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GP Week : Issue 160
Carlos Slim Jr. 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 Nor way'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 anti- motorsport 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 sur vive seemingly any scandal, blue- chip 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. This story isn’t over yet. 28 GPWEEK.com // PARTNERS: F1 >>> FEATURE