
Whether this will help the sport remains to be seen. Ecclestone does what he does very well but he was quoted recently as saying that the sport’s target market is 70-year-old Rolex buyers (he later said he was misquoted). The odd thing is that everyone believed that it is something that he would have said. The bad news is that the sport has revenues of $1.6 billion but cannot keep more than nine teams alive and three of them are not very healthy.