The purchase of a stake in the Aston Martin Formula 1 team by US private equity firm Arctos Partners in November was further proof of the current health of the sport.

It came hot on the heels of a similar but higher profile investment in Alpine by a group that included Hollywood star Ryan Reynolds and a string of sporting legends, and it follows a pattern that has also seen the likes of Williams and McLaren receive funding from the US.

The bottom line is that F1 is now regarded as a good business in which to be involved, in essence because of the franchise system that maintains the value of teams. The push for financial regulations that has kept a lid on spending as income from all sources has risen has helped to boost those values. 

The Aston Martin case is intriguing because few thought that Lawrence Stroll would be willing to cede a stake in the team.

"We met them two years ago,” Aston managing director Jefferson Slack says of Arctos. “They're really best in class. They've specialised in long-term minority stakes and top franchises.

“There are not many people that are doing that, although you’re getting a lot more money coming into sports, institutional capital. These guys have been the leaders in doing that.

“A lot of people have approached us and Lawrence to invest in the team. And we're in a very unique situation, we have one owner that controls the whole team, and can decide on lunch if it's the right deal. 

"It's not a complicated process, it was just these guys were clearly the right guys, mainly from a strategic standpoint.”

Arctos logo, Aston Martin AMR23

Arctos might not have any household names associated with it, but there is a strong element of showbiz background.

Managing partner David “Doc” O’Connor spent 32 years at talent agency CAA, where his roster of A-list clients included Sean Connery, Robert Redford, Michael Douglas, Bruce Willis and Eddie Murphy, among others.

He then had a spell as CEO of the Madison Square Garden group, which as well as New York’s most famous sports and entertainment venue also owns Radio City Music Hall, sports media networks, and the NBA’s New York Knicks and the NHL’s New York Rangers franchises.

It was after he left that role in 2019 that O’Connor directed his attention to investing in sport, promoted by a major change in the landscape.

Franchise values were rising in all major US sports leagues, and in effect starting to put the cost of owning teams beyond the scope of even the wealthiest individuals.

Leagues began to realise that they had to relax the regulations that previously blocked financial institutions from investing in teams, and which in the case of the NFL was jokingly referred to as the “two-legged rule” – you had to be an individual.

"I think the catalysing event for the creation of Arctos was in mid-2019,” says O’Connor. "Major League Baseball changed their ownership rules, and for the very first time allowed for institutional capital to come into baseball.

“We thought that due to the same forces that were incentivising Major League Baseball to change, the other leagues would follow suit.

“So we launched Arctos at the end of 2019. Our first deal was Fenway Sports Group, which owns the Boston Red Sox and Liverpool FC, and a number of real estate assets and stadiums.

“And very quickly, the NBA changed their rules, the NHL changed their rules, and the MLS changed their rules.”

That opened the doors for Arctos to invest in a wide range of teams in various US sports, creating a portfolio that now includes the Houston Astros, the Chicago Cubs, the LA Dodgers, the Sacramento Kings, the Golden State Warriors and many others.

Lawrence Stroll at Miami GP 2023

In addition to its by proxy involvement in Liverpool late last year, the company made a move into European football with investments in Paris St Germain and Bergamo’s Atalanta BC.

F1 also came onto O’Connor’s radar, encouraged by the boost that Netflix gave to the sport.

"The catalysing event was Drive to Survive,” he says. “It created a window of understanding into this whole ecosystem. And because of that window, it was fascinating to us.”

Due diligence on the financial side of the sport convinced O’Connor that F1 could be a good business for Arctos to become involved in.

By co-incidence through the entertainment world he already knew of many of the key players around Liberty Media, including chairman John Malone, CEO Greg Maffei, and former F1 boss Chase Carey.

O’Connor makes clear why F1 has such appeal: “The new Concorde Agreement, the financial regulations, the stewardship of Liberty as the controlling shareholder, the fact that it is a remarkable global platform, plus a massive tailwind in the US, which is the largest market in the world, that's what piqued our interest. Aston Martin in particular was our top priority."

He stresses that Stroll and Aston represented a compelling opportunity.

"I think it boils down to four things,” he says. “First, a commitment to infrastructure. Lawrence has gone deep in terms of his investment in the infrastructure around this team, the wind tunnel and the factory and everything that he's built in Silverstone.

“It's about people, his investment in people and bringing the best operators that he can find in every category. Whether that's technical, or it's on the commercial side, he has attracted really top-level people, and with a vision that is behind that.

“It's about processes, whether that's the new relationship with Honda, or the technical processes around the team.

“And I'd say the fourth category is partnership. He's brought in incredible partners, like Aramco, and obviously Honda as the best engine manufacturer in F1, plus the other commercial partnerships that he's made.

"Lawrence has an insight into the consumer mentality, and an insight about branding and quality and luxury brands, that very few people have.”

That’s tied to the obvious appeal of the Aston Martin name, boosted over the decades by the association with the 007 character once played by O’Connor’s own former client, Sean Connery.

Fernando Alonso and Lance Stroll at Brazilian GP 2023

Funding aside, what can Arctos bring to the team?

“One of our assets is that when we're investing across all of these different leagues, across all these different geographies and markets, we have a view that's exclusive to us,” says O’Connor.

“To take the data and intelligence that we gathered from our exposure there and bring it to F1 we think will be very valuable to Lawrence.

“F1 has 24 events around the world, only five of which are in North America. The aggregation of audience that F1 creates around the world, the synergies that could exist with say, the NBA, that wants to grow in certain territories like Europe, there could be some interesting things.”

Aston commercial boss Slack agrees that the new deal is not just about finance, but also the knowledge of other sports that Arctos has gained.

“Obviously, there's investment, but there's also what they bring to the party,” says Slack. “They work with some of the best franchises in the world. And as an American I know how good especially US franchises are at building sports businesses.

"It has to be applied correctly, whether it's in baseball, soccer, or in F1. There's a lot of learnings from that, being part of a group. And I think vice versa, hopefully we can help them.

"I think you have to be open-minded. Nobody does things perfectly or the best way. And you have to look outside of the bubble to say, ‘How can we as a business do things better?.’

"There's a whole gamut of things that we can learn from. And there might be things that those organisations learn from us, because we're a global business, whereas a lot of the franchises will be more local.

“It's real strategic relationship, and they're the right kind of people to do business with. At the end of the day, this was something Lawrence was very comfortable about."

The bigger picture is the positive message that the Aston/Arctos arrangement sends to the Wall Street world of private equity investors, especially after the earlier Alpine deal.

"It’s good for our whole sport,” says Slack. “It values the sport and says, ‘Hey, this is like buying an NBA team or an NFL team. This is what you're getting when you get into F1.’ I think that is good for the business.

“Specific to our team, we've talked about the new campus, the new wind tunnel, Honda engines, doubling the workforce.

“This is the next evolution, and this also gives us the right financial partner to do what we need and invest how we need. Not that Lawrence couldn't do it, but now he has a true partner who does this for a living."

Fernando Alonso and Lance Stroll at British GP 2023

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