Aug 01, 2011 at 01:56 PM
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Boris Bikes Deal Draws Criticism For Not Bidding Out Barclays Renewal

Last week, we reported that London-based financial services firm, Barclays, had agreed to put an additional $41 million into London's public bicycle sharing program, Barclays Cycle Hire. The deal extended Barclays title sponsorship through 2018, doubling the bank's lifetime investment in the program. While London mayor, Boris Johnson, took credit for the deal, this BBC report says that Barclays got the renewal on the cheap, leading some lawmakers to publicly question whether the sponsorship should have been put up for bidding among Barclays competitors.

In a letter to Johnson, the chair of the Chair of the London Assembly Transport Committee, Caroline Pidgeon, asks 10 pointed questions about why the sponsorship was not bid out to other potential sponsors.

"My questions to you relate to a number of very serious allegations made in the recent BBC London television report, broadcast on Thursday 27th July, but also in relation to your decision to announce the further extension of the sponsorship contract with Barclays for three years, without any tender being sought," Pidgeon writes.

In the letter, she asks why the market was not tested to see whether more sponsorship income could be generated from other potential partners.

"Before a sponsorship deal was achieved is it true that you personally made only one direct approach to a bank – that of Barclays – to encourage them to consider sponsoring the cycle hire scheme," Pidgeon writes. "If this is true why was no consideration given to approaching a number of banks or other organisations? Was no consideration given to encouraging a "bidding war" for the sponsorship of the cycle hire scheme?"

While municipal deals like this raise some special considerations that other properties don't face, it's an interesting question for sellers to consider. Beyond right of first refusal, which is baked into many contracts, should you have any other obligation to pre-existing partners and if so, what is it? With most partnerships lasting for at least a couple years, and leading to future renegotiations, viewing deals (even municipal ones) in such a transactional vein can lead to some seriously strained relationships and may, in the long run, actually limit the options of the seller. What's your take?