In his native Nigeria, Malik Ado Ibrahim is considered a big man. He comes from one of the top ten families in the country, with interests spanning oil, food, and politics. Sitting in an office in Soho, the man who has bought 70 per cent of the Arrows Formula One team, valued at 110m, still cuts an impressive figure; he comfortably fills his six-foot-two frame.
He has broad shoulders, and will need them if he is to survive in motor racing’s shark-infested waters. Ibrahim’s business dealings have made him a small fortune, but getting involved in F1 is as good a way as any to dispose of it.
For proof of this he need look no further than his team partner Tom Walkinshaw, who put 6m of his own money to take over the team in 1996. Over the past two years former driver and technical director Walkinshaw struggled to keep control of the team as it haemorrhaged money, while the performance of the car ranked no better than modest.
By the middle of last season it had become apparent that Walkinshaw could not keep taking these losses and began to look for a backer. Many in the sport thought that he was in such a weak position that he would have to sell out completely.
But in stepped Ibrahim, along with the investment bank his family use, Morgan Grenfell Private Equity, to purchase 70 per cent of the company for 77m. Walkinshaw keeps a 25 per cent stake and remains in charge of the technical aspects of the car. The other five per cent of the company is distributed among the staff.
On face value the price of this ailing team looks high. This is a team which has failed to win a single Grand Prix in more than 290 attempts since it was formed in 1977.
Yet Ibrahim says that the weakness of the group appealed to him. “In many ways the team is a clean slate, because the car does not have a strong public image, unlike the Williams or Jordan team.
“This will make it easier for me to market the team the way I want to. F1 stopped being a sport for mechanics long ago. Now it’s big business, and the opportunity here is a marketing one.”
Others in F1 say it is worth buying into the sport at almost any price. F1 teams are able to draw on three revenue streams. The first is TV money, which is negotiated by F1 boss Bernie Ecclestone who then distributes this money, after he takes a sizeable commission, on a sliding scale based on the team’s performance and the amount of time the team has been involved in the sport.
Money can also be made from sponsorship, which also varies. Arrows’ last deal with office machine company Danka was reputedly worth 7m over three years, while Williams’ deal with Rothmans is priced at 25m for the same period.
The third area of revenue is a growing one, merchandising. As Stewart Grand Prix commercial and operations director Rob Armstrong says: “This is an area that is under-exploited by most teams. Ferrari has a strong brand and has made money here. In the future there will be a chance for other teams which develop their branding to pick up significant revenue.”
Others in the sport say TV revenues will grow when digital pay-per-view starts. And sponsorship revenues will remain high because there is always competition among companies to get into a sport which has only 11 teams. In this light, some say, Ibrahim’s investment does not look so risky.
The Nigerian businessman says he has been trying to get into the sport for the past year. “There are a lot of egos in the business. I was looking around for an ego I could work with,” he says.
He first approached Walkinshaw in the middle of last season when it became clear that the team needed further backing. Other players also courted Walkinshaw, including German company Zakspeed, which would have wanted to move the team from its Oxfordshire headquarters to Cologne.
Ibrahim says that by October “we were pretty far along”. Zakspeed was the only other serious contender. Talks continued right through Christmas, and Ibrahim says the deal was finally signed between all three parties at 10.30pm on December 31 last year.
He adds: “We had been talking with the lawyers for days, for ten to 12 hours at a stretch. When the deal was signed I was too tired to see in the New Year. I went to bed.”
Although Ibrahim is the first African to take control of an F1 team, in many respects he has much in common with team owners such as Rocco Briatore at Benetton or Eddie Jordan at Jordan. He comes from a rich family. His father Ado Ibrahim took the family into the largest private oil business in Nigeria, called Nigus, which exports crude oil to the US. The family also has a 40 per cent stake in Nestlé Nigeria.
Ibrahim is the third of nine children – he has seven brothers and one sister. He was educated in London and California. After working in the family oil business for several years, he branched out into a Nigerian telecoms business, and other venture capital interests. Three years ago he went to a Grand Prix and became hooked.
His cosmopolitan education formed his approach to business. He explains: “In the UK you are taught to be a specialist. In the US you are encouraged to be eclectic. I prefer that. I like to set strategy for a business and let others run it. But I am very interested in this team and I will be very hands on.”
Ibrahim plans to take the team to a place that the world’s premier motor sport does not often venture to. He says: “F1 has missed out the whole of Africa – that’s 600 million people. The sport is white, and middle class. We want it to have street credibility.”
This is all very well, but according to M&C Saatchi Sponsorship chief executive Matthew
Patten who handles the sponsorship for the Jordan F1 team street appeal is dependent on two things.
He says: “To have this kind of appeal you need to have performance. Nike has stars such as Tiger Woods and until last week Michael Jordan. Adidas has people like Paul Ince and David Beckham. Arrows needs to sign stars if it is to have credibility.”
He adds: “The other thing central to youth appeal is access to the sport. It costs up to 150 to see a Grand Prix. It’s not like basketball, where there are free courts on street corners.”
If Ibrahim is to make the Arrows team any more than the also-ran team it has been until now, it must spend on technology and talent. Then it will maximise its sponsorship, TV, and merchandising revenue streams. Ibrahim’s 77m investment is only the start of the odyssey.