lehman bros share of F1 to be sold

[lebesset]

http://www.guardian.co.uk/business/2012 ... -one-stake

would have thought that F1 was worth more than the 10 billion quoted

[markc]

For those interested, here's a way to visualise what is a very large number:
http://demonocracy.info/infographics/us ... _debt.html
Effectively $10Bn is equivalent to 5 pallet trucks.

I only post this so that people have some real world context of how large $10Bn is.

[raymondu999]

doesn't give much perspective as to the VALUE of it though

[WhiteBlue]

F1 would be over valued at $10bn I think. That is an inflated figure which would be based on massively optimistic earning expectations. In reality F1 revenues will not grow at 10% CAGR and it will not be nearly as profitable as it has been in the last two Concord periods. Currently nobody can predict how the profits will be shared as the Concord talks will run for at least one more year if not two or three years. So one could with good reason cut that figure to half and be still over a value that would be attributed if a forced sale would happen in the next six months.

[raymondu999]

I've never heard of M&A valued via CAGR though. I've only really ever heard it being done by revenue and P/ER

[WhiteBlue]

I've never heard of M&A valued via CAGR though. I've only really ever heard it being done by revenue and P/ER

To get to a bottom line you have to have revenue first. And I seriously doubt that FOM's long term revenue growth targets are achievable.

In 2006 F1 was valued at $2.6m if my memory is correct and two years ago Bernie claimed between 5-7bn. So $10bn must be very optimistic, considering that F1 is hitting critical market conditions.

In the absence of any figures to support the valuation one can only look at the two factors of revenue growth and how the resulting profits would likely be split with the teams and FiA. That would be hinting at the net earning expectations. There is high risk for both underlying factors as I have shown. Hence a totally optimistic valuation of $10bn isn't going to fly short term unless you create a bidding war between strategic buyers.

[raymondu999]

WB - yes but I've never heard of CAGR going into valuation. Or even EBITDA.

I have no idea to the scale of deals; whether they be sponsorship; prize money; entrance fees - and ticket sales etc so I would honestly not know how accurate 10bn is.

[WhiteBlue]

WB - yes but I've never heard of CAGR going into valuation. Or even EBITDA.

I have no idea to the scale of deals; whether they be sponsorship; prize money; entrance fees - and ticket sales etc so I would honestly not know how accurate 10bn is.

Valuation is conservatively done by projecting all elements of the last five or ten balance sheets into the future. You kind of try to predict risks and how revenues and costs are going to change and what impact that is going to have on the bottom line. You finally get a cumulated earning projection and you discount that to the present day to arrive at your valuation.

FOM's revenues are coming from TV sales, race fees, track side advertising and the paddock club mainly. TV and race fees are the big chunks. There is no big growth in TV right now and race fees are supposed to grow at 10%. But that target is getting very difficult to achieve with various tax payers becoming more critical in the current economic climate.

You are right that one cannot valuate the company from the publicly available figures but one can easily see that 10bn is very optimistic if you know the historic figures of valuation.

I would quote Joe Saward's blog to support my opinion:

The ridiculous element in the story is the suggestion that a 15.3 percent share in the business is worth $1.5 billion. This is bull. Lovely though it might be for the finance people to think that the sport can be valued at $10 billion, it is worth a fraction of that at the moment – particularly as there are questions over the future as there is no Concorde Agreement with the teams, no ordered succession plan despite having a CEO who is 81 years old, not to mention a number of legals actions and investigations that would make potential investors wary in the extreme. Given that the story comes from a source that is considered in the business these days to be Bernie Ecclestone/CVC’s unofficial press office, it is obvious why the big numbers are being bandied around, but you would have to be a real schmuck to pay that kind of money for that much of the business. Right now it is worth about 15 percent of the figures being suggested and Lehman Brothers would be lucky to get $200 million.

[raymondu999]

In all my years as a VC I have always valued a company not based on book value or projected earnings but sales, times a PER multiple. Maybe I've been doing it wrong all this while. But back to the topic at hand - my point was we don't know how much the TV coverage costs. Is it 1 million a year? 10? 100?