While we saw earlier there are reasons why mergers aren’t that common to even attempt, the real bottleneck is in the execution.

In cycling, all contracts for riders, staff and sponsors are with the paying agent, the company that holds the UCI license. You can merge those companies, but you can’t merge the licenses. This means all the talk of teams merging is really nonsense, there is no such thing in cycling. Just like teams can’t split (Omega pharma-Lotto), only one of them keeps the license. So in a merger you have to make a choice, which license do you use? This has far-reaching consequences and it all depends on the contracts.

Rider contracts are pretty standard and follow a UCI template, which states that when the paying agent loses its license, the rider is free to go elsewhere. In fact, the rules are such that a team is not even allowed to delete that clause, even if a rider would agree to it. Bottomline, every rider has this clause in their contract.

This means you cannot merge two teams and thereby bring the two groups of riders together. One of the two groups will per definition be connected to a license that is cancelled, and therefore be free to go where they please. You saw this play out with the Omega – Quickstep merger, Omega’s paying agent was trying to make the claim that it still had a contract with Gilbert for 2012, but couldn’t really push that too far because if they were indeed merged and their license was still valid, it would have meant Quickstep’s was not and all those riders would have been free to go. I would be very surprised if Gilbert paid anything to get out of that Omega contract, if he did it was either to avoid a messy break-up or because he didn’t know the rules (which I doubt).

Obviously in the Leo-Shack case, the Leopard license is the most valuable. It has the Schlecks and Cancellara tied to it. No disrespect to Horner, Brajkovic et al, but they’re not of the same importance. On top of that, inserting Bruyneel into Leopard won’t upset the Radioshack riders he’s taking with him, so there is little risk they’d “flee”.

On the Leopard side, things are less clear. Are their top riders happy about this change, did they even encourage it (as the key to future success)? Or were they taken completely by surprise and are they pretty pissed off that their idyllic family atmosphere team has been blown to pieces by Becca? So far I haven’t seen any comments from them, which makes you wonder. Obviously, if they are upset, using the Leopard license would block them from going elsewhere.

Using the Leopard license would obviously require the approval of Radioshack and Nissan to modify their contracts, and apparently Bruyneel got that.

Yesterday I wrote that there’s limited potential for growth when putting two teams together, but that doesn’t mean people left out of a merger necessarily lose their job. Look at it this way;  the introduction of Leopard did not directly add 80 people to the pro cycling family, its demise wouldn’t make 80 leave. People flow from one opportunity to another within the sport. That is of course, if the number of newcomers matches the number of teams disappearing.

Just like some people went from Credit Agricole or Gerolsteiner to Cervelo TestTeam and some went from Cervelo TestTeam to Leopard or Garmin-Cervelo, Leopard and Radioshack riders and staff could in principle make their way to new projects like GreenEdge. There are also some teams bulking up on the number of riders and staff (Skil-Shimano probably). The problem is of course timing and competition; it’s very late in the season and there is lots of competition with staff and riders from outfits such as Highroad also looking for new employ.

This may or may not be a concern for the people at the controls, but regardless this will become a nerve-wrecking experiment. Both Highroad and CTT showed that if you announce the end of the team in August, you can still find new work for (virtually) all riders and staff. Whether that’s still the case in September, I don’t know.

However, it should be pointed out that the uncertainty for riders and staff is not so much a financial concern as it is an “I’ll be bored” problem. You see, staff and riders at the merging teams either have a contract for next year or they don’t. If they don’t, then it would have been prudent for them to start looking for other opportunities long ago. If they do, then that contract remains valid whether the team continues or not. If they can find a new team, they can demand to be let out of their old contract. If they don’t find a new team, they can demand the old contract be paid out. There are all sorts of nuances to this, but that’s the gist of it.

Oh boy, cycling is not known for its sophistication, and press releases consisting of hot air wrapped in lycra are no exception. But even in this world, Lepert’s press release yesterday evening was at another level. Let’s analyze:

Leopard announces that RadioShack and Nissan are joining the Leopard-Trek World Tour Team as sponsors for the 2012 and 2013 seasons.

Leopard will continue to hold its existing UCI World Tour License. The team will be rebranded as RadioShack-Nissan-Trek Professional Cycling Team as of next year.

So with Leo-Shack rumors floating around for so long now, you may start to wonder “what’s taking so long”. Of course, if nothing is actually happening and it’s all BS, it’s no wonder it’s taking so long! That was covered earlier today.

But even if there are talks, and even if rumors are getting stronger, and even if a merger is eventually announced, a merger in cycling is very difficult, which is why until very recently, you didn’t see any. There are many complicating factors as we’ll explore in the next few days.

First off, unlike “normal” corporate mergers, merging two teams means putting together two entities that are doing exactly the same thing. You’re not creating opportunities like the product of company A with the distribution of company B, or the software of one with the hardware of another, you’re not combining geographic strengths, integrating vertically or anything of that nature.

You’re putting together one team with 25-30 guys riding a bike and 40-60 people supporting them with another team of 25-30 guys riding a bike and 40-60 people supporting them. If you’re merging two teams that were both on the small side, the resulting team can be a bit bigger, but not hugely so. At most it can be a team of 30 guys riding a bike and 60 people supporting them.

At best, you may achieve synergy in the form of combining a group of riders strong in the classics with a group strong in GC, or good riders on one team with good management on the other, and you may create another 5 rider positions and 10 staff. But the fact remains that with the current rules, you can’t create something bigger than the 30 riders allowed (unlike the old days with for example Mapei).

This is not to say that all the people left out of a merger will lose their job, obviously it’s more fluid than that. More on that tomorrow. Since I will be posting a lot this week with so much going on, an easy way to ensure you don’t miss anything is to subscribe here.

Interesting post from Velocast on the Leo-Shack merger rumors. While I agree with his conclusion that the rumors may very well originate from Bruyneel’s desk, that doesn’t mean there are no merger talks.

After all, if there are no talks and Bruyneel is just “playing with Becca’s balls” as Basso would say, then I am sure Becca would issue a pretty strong rebuttal and Nygaard would too. Instead, the latter has changed his usually daily tweeting to posting three tweets in the last two weeks, none of them cycling-related and one that mysteriously said:

As one my good friends said the other day: integrity is what we do when others aren’t watching.

Velocast mentions that Trek currently shows Leopard everywhere and Radioshack nowhere in their events and advertising collateral and uses this as proof that they are not behind an attempt to insert Bruyneel into Leopard.

You could also argue the opposite. One of the world’s biggest bike companies has long-term contracts with two teams (both signed recently and in full sanity). Yet it uses only one team and completely ignores the other. Methinks that indicates something is going on, rather than that there’s nothing to see here.

Velocast’s main argument is this:

The central point that L’Equipe fails to tackle is that Becca has made a 4-year guarantee to the UCI to fund the Leopard-Trek team. An individual rider, such as Roman Kireyev for example, can be made to conveniently “disappear”. But a four year commitment to the UCI simply cannot. That, frankly, is drawing too much attention to places where the UCI does not want attention to be drawn. Creative accounting and administrative slight of hand wouldn’t allow those involved to wriggle free from that kind of mess.

But there is no such thing as a 4-year guarantee. In the license application, the paying agent would have indicated their desire to run this team for at least four years in order to obtain a 4-year license. There would be contracts showing the budget for 2011 being covered, and some of them extending into 2012, 2013 and maybe even 2014.

But the UCI understands that virtually no team already has all their sponsors lined up 3 years in advance, so they’re not demanding that those future year budgets are fully covered. They couldn’t. The requirement is as per article 2.15.068 to show:

financial planning for the period covered by the licence application or the remainder of the licence period.

That’s a forecast, not a guarantee. The guarantee teams need to provide is a bank guarantee. And regardless of the length of the license, such a bank guarantee covers 3 months of salaries. UCI regulation 2.15.098:

The amount of the guarantee shall represent one quarter of all the gross sums due for payment by the UCI ProTeam to riders and persons under contract for the operation of the team during the registration year.

In no case may the amount of the bank guarantee be less than CHF 975,000.

Does this mean I think a Leo-Shack merger will happen? Not necessarily, because cycling mergers are EXTREMELY difficult, I believe much more so than “standard” company mergers, so the chance of success is limited. But talks are definitely going on.

More on that later today. If you don’t want to miss that, you can subscribe here.