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Havn't had to repair mine yet. Is there a switch the lever hits in 'M' mode? Is it damaged? Is it connected? Could a PO crossed up some wires? You may need to download a wiring diagram. A careful look round may solve your problem. If you join those wires does the 'M' light come on?
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Good - Fast - Cheap: Pick any two.
Current:
E23 735i; E30 318i; E32 735iL; E38 735iL; R50 Cooper; R55 Cooper Clubman. 
Previous:
E21 318i; E32 735iL; E34 535i; E38 730iL; E53 4.4i
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