Analysis: McLaren Considering F1 Team Shares Sale

McLaren are considering selling up to 30% of its F1 team in a bid to gain extra finance to break into the top 3.

The sale plan is understood to only involved McLaren Racing, not McLaren Automotive or any of the McLaren Applied sectors. However McLaren Racing includes both the McLaren F1 Team and the new-for-2020 Arrow McLaren SP IndyCar team.

It’s a move that comes as a combined result of needing more finance to improve the teams competitiveness, the $145M budget cap being introduced to F1 in 2021, and the financial impact of the COVID-19 pandemic.

Currently, McLaren Racing shares the same holders as parent company the McLaren Group, so a sale of a stake in the team would involve some form of restructuring.

As it stands, around 56% of the McLaren Group is owned by Bahrain’s Mumtalakat Holding Company, 14% by Franco-Saudi entrepreneur Mansour Ojjeh who is the CEO of TAG, and 10% by Iranian-Canadian businessman and entrepreneur Michael Latifi, father of Williams F1 driver Nicholas Latifi. The remaining 20% is split between minority shareholders.

But why is a team like McLaren, once one of F1’s dominant teams with the likes of Ayrton Senna, Alain Prost and Niki Lauda, now on the ropes financially and at risk of disappearing entirely?

The story is similar to Williams – once a dominant F1 team with works manufacturer deals, losing the works deal and subsequently falling down the pecking order to rock bottom of the championship.

McLaren last won a championship in Formula 1 with Lewis Hamilton in 2008. The McLaren-Mercedes powerhouse had been running strong since the late 90s, but the massive aerodynamic regulation change in 2009 saw the team slip into the midfield.

Alonso celebrating a win in 2007 with McLaren

To make matters worse, Mercedes then bought out the 2009 title winning Brawn GP team to return to F1 as a works manufacturer for the first time since the 1950s. This was bad news for McLaren, as whilst the McLaren-Mercedes partnership remained, they were no longer receiving a works team treatment.

After failing to win a championship with the power lineup of Lewis Hamilton and Jenson Button between 2010-12, falling into the midfield for the 2013-14 seasons and losing their Vodafone title sponsorship after 2013, McLaren gambled on the returning Honda as an engine supplier for the 2015 season onwards.

The McLaren-Honda name is synonymous with the late 80s and early 90s. The McLaren Honda MP4/4 from 1988 will forever be one of the most dominant cars in F1 history, so its easy to see why McLaren took the gamble to reform that once perfect partnership.

The McLaren MP4/4 won all but 1 of the races in 1988

However, Honda were behind the came with the V6 turbo-hybrid powerunits, both in terms of reliability and power. They had a powerhouse lineup of Jenson Button and Fernando Alonso, but Honda’s disastrous return caused Button to retire after 2016. After 2017, McLaren ditched Honda for Renault, however the Renault powerunits have also had a tough time with Red Bull, and McLaren remained off the pace in 2018.

2019 saw hope for McLaren restored, with Carlos Sainz Jr and Lando Norris taking the team to 4th at seasons end, and Sainz taking the team's first podium since 2014. But that doesn’t hide the fact Honda have since found great success with Red Bull, and that McLaren remain winless since 2012.

The strong 2019 performance also doesn’t cover for the past seasons’ impact financially – despite the tasty sounding return of the McLaren-Honda partnership in 2015, the team had a significant lack of sponsorship, and that only fell in the coming years. McLaren finished 9th in 2015, ahead of only Manor Marussia who ran a modified 2014 car. 2016 saw the team jump to 6th, but then fell back to 9th in 2017. They returned to 6th in 2018 with Renault engines, but a poor engine and chassis combination saw the team finish the year with evidently the slowest car.

All of this took a major hit on the team’s financial income, as potential sponsors don’t want to be seen with a team flailing around in last place, and while a rejuvenated McLaren may be more attractive to new sponsors now, the impact of sponsorship money won’t be immediately felt, whereas new investment money will, and with the impending budget cap and 2022 regulation changes, immediate money impacts is what McLaren need.

Overall, the future looks brighter for McLaren than it does for Williams, but neither team are out of trouble yet.