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The French Goodbye: NASCAR and How Not to Exit an Investment

 5 min read / 

The investment strategies of family offices are highly diversified. What works for one family office may be wholly inadequate for another. Furthermore, providing advice is typically made even more difficult by the lack of transparency coming from within.

France and Nascar

Sometimes, however, there is enough happening out in the open for some family office strategies to be very clear. The ongoing case of the
potential NASCAR deal is indicative. While there is surely more going on behind the scenes, the France family and their management of NASCAR can also provide a general lesson to any family office with a portfolio of businesses.

Everyone has heard this ad nauseum, but that does not stop people straying from it over and over; family office need to know the value proposition of the business. It seems that somewhere along the way, NASCAR lost sight of what it was good at: giving its audience fast cars, driven by big personalities, all racing against one another in a simple format.

Of that value proposition, only the fast cars remain. As one recent article points out, “NASCAR has changed its rules so many times to gin up competition that the show seems contrived.” It is a sentiment which is echoed all over online message boards about the sport, with the general perception being that NASCAR has become gimmicky.

NASCAR and Learning the Wrong Lessons

Being fair to NASCAR, personalities in sport come and go, so there is not a whole lot they could do about losing era-defining drivers. But the general consensus is that NASCAR has toyed too much with a winning format, moving away from the tenets that made it so popular in the first place.

There are ways to change direction without losing the value proposition. It is easy to say in retrospect that NASCAR should have dealt (or should be dealing) with competitive threats differently. But when an iconic franchise begins to fade and sponsors start going elsewhere, what solutions are there? It is a question which is not easily answered.

That said, it is important when shifting strategy that management does not ‘throw the baby out with the bathwater’. The company’s value proposition is sacred and should not be altered when changing strategy. Putting it another way; if the NFL saw soccer as a threat to its dominance, it would not change a touchdown to 15 points to counteract it.

NASCAR was founded 70 years ago by Bill France Senior. Since then, the reins have been passed on twice, both times to younger members of the France family. Ben Kennedy, aged 26 and a fourth generation member of the family, is already General Manager of the NASCAR Camping World Truck Series.

All are probably excellent managers in their own right. And there is no denying that they are steeped in the NASCAR heritage. But the most  successful sports in the 21st century have been the ones that are outward looking; knowing NASCAR inside out is a great starting point
but there are several other dynamics at play too, and they have been missed.

Remembering the Strategy in ‘Exit Strategy’

It has been reported in several media outlets that NASCAR CEO Brian France is speaking with Goldman Sachs to “explore a potential
sale for the France family.” It is not clear what the motive for doing so is, but one can hazard a guess that it is because the company is flailing. This is not an exit strategy. This is ad-libbing an exit.

Among other issues, an exit strategy would have involved having external management in place several years before the exit, and perhaps even looking to exit when the company’s biggest ever personalities were still on the racing track. Without an adequate exit plan in place, most companies are considerably harder to sell. NASCAR will be no different.

Perfecting the French Goodbye

In February 2017, the Wall Street Journal printed a story under the heading: “NASCAR, once a cultural icon, hits the skids.”[3] The
Journal goes on to point out that the decline began ten years before and that NASCAR is finding it difficult to attract sponsors. Just imagine trying to put a positive spin on the company’s memorandum after that.

The memorandum would have written itself ten years before. It is far easier to sell a company which is stable, and easier still to sell one that is growing. There is very little chance of a company with declining figures achieving a premium when it comes to a divestiture, even if you have got Goldman Sachs on board.

 

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