So what happened at Manor?

There have been many different stories circulating about what has been going on at Manor in recent months and there have been many different interpretations of the problems. It has been assumed (by me and others) that the key was money, but the truth seems to be that the stumbling blocks more complicated than that. Firstly, the owners wanted to hold on to part of the team, secondly there were questions over indemnities relating to potential liabilities, notably the possibility of legal action from the Bianchi Family and thirdly, there was a massive hole in the 2017 budget, even before Manor was knocked back to 11th in the Constructors’ Championship by Sauber in Brazil.

This is what I have been able to ascertain, although no-one wants to go on record about the different stories, so we must take them on that basis.

There is no doubt that from the start of the adventure in 2015 the new owner Stephen Fitzpatrick was looking for people to buy into the team and help him keep it going. he was involved in a busy role with his energy company and did not come to many races. He engaged a merchant bank, believed to be Rothschild, to find possible investors, but it was clear that with Manor’s poor results and no desire to sell full ownership, there was no deal to be had. The team did better in 2016 with Mercedes engines and there were talks with at least three different investor groups: one American (Tavo Hellmund’s group), one from Indonesia (CGF) and another which seems to have been from Mexico, which may have involved Esteban Gutierrez’s backers.

None of these discussions were successful because no-one was offered an acceptable deal. Whether this was because of the price or the fact that Fitzpatrick wanted to hold on to equity is not clear. The Mexicans were the last to give up, after the Brazilian GP, when the team’s financial situation took a big dive. At that point the team’s value fell to nothing as there was a hole in the 2017 budget of an estimated $40 million. Thus, even without the Brazilian result, the team did not have a budget to race in 2017, as the prize money lost was nowhere near $40 million in value. The team owners were thus faced with having to offer a debt-free team for nothing if they were allowed to remain as a minority shareholder. They would, of course, have been called upon to invest in line with any remaining shareholding, but at that point they chose to stop the money supply to the team, which meant that it was unable to continue the build programme of the 2017 cars.

This may have made financial sense, but it was a huge mistake because it meant that the team would not have cars ready for 2017. One can see why the sellers felt it was a bad idea to go on funding, because they might simply be wasting more money.

The other mistake seemed to be the continued insistence on keeping some of the equity, which meant that the new owners would not get a clean slate. There were also questions of indemnities against potential liabilities with regard to the Jules Bianchi accident in 2014. The owners were talking about giving the team away at this point and they were not willing to give indemnities, on the basis that when they acquired the team they took on the risks as well and did not see why new owners should not do the same, given that they would be getting a lot for nothing, and so should assume the risks as well.

The sellers continued to try to find someone to take the team off their hands and the Indonesian bid came back to the negotiating table and was granted a period of exclusive negotiation before Christmas. The deal came so close that director John McQuilliam resigned in expectation of new ownership, but the proof of funds wanted by the owners did not materialise. In the end, with time running out, the discussions were terminated. With a $40m shortfall for the 2017 budget there was no possibility of completing the 2017 upcoming season, so the operating company was put into administration.

Even after that, no-one was able to agree terms on the acquisition of the holding company, for the same reasons as stated above.

Will things now change? The only real difference is that the owners now have no claim on any shares and are out of the picture, unless they join forces with a bid to acquire the team from the administrator. The question of the financial hole still needs to be addressed and the question of indemnity is still there, but the biggest problem now is time.

One can blame everything on the fact that the prize money does not cover the costs of competing in F1, but if it did, there would always be teams simply cruising along, the owners being there just for the parties that surround F1 and not really caring about the racing.

 

 

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