ANALYSIS: Why are McLaren considering a partial sale of their F1 team?

Just weeks after Williams announced they are considering selling a stake in the Formula 1 team, it has emerged that McLaren are also evaluating such a move.

What is happening?

McLaren said they did “not comment on speculation” following a Sky News story published on Wednesday evening, but Formula1.com has learned they are in the exploratory phase of selling a minority share in the racing business.

READ MORE: McLaren exploring partial sale of Formula 1 team

It’s very early stages, but there have been discussions about selling a portion of the race team in order to find funds to bolster the outfit’s stable footing and allow them to take the fight to the big three.

Having risen to the head of the midfield with an impressively dogged campaign in 2019, this is the next step in their revival strategy.

Why do they need further investment?

McLaren are in the midst of a rebuild, as they look to evolve the racing business into an efficient team that can once again challenge for top honours. The staffing structure, led by Andreas Seidl, is now in place, while Mercedes power will be in the back of the car from next year.

This potential extra investment, should they find an investor and decide to push ahead with such a sale, is the next stage in their rebuilding process.

And the new budget cap coming in next year – set at $145m before dropping to $140m in 2022 and $135m in 2023 – offers the team a unique opportunity to get back to the winning ways they were used to for so much of their history.

ANALYSIS: What lies ahead for Williams after shock financial news?

New investment could ensure they have the funding to hit the budget cap limit, thus putting them back on par with the big teams, Mercedes, Ferrari and Red Bull, who will need to come down to that figure and change their organisations and the way they operate accordingly.

The plan, as it is understood, is to raise funds specifically for the F1 operation so they can take that next step, efficiently use the extra resources to close the gap and become a world championship contending team once again.

Why now?

This is a difficult time for all businesses, Formula 1 teams included, as the world continues to fight the coronavirus pandemic that has severely restricted normal life.

The F1 season is set to resume next month, but with a reduced calendar and this will likely reduce the sport’s income, which in turn will reduce the amount of money each team receives from the commercial rights holder.

It was revealed last month that the McLaren Group, of which McLaren Racing is part, is set to make around 1,200 employees redundant across their technology, automotive and racing businesses, in response to the impact of the pandemic and the implementation of the new budget cap.

READ MORE: McLaren Group set to make around 1,200 staff redundant as part of restructure

As it stands, the McLaren Group has multiple shareholders, including Bahrain’s Mumtalakat holding company, the TAG Group led by Saudi-born businessman Mansour Ojjeh and Canadian businessman Michael Latifi, father of Williams driver Nicholas.

But by exploring the possibility of selling a stake in the F1 team now, McLaren are giving themselves the time to potentially use those resources to help them take advantage of the reduced budget cap and also the new technical regulations, which comes into force in 2022.

READ MORE: Norris and Sainz test F3 cars at Silverstone as they prepare for 2020 season start