Make no mistake about it, new Richard Petty Motorsports ownership partner Douglas G. Bergeron sees NASCAR as a way to make money. Big money. Saving one of the sport’s legendary teams is a nice fringe benefit.
The Canadian-born Bergeron is best known for his ownership of VeriFone; the system used to verify credit card transactions around the world. He purchased VeriFone a decade ago for $50 million. Today, the company is worth an estimated $3 billion. He and his new partner, Medallion Financial Corp CEO Andrew Murstein, are making their first foray into the world of professional sports, and Bergeron said he is looking forward to being part of the NASCAR Sprint Cup Series.
“NASCAR teams have historically been quite profitable businesses,” he said. “They’re also a lot of fun to own. There’s quite a lot of personal pleasure that comes from owning a business that succeeds.”
Asked where the team’s previous owners, Boston Ventures and George Gillett, Jr. went wrong, Bergeron stated emphatically, “Too much debt. It is widely known that Gillett took out a $90 million loan with Wachovia. That’s five, six, or seven million dollars per year in interest payments alone; money that cannot go toward funding the team (and) investing in next-generation technology.”
He called RPM’s financial structure “fundamentally strong, but poorly financed and over-paid for at the wrong time,” saying Gillett fell into a trap that consumed many investors. “It’s not unlike a lot of businesses outside the motor racing industry that were bought in 2006 and 2007,” said Bergeron. “There was too much debt that needed to be restructured. They were also in the wrong place at the wrong time when the auto industry went through bankruptcy in 2008 and 2009, (leaving the team) with a lot of receivables that were not paid.”
Bergeron called those economic circumstances “a perfect storm of unfortunate events. I don’t think those guys did anything wrong operationally. They just had too much debt up front and failed to plan for a recession that forced sponsorship revenue down. But we’re in a new place now. With a new balance sheet, a new investor group and Richard Petty involved as a very significant co-owner and chairman, I think it’s going to be a very successful several years for the business.”
The VeriFone CEO stressed that neither he, Murstein nor Petty bring any debt to the team, allowing RPM to proceed without the financial encumbrances that crippled the previous owners. “It’s the same as with an individual consumer,” he explained. “If the first bill you have to pay each month is to the bank, it has a big influence on how you run your personal business. If you can invest what you earn, it’s a much easier way forward.”
He said RPM’s newfound financial freedom will allow the team to invest revenue from sponsorship and race winnings back into the operation, rather than making multi-million dollar interest payments to banks. “I think this is going to be a much easier, less-stressful structure for the team,” he said.
Bergeron admitted that he is motivated primarily by the opportunity to purchase a NASCAR team for pennies on the dollar, from a lender highly motivated to sell. “I don’t apologize for being opportunistic,” he said. “I bought VeriFone 10 years ago from a seller who didn’t know what to do with it, and just wanted to get rid of it. I have found that if you buy things right and put the proper amount of management attention to them, you can create great value. The Petty name is fantastic, but getting a franchise with a great track record and a bright future at an opportunistic price was the real attraction.”
Bergeron said he and Murstein will have a different management style than Boston Ventures or Gillett. “Both of them did the same thing; running off the people within the organization who know and understand the sport,” he said. “My management style over the years has been to let the people who know the business run the business. Set goals and milestones, agree to a budget up-front, then get out of the way and let your people perform. I don’t know how to run a race team, but I know how to create value. We’ll have good communication with the (competition side), but we need to get out of their way and let them excel.”
Bergeron said that while Petty will serve as chairman of Richard Petty Motorsports and “the face of the organization, we will also install profession managers to run the financial side of the business and give Richard a hand with that.” He pledged that Petty will have “a much more active and meaningful role with the team than he had under the previous ownership structure.”
There are plenty of examples of businessmen running NASCAR teams into the ground. JD Stacy, Bobby Ginn, BANG Racing owner Alex Meshkin and homebuilder Michael Holigan all came to the sport with considerable fanfare and grandiose plans, only to slink away in a maelstrom of broken promises and shattered dreams. Bergeron attempted to calm fears that he and Murstein are cut from the same cloth, saying, “I’m not going to bullshit anybody. Investors invest in businesses to make money and create value. The way you create value in professional sports is to put out winning teams… and make sponsors want to pay larger amounts to sponsor you.”
Not all NASCAR investors fail. John Henry’s Fenway Sports Group has done tremendous things for Roush Fenway Racing, opening financial and marketing doors that were not accessible before. The same can be said for Michael Waltrip Motorsports’ “silent partner,” Rob Kauffman. Douglas Bergeron and Andrew Murstein seem determined to join the list of successful businessmen who have found a home in NASCAR; simultaneously helping Richard Petty Motorsports regain its former glory.
“I’m putting my money at risk because there is money to be made,” said Bergeron. ”I don’t apologize for that.”