The complications and negotiations behind Perez’s Red Bull exit

It had been pretty clear for a while that Sergio Perez would not be a part of Red Bull’s future in Formula 1 off the back of his troubled 2024 campaign.

However, what was not so obvious was exactly how the parting of ways would play out because of the complications caused by him having a firm contract.

That was the result of the decision made by Red Bull in June to hand Perez a two-year extension for 2025 and 2026 in a move the team thought would settle him down.

As Red Bull team boss Christian Horner admitted earlier this month about that call: “We elected to go early – which obviously didn’t work. That’s just life sometimes.”

Once committed to it though, there was no way Red Bull could change its mind and simply decide itself that it preferred to do something different.

In the big money world of F1, drivers and their managers do not simply agree to rip up multi-million pound contracts and walk away without some form of deal being put on the table.

And a chief weapon in Perez’s armoury was his veteran manager Julian Jakobi, who is well known for driving a hard bargain having worked with the likes of Ayrton Senna, Alain Prost and Jacques Villeneuve in his lengthy career in F1.

Red Bull was well aware of the contractual situation over the closing stages of the season, when it was clear on performance grounds that it wanted to make a change but equally understood there were other factors that clouded the situation.

It knew it needed Perez to concede ground himself about the realities of the situation he was in.

Achieving the desired outcome is never straightforward though because, when it comes to reaching a deal to end contracts, there is an obvious game that is played by the two sides. If you are the one that you know the other party wants to get rid of, then it is best to repeatedly make it clear that you have every intention of seeing things out. You see this happen time and again when people know that there is a chance they are going to be moved on – so they dig their heels in.

One famous example was at the 2021 Brazilian Grand Prix, when then Aston Martin boss Otmar Szafnauer’s days were numbered as he became linked with a switch to Alpine. Speaking in a press conference that weekend and asked about his future, his stance was defiant but specific in its wording: “I’ve been at the team for 12 years, I have no intention of leaving.” Two months later his departure was finally confirmed as an exit package was put in place.

Playing hard ball over seeing out a contract means that once the lawyers come in, then they can argue that any move to terminate the contract has to be compensated with the biggest pay off possible.

If you let slip that you are open to a deal, or that you are thinking of walking anyway, then it weakens your hand in negotiations.

This was the battle that appeared to be playing out in the closing stages of the season as Perez, well aware the writing was on the wall, dug ever deeper about his determination to race on with Red Bull and explain his conviction that he would remain with the squad.

Sergio Perez, Red Bull Racing RB20

Photo by: Red Bull Content Pool

In Abu Dhabi he said: “Nothing has changed since before in terms of what I’ve said for the entire year. I’ve got a contract for next year and I will be driving for Red Bull next year.”

Red Bull equally knew that it could not simply just dump Perez on a whim – as F1’s Contracts Recognition Board would likely have got involved if there was any breach in what had been signed.

That meant an agreement would have to be reached, which is why Red Bull was always eager for Perez to accept himself that a way out had to be negotiated. As early as Qatar, Red Bull team principal Christian Horner talked about Perez taking on board himself that things were not working.

“It’s not an enjoyable situation for Checo being in this position with speculation every week,” he said. “He’s old enough and wise enough to know what the situation is and let’s see where we are after Abu Dhabi.”

Once Red Bull’s shareholders had agreed in a meeting in Dubai on the Monday after the season finale that they could not continue with Perez, the matter then became one of getting a deal across the line.

And, as revealed by Horner, when he and Perez sat down last week to discuss matters, there was an acceptance from both of them that their futures would not be together.

Horner told Sky Sports F1: “He [Perez] reflected after the season, and we sat down and discussed it last week about what are the next steps? And he decided that he’s going to take a bit of time out, take a sabbatical from F1 essentially, and he’ll still be involved with the brand and the team, but he’s stepping back from driving duties moving forward. It was sad to see him leave the team, but obviously it’s time for him to spend with his young family as well and reflect on what he wants to do for the future.”

Christian Horner, Team Principal, Red Bull Racing, Sergio Perez, Red Bull Racing

Photo by: Red Bull Content Pool

So, it ultimately then became a matter of crossing the t’s and dotting the i’s.

While F1 is a series where the obsession is over hundredths of a second, when it comes to contracts, lawyers and managers, it moves at a much slower pace.

There is inevitable toing and froing over clauses and wordings, clarifications over what should and should not be included in negotiations, and of course the biggest issue of all – the financial compensation package. This explains the delays in getting to where we finally got to today. And it is understood all of this was playing up to the 11th hour prior to Perez eventually going public with the news of his departure.

The fine details of what was eventually agreed between Perez and Red Bull are something that will only be known to themselves, but it is quite notable that in the end the first confirmation about their relationship ending came from Perez himself.

This was very much presented as Perez’s own decision. The announcement was “A message from Checo” and it very quickly made reference to “an agreement to part ways” that had been reached between driver and team. It’s that fine line between jumping yourself and being pushed: the end result is the same, but the starting point makes a world of difference once the lawyers get involved.

For Perez, the deal may leave him on F1’s sidelines for 2025 but he will at least take a decent pay off with him while he ponders his next steps in racing.

And for Red Bull, there may have been an expense in sorting the agreement in the end, but it will hope that what it has had to pay out, and potential losses in sponsorship money that Perez brought, will be compensated by it having a better shot at the constructors’ championship next year.