Wise Equity’s exit from racing car company Tatuus Racing is coming later than expected, after even the resilient motorsport segment stalled when the coronavirus pandemic hit. But the strong performance of the sector since that initial delay meant the wait was worthwhile, partner Fabrizio Medea and principal Alessio Riccioni at the private equity firm told PE Hub Europe.
Milan-based Tatuus Racing designs and produces single-seater racing cars for junior categories within the Formula 1 and IndyCar pyramids. Wise Equity, also based in Milan, invested in Tatuus via its Wisequity IV fund in 2017. Investment firm The Equity Club, via SPV TEC Racing, will acquire a majority stake in Tatuus. The size of the deal was not disclosed, but Riccioni described the sale as “successful”.
Like many industries, motorsport had to adapt during the pandemic. In Formula 1, the race calendar shrunk significantly in 2020, but the competing teams created bubbles, allowing them to travel around the world with minimal contact to others.
In Formula 4 – a category for junior drivers – most championships went ahead, but travel across continents was complicated, leading drivers to miss out on crucial races. “Most of the drivers participating in the Italian Formula Quattro Championship are not Italian,” said Medea. “It’s an important race – if you win that one, you will move on in your career.”
But Tatuus hit an unexpected growth path in 2021, according to Medea. “Incredibly, motorsport was an industry where more money came in after covid,” he said. “We decided to complete the growth path and put the company on the market at the end of 2022.”
“This was a company that probably was ready at the four-year mark, but covid pushed it to five years,” he added.
Revenues for the Formula One Group grew in 2022 across all primary revenue streams, according to Liberty Media. Record attendance in races combined with growth in F1 TV subscriptions aided recovery.
A key focus during the five-year ownership period was organisational structure. Tatuus integrated two Italian companies; Autotecnica Motori in 2017, followed by Breda Racing in 2018. Casalmaggiore-based Autotecnica, which was already collaborating with Tatuus before the acquisition, designs, produces and develops competition engines. Breda Racing is a Villafranca Padovana-based company operating in key metals used in single-seater cars.
All in one
The thought process behind the acquisitions was to create a one-stop-shop to support the growth of the new F4 platform in particular, Riccioni said. “We wanted to create a credible player for promoters and federations and to give the final customer, the drivers, the best service,” he added.
Early on, Giovanni Delfino, founder of Autotecnica, was identified as the future Tatuus Group CEO, with the target to work on the integration of the three companies. Part of the integration and value creation process was to clarify job descriptions and implementing centralised finance. “In this industry, you need to have a well-working organisation without losing the fastness and flexibility motorsport needs,” said Medea. “You have to be flexible – on Sundays you have to race.”
The growth of Tatuus goes beyond the company, according to Medea. “This project in some ways created the F4 market,” he said. “When we started, there were only a few championships.” The success of the Italian and German championships, combined with promoters having access to Tatuus’ services on track, allowed them to start additional championships, Medea said.
While Wise has no new motorsports targets on the table, the firm is still keen on the segment, if the opportunity arises. It is an industry where the driver of growth is rooted in growth of areas like Saudi Arabia and the Emirates, said Medea.
“Formula 1 is used to showcase a country – you can say my country has reached a level that allows it to have a Grand Prix,” he added.