While folks have been trying to understand the complexities of the Liberty-Formula One deal, another story has been and gone: the suggestion that Carlos Slim Jr might buy Force India. It is not the first time this old chestnut has fallen from the F1 tree. The team does a remarkable job, thanks to a great group of people and some extra oomph from Mercedes engines. But what is such a team worth? The answer is that it is worth what someone will pay for it, be that $1 or $200 million. It has solid revenues from the Formula One group, in 2015, this will have amounted to about $85 million. In addition to that, sponsorship associated with Sergio Perez will have added around $25 million, with some money coming from other sponsors, if indeed the names on the cars actually paid to be there, which is doubtful in some cases. The Sahara deal, for example, seems to have been related to money long gone, while the Diageo cash may or may not have arrived, depending on who you talk to. Other money will have come from test drivers and so on. In total? Probably $120 million. The catch is that all of this will have been spent to keep the team sufficiently competitive to win the prize money, and to pay for the all-important Mercedes engines, so in the end, it’s a high turnover, low/no-profit operation. It survives, in the hope that one day things will get better, like most F1 teams without other businesses.
So what is it worth? It has an entry and runs very lean, but it requires funding on an annual basis, a chunk of which comes as a result of Carlos Slim Jr and his connections in the business world. If that money stops coming, then Force India is in a hole. It is perhaps logical for him, therefore, to say to the current owners: the troubled Vijay Mallya and his business partner Subrata Roy, who is up to his neck in financial and legal trouble (a la Mallya), and has spent much of the last two years in prison in Delhi, that he will take the team off their hands to avoid them getting into further financial trouble in the future. Putting more money into the team will inevitably lead to questions in India about from whence this money came. The team’s holding company used to borrow money from banks, but few if anyone will loan them money at the moment. Besides, what fun is a team that one cannot see in action and cannot be used to boost their own brands/egos?
Obviously, they would prefer cash, but the removal of future potential liabilities is often the most sensible route out of the sport for those who come and go. We’ve seen that happen so many times…
It is clear that in F1 circles, the shenanigans that surround the Force India owners have become a bit of a problem, and will become more so in the future as F1 dallies with the clean-living, all-American NASDAQ exchange, with its squeaky-clean apple pie approach.
So, is Force India for sale? Yes, of course it is. But will anyone leap in at the price that Mallya & Co might want? It’s unlikely. Potential buyers are better off waiting. There is a lot that is uncertain in F1 at the moment, but for a dollar you will always find a gambler, finding $200 million in the circumstances will not be quite so easy.