DECEMBER 12, 2005
The value of Allsport Management
Allsport Management exists to make life easier for Bernie Ecclestone. The company looks after commercial aspects of Formula 1 that Formula One Management does not have time to deal with and pays FOM an annual fee for the privilege. The company has turnover of around $280m and makes an annual profit of $160m. It is not clear how much of the $120m difference goes to FOM and how much is expenditure (with salaries, suppliers, caterers and transportation costs) but we hear that the fees to FOM are around $50m a year. This means that if FOM did the job itself, rather than sub-contracting the work, it would be increasing its turnover and its profits. As we suggested recently CVC Capital Partners is keen to streamline the entire F1 business and buying Allsport from its current owner Patrick McNally makes a great deal of sense. The company is value at around $1bn although that value is to some extent time-sensitive as there is nothing to stop FOM ending the deals in place when the current contracts expire and taking the work in-house. It is not clear how many years the current contract between FOM and Allsport runs, nor how long McNally's deals with circuits are. They are, however, likely to be long-term as Allsport and FOM tend to work in five-seven year cycles. This means that it makes more sense to buy now rather than wait until the contracts expire.
Although McNally runs a very lean organisation, it is thought that there is potential for savings to be made and profits increased.
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