McLaren celebrated in Abu Dhabi last weekend its first F1 Constructors’ title since 1998, but four years ago, the Woking-based outfit faced a financial crisis so severe that its survival seemed anything but assured.
McLaren’s hard fought 2024 title is a vindication of sorts for team papaya and a genuine testament to its unwavering resilience under the guidance and management of chief executive Zak Brown.
It’s a powerful reminder that even in the face of seemingly insurmountable odds, with vision, determination, and a refusal to give up, a team can rise from the depths of despair to achieve greatness.
In 2020, McLaren was staring into an abyss. The COVID-19 pandemic had delivered a hammer blow to the global economy, and McLaren Group, which encompasses both the racing team and the luxury car manufacturer, was not spared.
The company’s road car sales plummeted as the world shut down. The domino effect rippled through McLaren Racing, exposing the fragility of its financial underpinnings. Costs had already been committed for the 2021 Formula 1 season, but the revenue streams needed to sustain those costs were drying up.
“Closing Abu Dhabi ‘20, we were definitely on the brink,” McLaren Racing CEO Zak Brown recounted last weekend at Yas Marina, quote by Speedcafe.
“We were paying all our bills, but we were months away, not several months… We knew we could make it through the year, but we were in a situation where if we didn’t have a cash injection, we would have been at risk.”
The situation was dire. In June 2020, McLaren Group launched legal proceedings to protect itself from insolvency. The organization took out a life-saving loan from the National Bank of Bahrain, a stopgap measure to remain solvent while seeking longer-term solutions.
The company also embarked on painful cost-cutting measures, shedding 1,200 jobs across the group, including 70 within the racing division. But these measures were not enough.
Behind closed doors, Brown and his team were fighting an uphill battle to secure the funds necessary to save McLaren Racing from sliding into irrelevance.
Initial attempts to raise $190 million from the UK’s Department for Business, Energy and Industrial Strategy failed. In a desperate bid to stay afloat, McLaren began selling assets, even as it sought external investment to keep the racing team competitive.
“It wasn’t a comfortable place at all,” Brown reflected. “[I] was always confident the shareholders would never let it get there [to insolvency], but it was also clear we needed the investment.
“I could put my head on the pillow at night knowing they’ll back us up if they have to, but it was going to be the ninth inning, to use a baseball term, before they brought in the relief pitcher.”
The vital lifeline arrived in the form of MSP Sports Capital, a private investment group that acquired a 15% stake in McLaren Racing in December 2020, later increasing its holding to 33% by the end of 2022.
The investment, worth £185 million, valued McLaren Racing at £560 million and provided the critical cash injection needed to stabilize the team. It also gave Brown and his team the breathing room to strategize for the future.
MSP’s arrival was pivotal. It ensured that McLaren could continue to operate competitively, avoiding the dreaded "slippery slope” that could have led to the team’s irrelevance.
Even as the racing division stabilized, the scars of 2020 lingered. McLaren was forced to operate leaner and smarter, and the lessons learned during this period of austerity became the foundation for its eventual resurgence.
With its financial footing restored, McLaren Racing began to rebuild. Brown orchestrated a strategic overhaul, attracting new commercial partners and securing lucrative sponsorship deals that would become a cornerstone of the team’s recovery.
Changes to Formula 1’s financial landscape, including the cost cap introduced in 2021, also played to McLaren’s advantage. Prize money payouts began covering a significant portion of the team’s operating costs, a crucial lifeline for a team that was still rebuilding its commercial strength.
The results were tangible. After finishing fourth in the 2023 Constructors’ standings, McLaren posted a £12.9 million profit last year, a staggering £70 million ($88 million) turnaround from its financial position just twelve months earlier.
Prize money from its Formula 1 performances provided a growing revenue stream once again, and McLaren is now poised to claim an estimated USD $140 million in prize money thanks to its 2024 Constructors’ Championship victory.
The team’s financial health is robust, and profits are soaring. Forbes valued McLaren at a staggering USD $2.2 billion in June of 2023, a figure that has only continued to climb.
The initial investment from MSP Sports Capital has likely more than tripled in value, a testament to McLaren’s resurgence and to the power of grit, vision and teamwork.
Team papaya’s journey from crisis to championship is a story of survival, reinvention, and, ultimately, redemption. As Lando Norris and Oscar Piastri streak past the checkered flag, they carry with them not just the hopes of a team but the proof that even in the face of extinction, greatness can endure.
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