Ever heard of a guy called Michael Smith? You are going to because he is the chairman of CVC Capital Partners which has just bought Formula One. There are a few loose ends to tie up but, essentially, it's a done deal.

CVC Capital Partners does not have a high public profile, but it is an immensely successful investment company. Michael Smith happens to be English, and is the largest individual shareholder, but the board of CVC is international. An article in The Sunday Times (23rd October, 2005) suggested CVC is secretive, "CVC is a trailblazer in a the secret side of a City (of London) dominated by privately owned hedge funds and buyout firms shielding their methods from public scrutiny."

CVC denies that it is secretive. It says it's private. It is a financial company in which individuals and institutions such as pension funds can invest. It aims to make money for its investors and one way is to buy companies and brands which it thinks are under valued. It operates through countries with generous tax deals, like Luxembourg, Monaco and the Channel Islands, in order to maximise profits. It plays the system and there is nothing low profile about some of its acquisitions.

Among the companies CVC has bought are Kwik Fit, which specialises in replacement car tyres and exhaust systems, and has also branched into insurance; Halfords, Britain's largest motor accessory retail chain; and the Automobile Association. The AA provides a comprehensive range of services for motorists, from roadside breakdown assistance to insurance. You can check with the AA to see if the secondhand car you are thinking of buying is all that it is claimed to be, the AA runs driving schools and has a publishing side.

The Automobile Association began 100 years ago as a service for motorists. In Britain there was a blanket speed limit of 12 mph, later it rose to 20 mph. If you joined the AA you displayed a badge. If you passed by an AA patrolman (on his bicycle in the early days) he had to salute you. If he did not, you stopped and asked him why. The reason was usually that, up ahead, there were two policemen in the hedgerow, a measured distance apart, and one had a stopwatch.

CVC Capital Partnerships buys companies, improves their value and then either retains them or sells them at a profit. The bottom line is return on investment. According to the article in The Sunday Times, CVC expects a minimum return of 18%. Sterling is currently strong and stable and five to six per cent is the usual return in a high street bank in the UK. In other words, if you are a multi millionaire you can earn three times the interest on your clam shells than we humble folk. You have to have a big pile of clam shells before you can join the game.

It strikes me that if CVC comes knocking at your corporate door the underlying message is that you could be trying harder. CVC will have done serious research into your company and decided that you are under performing. They have discovered something that you do not know. Among the things they will have discovered will have been the strengths and weaknesses in the management and in the value of the brand.

CVC bought the 500cc World Motorcycle Championship and rebranded it as MotoGP. That has been a success, and how. Top level motorcycle racing has never had so much media exposure. How many people who do not follow the sport can name the three World Champions before Valentino Rossi?

That is an example of CVC making a very shrewd purchase of an undervalued franchise, bringing in the right people and making a fabulous success. The downside is that MotoGP is an investment. My guess is that MotoGP would be for sale at the right price, even if that price would bring tears to your eyes.

The interesting thing will be to see how CVC gets its 18% return on an investment in Formula One, believed to be US$ one billion. This is a profit of US$180,000,000 per annum. Count those noughts.