How do F1 deals get done so quickly?

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Several teams have already revealed new sponsorship for the 2019 F1 season. How long do these deals take to arrange – and what happens if they go wrong?

@DieterRencken tackles a new question from a RaceFans Supporter. If you’d like to ask our special correspondent anything about F1, send in your question below.

We often see deals concluded in modern F1 in a matter of days or even hours, be it Kimi Raikkonen’s contract to drive for Sauber (now Alfa Romeo) or Sauber’s decision to tear up the Honda contract and stick with Ferrari power.

It would be interesting to understand how these deals get done so quickly. I have worked on various corporate transactions and deals myself and the time frame to get those done quickly is still not as fast as what goes on in the F1 world.
Urvaksh (@Thedoctor03)

A deal is a deal – but every one is different as far as F1 is concerned. Of course some deals happen quicker than others, but for every ‘overnight surprise’ there are many that take months to close, and still others that didn’t happen despite both parties being close. Sometimes unrelated factors work for or against deals at crucial points.

In this respect F1 is no different from the real world. In many instances enormous amounts of research and due diligence go into planning a deal, with the larger teams employing banks of analysts to research potential partners, then provide the sponsorship department with crucial background information to pitch with.

[smr2018test]

The departments produce professional proposals based on the elements of ‘fit’ between team and prospect brand, rights and benefits of the partnership based on a rate card, projected exposure and cost-to-benefit analyses. Thereafter they pitch in the hope of a deal, but this process takes days, weeks, or months, depending upon the target.

At times it works the other way: company boards decide their brand is in need of a revamp or re-positioning in the marketplace. Various platforms are researched, options are whittled down and so on. Thus F1 may be listed against TV campaigns, football teams, music tours or fashion weeks. If the decision falls in favour of F1, the next step begins: trackside, team, or driver deal?

The pros and cons of each are analysed, discreet approaches made, non-disclosure contracts signed, terms negotiated, rights and benefits agreed, liveries conceptualised, contracts thrashed out, board ratification sought, then eventually deals are cut – or not. This can take weeks (or months), yet once a deal is announced, the perception is one of haste – proving how watertight the processes are…

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Force India, Melbourne, 2017
Force India’s BWT deal was done very quickly
The quickest negotiation I know of was BWT’s sponsorship of Force India, yet that process took a fortnight – after BWT had undertaken research into F1, studied various teams and options and benefits of sponsoring a specific team, which turned out to the only one open to pink livery at that price at the time, and taken a decision in principle. Quick it was, but certainly not flash-fast.

Where companies have sponsorship departments these are allocated budgets and specific objectives, and similar processes apply: they seek the best ‘fit’ within budget for specific products. Where they exists in F1, feelers are put out; if not, time to move on to the next sport or activity. Where everything fits, board approvals are a mere formality.

Similar processes apply to driver contracts: teams generally acquaint themselves with who is (or could be) out of contract and when, make approaches through agents, sound out fiscal requirements, discuss the possibilities, sign non-disclosure agreements and heads-of-agreement options. Then, when push eventually comes to shove, the building blocks are in place, and deals struck quickly. But invariably weeks or months of effort preceded signature.

I believe the Vettel/Ferrari, Ricciardo/Renault and Raikkonen/Sauber contracts fall into this category.

There are exceptions – as in all walks of life – but these seldom apply to major sponsorship or partnership deals, usually relatively minor deals done on whims by compact companies with streamlined decision-taking processes; more usually a privately-held companies with a majority shareholder who wishes to be in F1.

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Kimi Raikkonen, Lotus, Melbourne, 2013
Lotus owner Genii put its name – and Raikkonen’s – on the car
Then there are “deals” that don’t get done, even after months of effort. An anecdote involving a USA-based conglomerate springs to mind, but the company in question shall remain nameless for indications are the company was an unwitting participant.

Whatever, during the 2012 Canadian Grand Prix a well-known sponsor agent pitched various teams, allegedly on behalf of said company, from whom he said he’d been granted a mandate to secure a deal by its (purported) sponsorship manager, who would take over final negotiations.

Three teams expressed interest; two withdrew early on, leaving one team hopeful of signing a three-year $100m deal: title sponsorship, plus the company’s red/white logo on front wings, sidepods and airbox. By December the deal was ready for signature, and suddenly the ‘sponsorship manager’ demanded substantial payments before presenting the contract to ‘his’ board.

Suspicion abounded, so team and agent contacted HQ, only to discover no such individual existed. Clearly they’d been taken in, but fortunately no ‘commissions’ were paid. However, time was now tight, and no replacement could be procured ahead of the new season. Who was it?

Well, Kimi Räikkönen won 2013’s season-opener with a Lotus displaying suspiciously bland red patches on front wings, sidepods and airbox, but he later threatened to boycott races unless paid…

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Dieter Rencken
Dieter Rencken has held full FIA Formula 1 media accreditation since 2000, during which period he has reported from over 300 grands prix, plus...

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  • 9 comments on “How do F1 deals get done so quickly?”

    1. Ah brilliant – thank you. Extremely informative, @dieterrencken.

    2. I know @dieterrencken has refused to name names, but the information is out there… http://www.grandprix.com/ns/ns25021.html

      Very interesting to find out said deal was a scam though!

    3. This is one topic where I would suggest that F1 is no different to “the real world”. As in the real world, deals get done quickly if there is (a) commercial necessity (i.e. changes in tax legislation/your key sponsorship contract coming to an end) and/or (b) if all of the parties buy into the process and/or (c) the key commercial terms are agreed by the parties quickly at a high level. For example, just last month I completed two transactions involving the Shariah compliant refinancing of UK commercial real estate within a few days of each other, each of which took one week from instruction to completion…these transactions usually take around a month to complete. It’s amazing what you can get done if everyone is focussed and there is a true commercial driver for the transaction.

      Also, I assume the company mentioned in the last few paragraphs was Honeywell. There was all sorts of noise about them sponsoring an F1 team a few years ago.

    4. As always, an interesting read.

      It would be interesting to know how many deals get discussed only to fall through as it becomes apparent that the target teams WDC standing is on the slide.

      I imagine both Mclaren and Williams would have suffered from this.

    5. The rate card slides accordingly…

    6. @dieterrencken
      Is the mentioned failed lotus sponsor deal related to quantum motorsports and mansoor ijaz? It is pretty funny story, I’d love to hear more about maybe in future?

    7. No, not at all. The company is a US blue chip that was apparently hijacked for this scam.

      Ahhh, the Ijaz story…

    8. Q. How do articles get written so quickly?

      A. We don’t bother to proofread. :(

    9. Another great read.

      What’s interesting is that all other reporting about the Lotus sponsorship ‘deal’ basically paints it as Honeywell suddenly pulling out at the last minute. This is the first time I’ve seen an explanation about what really happened.

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