25/06/2020
NEWS STORY
In recent months there has been continued speculation over the futures of a number of teams. While the talk concerning Mercedes has centred on the German team looking for a way out on the back of its overwhelming success, as far as Renault and Haas are concerned it was due to the lack of it.
But then came news of the financial difficulties that McLaren and Williams found themselves in, one looking at possible insolvency as early as next month while the other is looking at a number of options including selling up.
In a bid to improve its cash-flow in the last couple of years, the Grove outfit sold a 75% stake in its Advanced Engineering division, which applies the F1 team's skills to other industries. The move raised around £30m ($37.5m) net.
Then Michael Latifi, already a 10% stakeholder in McLaren, came to the rescue with a cash injection of £36m ($45m), which according to Forbes, "gave the funding for 2019 in totality and into 2021".
While it may well be thought that both moves were in reaction to the economic climate, a source tells Forbes that they were actually part of a deliberate strategy that goes back to the start of 2019.
"Williams had gone through a very difficult 2018 and was well aware that 2019 had started badly," says the source. "If your pre-season tests and your first races go a certain way, by the middle of March you know whether you are going to be mid-field, at the front or way at the back.
"Unfortunately the die was cast to some extent so Williams knew it needed to take action. It had to take a long-term view on this and that is precisely what it has done."
Last month, the Grove outfit revealed that it was looking at a number of options after group revenue declined to £160.2m in 2019, from £176.5m in 2018 and EBITDA deteriorated to a loss of £13m, compared to a profit of £12.9m the previous year.
Announcing a new strategic direction, Williams said: "the WGPH board is undertaking a review of all the various strategic options available to the Company. Options being considered include, but are not limited to, raising new capital for the business, a divestment of a minority stake in WGPH, or a divestment of a majority stake in WGPH including a potential sale of the whole Company".
According to Forbes' source, the timeframe for the sale is "three to four months", though Williams is "already starting to see a number of quality options develop".
While news of the potential sale immediately led to speculation over Michael Latifi taking control, the source insists that Williams "never thought of going down the route of asking Latifi to invest.
"If he eventually ends up investing that is terrific," they add, "but Williams wants to go through the process".
Of course, going through the process enables the team to look at the various options available to it, and in this endeavour it has two heavyweight investment banks at its back.
Lazard, which is providing UK and German regulatory approval, is joined by Allen & Co, which recently advised on the sale of IndyCar and the Indianapolis Motor Speedway to the Penske Corp.
Meanwhile, the recent funding ensures that Williams has enough money in the kitty to continue in the short-term.
"Prize money is going to be down on the original forecast," admits the source, "because Williams is going to be doing somewhere between 15 and 18 races rather than the 22 races on the original schedule".
One the other hand, the budget cap, which limits teams to $145m should play in its favour, as Williams latest filings reveal it spent $165.3m (£132.3m) last season.
Changes to the distribution of the prize money should also help, as will the fact that the teams will continue to use this year's cars next season.
While there is a major overhaul of the rules in 2022, Forbes' source says that that the "regulatory changes in other sports led to significant increases in franchise value so the same should be true in F1. So this is the perfect time to bring new investment into Williams and to put Williams in a position to challenge at the front".
Williams market value is around $135.6m (£107.5m), though, as Forbes makes clear, that doesn't put a premium on a change of control.
At a time, McLaren is looking at potential insolvency as early as next month, Williams appears to have the luxury of time to see how high its value can be driven up by a bidding war.