Due Diligence

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.

Me and Manor

As I'm starting to write more about F1 again after taking a breather from pitpass.com, it's only fair that I declare an interest in Manor Grand Prix. I don't work for them, at least not yet, and neither am I a shareholder, but I do know some of the people involved and can tell you that they are both very serious about being in F1, and aren't there just to make up the numbers.

I had dinner with Nick Wirth and Jane Nottage last night at the Nürburgring, and will be letting out entertaining snippets (hopefully not too biased) as they occur to me.

If you think I'm out of order, please leave a comment.

Alternatively, if you think I'm right, please leave a comment.

And if there's anything you want to know, ask me a question. I'll try to give a fair answer.

Btw - I could have called this piece "Manor and I" but I liked the alliteration.

So what's wrong with using Cosworth?

There's been a few stories in the press recently about teams that didn't get an entry complaining about having to use Cosworth engines.

That's fair enough at first sighting, although you'd think that someone claiming that "I had a real possibility of obtaining a Renault, Mercedes or Ferrari engine" would know a bit about the regulations.

The sporting regulations for 2010 state: "A major car manufacturer may not directly or indirectly supply engines for more than two teams of two cars each without the consent of the FIA."

And guess what? Ferrari and Renault already supply two teams. So does Toyota. And Mercedes currently supply three teams because the FIA, with permission from Vijay Mallya(*), granted Brawn an exception for one year to save the Honda team from extinction.

Which just leaves BMW, who don't seem interested in selling engines at the moment, or an independent engine supplier.

So to claim to have found out only one day before the announcement of the new teams (on June 12) that a Cosworth engine was the way to get selected shows either a distinct lack of understanding (or disregard) of what's required, or a disingenious and spiteful attempt to cover up an inadequate entry.

Either way, I think the FIA is perfectly right not to select that kind of team.

I am still wondering what engine Brawn will run next year though.

* See http://www.autosport.com/news/report.php/id/73513

Starting Grid

The random thoughts of a lifelong Formula 1 fanatic.

Alpine Town of the Year 2008 - Brig

It's amazing just how many awards there are in this world.

I never knew there was such a thing as an Alpine Town of the Year, but Brig seems to have won the big prize this year.

Probably the main attraction is the lavish Baroque palace known as Stockalper Castle, the largest private 17th Century building in Switzerland. Again, that seems like a very tightly defined title, but it, and its gardens, is certainly worth a look.

It also shows just how wealthy merchants could be, Kaspar von Stockalper must have made or bob or two in his time.

A relatively new addition to Brig's list of attractions is the Museum of the Papal Guards. This covers the history of the Swiss Guards, who to this day still patrol the Vatican in Rome.

Brig is one of those "crossroads of Europe" towns. Celts, Romans, Alemannic tribes all came through and settled.

The city itself is a UNESCO World Heritage Site, and with the Matterhorn (and of course the ski resorts of Zermatt and Saas Fee) close by, perhaps it wasnt an unusual choice for the title.

Brig Tourismus
CH-3900 Brig
+41 (0)27 921 60 30

www.ferienland-wallis.ch

photo: the phantom skier

Swiss pictures of the week

Some interesting light effects this week. First (above) a steamship on Lake Geneva.

And very local to me, the wooden bridge in Baden.

The night of the churches in St Gallen:

And finally for no apparent reason, a random picture from Bern, just because there's something about it I like.

Pictures Flickr dragunsk, serge baumeler, kreumi,  sacred destinations

Public Viewing Areas

As tickets for the matches are like gold dust, many people are opting for the next best thing.

Public Viewing Areas are springing up all over the place, even in the lakes, as you can see here in Zurich.

The idea is to promote the party atmosphere of the EM, and generally get loads of people out on the streets celebrating-

Some will be family areas, one I saw being built was sponsored by Migros the supermarket chain. Others will be corporate jollies.

I'll probably opt for a local biergarden with a large screen and nice shady trees...

Btw - EM is short for Europa Meisterschaft (European Championship) and I'll be sticking with the local abbreviation.