Some people have been surprised by the teams selected by the FIA to run in the 2010 F1 championship. Or to be precise, surprised by teams that weren't selected.
So it was with great interest that I was able to hear Nick Wirth talking about the due diligence process, where the candidates were grilled by CVC and Deloitte, an independent and internationally renowned firm of auditors.
Nick obviously couldn't comment on why any other applicants weren't selected - although it was clear to me that any team wanting to use an engine supplied by any manufacturer other than BMW or Cosworth would be contravening the regulations.
It seems the Manor approach was simply to get on and do the job, and stay out of the media spotlight, because every hour spent talking to the media was one hour less that could be spent perfecting their application.
Time well spent, it seems.
Text of the FIA press release:
2010 FIA Formula One World Championship - Due Diligence Q&A 12/06/2009
How are you ensuring that applicants are adequately and securely funded?
We are using professional advisors to make checks on the substance behind any funding sources on top of obtaining reviews of pertinent contracts and other relevant documentation. Bank references have been supplied in many cases.
What is involved in the Due Diligence process?
We have requested documentary evidence to support all the new teams’ assertions, in particular with regards to funding. Thus we have been provided with accounts, contracts, multi-year business plans and other supporting material. On the technical side we have asked for a thorough description of their capability, key staff, project plans, capital assets (present and planned for), organisational charts, and so on. Where there are key sub-contractors required we have asked to see contracts and letters of intent. This extends to the sponsorship side, where plans and any descriptions of existing relationships are required. In all these aspects we have requested evidence that substantiates any claim in the teams’ plans. In the background to these evaluations, where key individuals were identified on the funding side, our forensic accountancy advisors have run reputational checks, alongside the checking of factual data supplied. Once we had formed an opinion of the serious contenders we asked them to come to London to be questioned face to face by the due diligence team. Then a short summary report on the top five was sent to the FIA President.
Have you enlisted the help of other experts to help with the Due Diligence?
It would not have been possible to perform this exercise without expertise from our advisors, Deloitte, who have assisted us throughout. The forensic ability to give advice on the documents provided is invaluable.
How many applicants were there and were all of them taken forward to the due diligence process?
There were 15 applicants and we took 12 of these through the process initially. We interviewed nine of the more promising potential teams. There were a surprising number of well-presented entries, with substantial funds behind them.
Is it really possible to perform due diligence on all of these organisations in such a short amount of time?
It has been intense. The one advantage is that the short timescale has revealed the teams that really have their plans together and the answers to hand, and those that are making it up as they go along. If they are going to be in Formula One they need to be able to respond quickly and competently. Thus the condensed time line has ‘stress tested’ the new entrants.
Have you been surprised by how many viable teams have applied to enter the championship?
Yes it was a surprise in some ways, but more reassuring than surprising. Formula One is a fantastic prospect and with the financial reforms to lower the barrier to entry to realistic levels it is good to see such a strong market for new teams. This exercise has demonstrated that the only reason there have been vacancies on the F1 grid for many years was the excessive cost of participation.